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61 comments on Oil Fuel pipeline explosion outside Lagos

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Leanan on May 12, 2006 - 10:38am Permalink | Subthread | Parent | Comments top
I am also beginning to wonder if perhaps the Energy Tax/Abolish the Payroll Tax idea might be a really good idea, from the point of view of social stability.

Only if people have jobs.  I could envision a future where the employed are the privileged, and a tax break for workers would be seen as "tax breaks for the wealthy."  

This article is about inflation in Zimbabwe;

They're millionaires, but a piece of beef can cost a million

...Inflation, which clocked a record 1,042.9 percent on Friday, is a stark reminder of the southern African nation's eight-year recession that has sparked shortages of foreign currency, fuel and food while three quarters of workers are jobless.

Some landlords now raise the price of rent every month while real estate agents have a three-month rent review cycle. As the crisis deepens and the cost of gas soars, some workers have turned to pedal power, cycling to work, while hundreds others have formed walking groups.

Analysts say most Zimbabweans are just surviving, after cutting down on many basic necessities, with some families living on a single meal a day.


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westexas on May 12, 2006 - 12:01pm Permalink | Subthread | Parent | Comments top
As I have said before, I recommend that everyone plan their affairs based on three assumptions:  (1)  your income has dropped by 50%; (2)  gasoline prices are in excess of $6 per gallon and (3)  US discretionary income has dropped by more than 50%.  

If I am wrong, you will have more money in the bank, less debt and a lower stress way of life.  If Daniel Yergin, et al, are wrong, good luck.

Speaking of riots, I (seriously) wonder if we are going to see student loan riots, when legions of college students graduate with monstrous debts--which by and large can't be discharged through bankruptcy--with no realistic prospect of ever paying off the debt.

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PhilRelig on May 12, 2006 - 12:22pm Permalink | Subthread | Parent | Comments top
What if Zimbawean-style hyper-inflation ruins the dollar here?  Then student loans would be a cinch to pay off, would they not?

As a very general matter, I don't fully understand the constant advice to "get out of debt" when seen in this light.  If hyper-inflation ruining the dollar has a fair chance of happening, then why not run up immense debts now, only to pay them off in the future when hyper-inflated dollars make paying them off a cinch?

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HopefulPessimist on May 12, 2006 - 12:44pm Permalink | Subthread | Parent | Comments top
You're correct in that paying off debts in future inflated dollars would be easier.  The "get out of debt" advice is based on the reality that many people have large amounts of debt, little or no savings, and are dependent on their current income to service that debt.  If they lose their job or their income declines, they have no margin of safety to fall back on and are at risk of defaulting. Also, many more mortgages these days are for the full value of a home, or close to it, and should property values take a dive homeowners needing to sell might find themselves unable to sell for the amount they owe.

I feel comfortable with a low fixed rate mortgage that's less than half the current value of my house, along with a healthy savings account.  If I was mortgaged to the hilt and had no savings I'd find it hard to sleep at night.  Debt in an inflationary environment can work to your advantage, but only if you're still able to make the payments.

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Tom DC in VA on May 12, 2006 - 1:57pm Permalink | Subthread | Parent | Comments top
I would say the "get out of debt" advice is based on the assumption of relatively low inflation.  It has been a very reasonable assumption since WWII, but it is still an assumption.
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Glenn on May 12, 2006 - 1:12pm Permalink | Subthread | Parent | Comments top
IMHO inflation will occur to basic necessities (food, transport, heating, consumer goods), but that doesn't mean that wages will rise in pace with them. Real wages will decline and you will need a higher percentage of your salary/income to pay for the daily necessities. Jobs that are available will be lower quality. That's not a good situation to hold debt in.

I think absolute deflation will occur in most housing and stock market assets (choose wisely), so holding that probably won't help too much.

The best advice I have heard is that you should stay flexible and be able to adapt to changing situations. Debt seriously reduces your financial flexibility.

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Generaly on May 12, 2006 - 1:51pm Permalink | Subthread | Parent | Comments top
Timing is everything...

Maybe first the housing prices take a dive,
then the banks get very conservative,
then the rates go up to both protect the banks and to sell all of the other securities,
then inflation takes off,
then we all riot for higher salaries to pay for stuff,
then time passes,
then we start getting daily indexed salary increases,
then, if we were able to avoid defaulting on our old low interest/fixed rate loans, we can pay them off easily.

