The Oil Drum

I think the internet is just a little more resilient than that :-) Sure, TOD, PeakOil, DieOff, etc will get bombarded at first and hosting may go down, but the cluefull know how to use Google cache and once the initial furor dies down the masses will listen to talking heads on Tee Vee while the existing peak oil oriented sites cope with a 10X increase in subscribers.

There will, of course, be efforts to spin it just like the effort to spin global warming. Unlike global warming denial we'll see blaming - the oil companies, the {Arabs|Iranians|Venezuelans|etc}, the environmentalists, and so on.

There will be an immediate ferocious effort to undo environmental laws and pillage everything in sight - the environmentalists will be blamed for not permitted the development of the ANWR, and so on.

It'll take a bit, perhaps a couple of years due to depression slowing consumption, but it'll sink in that its us and we have to change here.

Gotta work on some of the phrasing, but I agree, there's a great song there.

- Scott
"Try sour grapes; you might like them."

Check out the Asylum Street Spankers video, Stick Magnetic Ribbons on Your SUV.

Warning: language. For mature audiences, with the sound turned down.

"I'm sitting here in Iraq
And I wish my head eyeballs in the back
It's a bummer that my Hummer
Isn't armored to a T
To show me your support
You've spent a dollar ninety-three ... "

That's my understanding. My point was that dividing up the profits of a company among its owners is a fundamentally less chaotic system than the capital gains speculation based model we have now. It turns things like
*Being informed about the company
*Being informed about the company's competitors
*Being able to invest your fractional vote on the board into improving the company's profits
into
*Being able to seed a rumor about a company in the right places
*Being able to psychoanalyze the market as a whole
*Being able to find inside info on the company
*Growing the company into a monopolistic monster, even at the expense of profits

Short term profits are based on meta-information (rumors of rumors), and long-term profits are based on unsustainable(and eventually monopolistic) growth.

Is this system more adaptable to growing economies? Certainly. But is it much more dangerous in a shrinking economy, when things get rough? I think so. Too much positive feedback: if the market ever convinces itself that seriously hard times are coming, panic sets in and the times get significantly harder.

This all is parallel to the fact that we've let financial services grow to a ridiculous amount, and the trade balance run so far out of bounds. You can't run an economy sustainably on people selling each other credit, insurance, car loans, entertainment, military tech, leisure, intellectual property, and imported electronics; At least, not for very long. Having international companies drop all their profits here can sustain us for a while... until the rest of the world stops putting up with them, they all move to Dubai, or we stop putting up with them because they leak too much money to the third world.

it's that we are very shortly going to see huge decrease in our ability to borrow from the social security account (payroll taxes) to fund our budget

Yup

we'll be paying a significant amount of interest on social security money we've already borrowed from the fund

Not really since the gov't isn't going to charge itself interest. The gov't currently borrows money form SS revenues (surplus). It uses the SS surplus to pay for general gov't spending (aka Miltary, education, infrastructure, etc). Although, the gov't will need to borrow much larger amounts of money to support budget deficits for federal spending and increased entitlement outlays, as the SS surplus declines and when SS outlays exceed SS revenues.

Starting next year, outlays begin to rise and the first wave of boomers are eligable for retirement and SS revenues will begin to decline. I think between 2011 and 2014 the outlays will exceed SS revenues. The gov't figures expect the outlays will not be a problem until about 2017 because they believe many boomers will work past minimum retirement age. But I believe we are headed for a severe recession (housing\credit bubbling popping), which will cause unemployment to rise significantly. An unemployeed boomer is much more likely to go for early retirment if they can't find a job. Considering the rise of heath insurance, its likely that the boomers will be the first group targeted for layoffs. I am almost certain that the gov't estimates do not include a recession in their estimates.

Its likely that the Republicans will lose control of both the houses and the executative branch by the 2008 elections (they'll loose some more seats this November). By 2009 the democrats will have a strong majority in both the senate, congress as well as have their man/women in the white house.

Its likely the the Democrats will substantially raise taxes (as they have been promising for years) and expand entitlements for the unemployeed and retirees which are large groups that vote for democrats. These policy changes will drive up inflation and unemployment. Higher entitlements lead to higher inflation and higher taxes lead to higher unemployment. This will further deterate tax revenues (less buying power due to inflation and less tax dollars from higher unemployment) will lead to larger deficits (as the higher taxes and inflation take a toll on the US economy. Eventually something will break.

The biggest issue that would prevent US hyperinflation is energy imports. The US needs energy imports to survive (even more in the future) Perhaps, if Congress gets desperate enough they will just start printing money. If this happens, virtually every exporter will stop shipping oil to the US, and the US as a nation ceases to exist. If we are lucky, the USA will become the DSA (Divided states of America) with each state havings its own currency.

I think in the near term energy prices will fall as a recession cuts demand (at least in the US, and perhaps in other regions). Although, I think there is a good chance that demand in Asia will continue to grow (after all Asia could sell off its dollar reserves for commodities and use capital to bail out bad loans). Its possible (but unlikely) that Asia will absorb all of the oil made available from reduced US consumption keeping oil prices high. I have strong doubts about this.

I think we will see shades of both inflation and deflation. The dollar is likely to continue to weaken as the economy slides into recession, which means imports will likely become more expensive (or at least not become significantly cheaper). Since we have a real estate market that is severely over priced, Real estate is bound to head into a deflationary cycle. There is a chance that a US lead recession will spread to other regions (Europe is a good candidate since it too has endured a credit/housing bubble). Asia has is also in a bubble but I think there is a 50-50 chance of it avoiding a major recession if internal demand picks up declining exports and if China uses its US dollar reserves to prop up its economy (might as well spend them).

if oil prices begin to slide because of a recession, investment in new energy projects will dry up, since no one is going to build a an offshore platform for profitable at $80 or $100 oil when prices are at $60. This will be a huge problem later on, because we need desperately replace declining reserves. If the economy is still in recession when oil prices begin to rise again (cause by depletion), there will not be enough available capital to restart these projects. In a recession bankers and investors are very hesistant to lend money if they believe the economy is weak. If energy prices remain high during a severe recession it will prevent the economy from ever recovering, since the industrialized economy is dependant on cheap energy for growth (which increases employment).

Another possible scenerio, is that the US goes to war in order to maintain access to foriegn energy supplies (ie full draft, carpet bombing population centers, etc). Don't think that if the democrats are in power that we won't go to war. The US went to war when Wilson, FDR and LBJ were president (all democrats). Its likely that other nations will join in with the US (possible as NATO) to ensure all western powers have access to energy supplies (Europe is dependant on foreign energy imports too) . Of course this could lead to an all out global war since some non-Nato nations (Russia, China) may not like the US or NATo taking over the Middle East, Africa. In which case, we will endure a nuclear war.

One last scenerio that I will discuss, is the possibility of a major global pandemic, killing billions. We can see some of the poor regions are already running into food shortages. These will likely get worse in the future, causing growth of diseases caused by mal-nuetrition and well as lack of proper medical treatment. Refugees fleeing will spread a contagious diseases to other regions resulting in a global spread. Remember the SARs and the bird flu? They are still out there. All they need is the right conditions to begin a pandemic. There are also other sources such as drug resistant staph and respitory infections that could develop into pandemics.