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A mild recession that causes the oil price to drop is better than a sudden crash under high prices. It gives time to prepare for a transition if in fact that is possible. Those still with jobs should be scared into permanently cutting back their energy use, cheaper prices or no. The tough times will be when there are no more voluntary cuts to be made.
I don't want to be a doomer but I feel very pessimistic as to what can be done. The problem, as I see it, is that we have become greatly overextended and just when we need resources to change our world the resources will become scarce. Also, I don't see the political will to take the right steps. Our political system is based on increasing extraction of resources and a growing economy.
On the plus side there is considerable slack in our system which could allow us some chance to muddle through. Think of all those people driving alone in cars. It should be technically (not socially) easy to double them up which would cut our oil use almost in half overnight.
Similarly, many people live alone in relatively large homes. There is huge opportunity to have them double up and cut energy use dramatically. Again, this is technically possible but it would be socially very difficult.
Hi Neutrino23,
have a read of this: http://energybulletin.net/23259.html
It's one of the posts that GailTA put up as a link in his work. It's a great insight into how conditions changed for the Soviets during the collapse of the USSR back in the late 90s and compares how 'prepared' they where with the USA now. I do not live in the USA but I do not see Europe as being that much better prepared.
As I read it I could easily imagine that some sort of 'tipping point' might be reached in the next decade or two whereby cascade effects cripple the US. I would think that those Nations suffering from PO effects now -think some of the African Nations where oil is just unnaffordable unless you are rich- are good microcosms of what could happen.
Its clear that we are entirely unprepared on just about every level and this is during times of plenty. We have gone so far beyond merely sustaining our existance that forever increasing standards of living are ingrained as a birth-rite into our psychie. Its going to be an awful awful shock to 98%+ of the population when the realization hits -like learning that the ship is sinking and there arn't enough life rafts.
Perhaps at this point people will be prepared to spend the sorts of sums talked about on preservation but not yet. Also consider that we have just seen the effects of distressed financial times in the form of a minor credit crunch -no money for big projects, tightening lending- couple this with fear of losing jobs or being made redundant, mass unemployment, inflation and you get an investment environment that procludes purchase of renewables, fancy new hybrids, etc.
Having said that there will always be those that profit during the coming times... Look what Abromovich achieved...
I am now considering payments for stuff that may be useful as 'insurance' but I am very much rooted in the 98% camp apart from my increasing awareness of 'troubles afoot'...
Regards, Nick.
Anything that can be done without further investiment is socially easy during a crisis.
Arkansawyer
Watch this.
The Fed just cut the discount rate.
The same thing that brought us to this point.
So we get to borrow money at less cost to finance
money we can't pay back.
The dollar should break now as China begins to unload.
Arkansawyer
"It gives time to prepare for a transition if in fact that is possible."
When the status quo is given time, we keep the status quo.
We now have the financial undead to match the political.
Friday, August 17, 2007
A 50 bp Gift From The Fed
The official Fed Funds target rate is 5.25%, but the effective rate is currently around 4.79% - this is the average at which Fed Fund transactions between banks have actually been taking place during the past 7-8 days. The Federal Reserve is supposed to intervene in the interbank money market to maintain its target rate, but it has not been doing so.
Since a variety of adjustable rate loans use the official Fed Funds rate as a benchmark, the Fed's lack of action is a direct gift to lenders who continue to pocket the 5.25%+spread rate on their loans, while their cost of funds has gone down almost 50 b.p. - at least for the portion that is related to the interbank market. A fifty basis point gift may not sound like much, but in banking it is huge. It is also conclusive evidence of unofficial easing which, if it goes on past this week, should start raising some awkward questions. For example, why is the Fed penalizing household borrowers for the benefit of the banks?
Posted by Hellasious-suddendebt
And this:
"Those still with jobs should be scared into permanently cutting back their energy use, cheaper prices or no."
The exact opposite-the more afraid, the more is used.
And outsiders are made to cut back. Think Republican Guard.
McGowan: That one line is classic- "why is the Fed penalizing household borrowers for the benefit of the banks?" All this time I had thought those players got together on Jekyll Island to help Joe Sixpack and his indigent cousin. Classic.
Arkansawyer
Wall Street becomes another Green Zone.
8D
Brian--
The Fed's main purpose is to protect the value of the Creditor Class--
Have you ever read Secrets of the Temple?
The book on the fed--