It seems like a lot depends upon our savings, ability to keep a job, but very importantly, how quickly we can get our salaries indexed on a short-term basis.  I'm going to start writing my representatives now!

Some think that economic slow downs will cause deflation and we will all be investing in zero-coupon bond funds...

Maybe...

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Dan Ur on May 12, 2006 - 3:58pm Permalink | Subthread | Parent | Comments top
Because you won't have the money either way.

If you don't have the money now to pay a debt you won't have it in the future either.  

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totoneila on May 12, 2006 - 5:11pm Permalink | Subthread | Parent | Comments top
Hello PhilRelig,

I think the 'poverty draft' will kick-in bigtime first-- the only way to pay off your college debts will be to become cannon fodder for the elite's '3 Days of the Condor' plan.  Same for homeowner's upside down on their mortgage-- your child's future military service will be the only way to payoff this debt unless you are still young & fit enough to go yourself.  But then a revolution might preclude this...

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

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Dan Ur on May 12, 2006 - 6:22pm Permalink | Subthread | Parent | Comments top
I am a holder of 23,000 dollars of student loan debt. I have no degree and last time I checked I was unemployed and also not fit for service, deaf in one ear and on blood thinners due to blood clots and over 40.  Though I do not own a home, Have little chance of ever owning a home and can for the most part be a vagabond,  though walking cross country is not in my plans guess if i have to, i have to.

I still do not see conspription as a big issue, you put a gun to my head and tell me i have to fight for my country then you teach me how to kill, I am likely to kill you.  That makes for a very bad way to get troops to do the work.

I talk to a lot of young people who if you took away their fun time, they are just as likely to cause as much chaos as they can rather than bow down to the status quo of no fun time.  Look at the photos of the streets of India, fairly well dressed people carrying sticks.  Mad!

A large scale draft is going to get us in trouble,  In this day and age, we have bred to many trouble makers, People willing to hurt others for the small gains, Our prisons are over crowded, step it up a notch with draft dodgers and you get more chaos than you would want.

As all systems go toward chaos,  so will our nation.

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fleam on May 13, 2006 - 12:53am Permalink | Subthread | Parent | Comments top
Ur I have about 2X the debt you do, and frankly, if I'm never going to get it paid off, and "they" told me, go play Army for 2-3 years and the debt goes away, I might consider it. It might be good practice for the nice game of "last man standing" we're setting up here.

Although over 40, one bad eye, no degree either, we'd have to be really in the shit for them to come and ask me.

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westexas on May 12, 2006 - 5:47pm Permalink | Subthread | Parent | Comments top
I expect to see inflationy deflation, or stagflation I suppose.  In any case, I think that we will see very powerful deflationary forces at work as Americans attempt to unload highly leveraged assets of all types, especially real estate.  I suppose we may see what kind of helicopter pilot the Fed ($100 bills from helicopters) Chief is.
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obdacher on May 12, 2006 - 3:57pm Permalink | Subthread | Parent | Comments top
Gasoline prices are in excess of 6 Dollars a gallon in a number of european countries (Norway, Netherlands, Germany, Portugal, Italy, Belgium, France...) UK,..http://www.oeamtc.at/netautor/download/document/preise_in_europa.pdf)
but life continues as usual. For instance, car sales in Europe in the first four months of 2006 are up in Germany, and for the whole of Europe only down by 1%.
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oaksmoke on May 13, 2006 - 10:44am Permalink | Subthread | Parent | Comments top
I think we have a long way to fall. The problems:
Unemployment is likely to soar.
The real value of the dollar will drop.
Energy will be expensive.
I recommend preparing for having no income, and the value of the dollar dropping 80%. I'm not predicting when, but when the energy available for the economy starts dropping 2-10% a year SHTF is virtually guaranteed at some point.
How can this be accomplished?

I would recommend owning at least an acre or two of land to farm. Those who think they will be able to sit around watching TV while the government provides are likely to starve.

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Arch Stanton on May 12, 2006 - 11:13pm Permalink | Subthread | Parent | Comments top
this is a way to steal gas in the usa , it must be better that a siphon hose ...

http://www.theregister.co.uk/2006/05/10/gas_station_rip-off/

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