The Oil Drum

I think the biggest thing in America will be for lack of a better word a shear effect. We don't have a very large class of people living in extreme poverty in America as is common in many countries that are what I consider economically bound. These are countries that are effectively controlled by a elite upper class Mexico and don't have a social welfare net. Mexico is a example but in general outside of Japan/US/EU most countries have a substantial class of people that are not just poor but what we call in the South dirt poor. In the US some illegal immigrants call into this category but we still manage to provide decent health care social services etc even for this class.

I think the first thing to go in the US will be this social safety net which is what separates the first from the second and third worlds. The reason is that taxes/government will be forced to either start a tax increase spiral or cut services and tax revenue dries up as more income is diverted to gasoline/transportation. And they cannot increase taxes on gasoline the time for this is long past. So the first thing we will see is a tax crunch that start to rip out this safety net. Next of course more and more families will slid down the slippery slope towards poverty a lot of course is because of their own greed but the result is the same. This dropping standard of living feeds into dropping taxes ...

This has not happened in America since the 1930's but what it is is a depression and what it means is that if you lose you job etc over the next few years the bottom may be a long way down. The example of people working together to lower everyones consumption works but the easiest is to have say one and ten Americans fall into absolute poverty and no longer consume basically any gasoline then 2 in 10 etc.
Eventually we will cut gasoline usage by say 50% simply because 50% of Americans now live in extreme poverty.

I think we will get electric rail and trams etc but they will be used to ferry our new class of desperate workers willing to work basically for food not some sort of Swiss dream. West Texas's ELP does not have to be done in a dignified manner the social effects of ELP applied brutally by the free market can significant and harmful. We have a choice how we practice ELP but we have to ELP.

This is how I think demand destruction will play out in America. The key is that by dropping a increasing percentage of Americans into abject poverty we can reduce consumption without changing the lifestyles of those that still have money. Obviously its also a breeding ground for political activism which will actually help people reduce services more. In general what this means is the New Deal will be repealed as we head into the next great depression. The irony does not escape me.