Most will agree that as a society, we cannot spend our way into prosperity. In fact, many, even the most ardent bulls, will acknowledge that we have some serious issues to address in our current economy. From preliminary reports, this rate freeze will have a very minimal impact on the overall housing market.
Housing related stocks are up and with the prospect of further rate cuts, all seems well until you start facing the brutal reality of what is occurring.
If memory serves, the ratio of total public and private debt to GDP for the US was around 150% in the late Twenties, doubling to about 290% in the Thirties, as GDP collapsed.
Recently, the ratio was over 300%.
A question I asked last year was the following. What percentage of GDP in the Roaring Twenties was related to non-discretionary spending?
In other words, if we look at the ratio of total debt to GDP, not only are we now far worse off in total terms than in 1929, our debt relative to non-discretionary GDP is probably far greater.
I've used Thom Hartmann's' description of a high tech company that he consulted for. They had the appearance of enormous economic activity--until they ran out of venture capital funding and closed their doors without ever delivering a real product.
All of this suggests an absolutely ferocious collapse in discretionary spending in the US.
I don't know about the other old farts who post on TOD but the Depression impacted my life tremendously even though I was born toward the end of it. My dad's father lost his business and went from lower upper class to upper poor while my mom's parents have several families living in their house.
I looked at all of this and swore I would do my best to insulate myself from the vagaries of the economy so far as possible. This eventually included giving up my career in the chemical industry and millions in potential income to move to the boondocks where I could produce most of my food if necessary and provide my own heat and power. And, naturally, with no debt.
It is saddening that so many people today do not have the historical perspective to understand how things can collapse.
I've put it this way: produce or perish. We are going to be forced to once again become a nation of producers.
http://mentatt.blogspot.com/
Tuesday, December 11, 2007
“The End of Cheap Food” Cover Headline of Economist Magazine, December 10, 2007
It has been calculated by a number of credible sources that roughly 80% of retail price of food in the U.S. was to pay for the fossil fuel inputs of oil and natural gas into cultivating, fertilizers, pesticides, harvesting, transportation, etc… of our food. If the cost of fossil fuels doubles (not an unlikely event in my opinion) does the price of food rise 80%, or might it be more?
I prefer to believe that the market will respond quickly with more locally and personally produced food products, and if this means my neighborhood smells more like a barnyard street market in Peru than a fresh cut lawn in spring how will that affect housing values in my neighborhood? JUST KIDDING!! (about housing values in my neighborhood, pretty serious about the rest) Had you for a second… People will respond, working class and poor folks simply won’t be able to afford not to (if I may use the double negative). How else can a population with ZERO savings afford a near doubling of their food and energy costs?
Can you imagine, instead of marching for a cure for breast or prostate cancer, we have Johnny Appleseed marches for fruit trees and raspberry bushes? Al Sharpton marching for equal rights to inner city gardening space? Martha Stewart giving instruction on not just goat cheese dressing, but on milking the goat as well?
My neighbor had her lawn people out earlier this week, spraying her lush green St Augustine with a combo herbacide/feed. (Of course some of it drifts toward my otherwise organic garden.) Yup, with all we know about what's going on in the world, making sure that grass stays looking good strikes me as one of the best possible uses of my time and money.
The same issue places much of the blame for the high increases in food prices on the devotion of corn to ethanol. Food prices have jumped 75% in real terms since 2005. "This year biofuels will take up a third of America's (record) maize harvest".
Yes, perhaps we need to produce or perish. But let us not lose site of what is driving these record food prices. Why people are not protesting in the streets is a mystery to me. Have they not noticed?
If we are going to be forced to be a nation of producers, let it not be because of this misguided policy on encouraging biofuels, especially corn based ethanol.
Why people are not protesting in the streets is a mystery to me. Have they not noticed?
I suspect the reason is the same as for why $3+ gasoline has not caused the meltdown some expected. Over the last three to four decades the portion of our income that we spent on both gasoline and food has decreased. So, while we are being forced to spend more on these items, the impact is not what it would have been in the past. We are likely shifting our spending from non-essentials into these areas without feeling it as excessive pain (especially as we can get those low low prices at Walmart).
The global economy is facing a second wave of food inflation after the US agriculture department on Tuesday warned of significant falls in stocks of corn, wheat and soyabean and heavy demand.
Officials forecast US wheat stocks would shrink to their lowest level in 60 years, dropping from 312m bushels to 280m by the end of the 2007-08 crop year.
...
Cold weather damaged crops in Argentina and drought affected Australia’s wheat production. Flooding also damaged European crops.
Michael Lewis, of Deutsche Bank in London, said the decline in stocks and rising shortages in large parts of Asia suggested 2008 "could deliver another year of . . . price shocks".
The cost of oil went from $12 to around $90 dollars. By the line of reasoning above the cost of food should have gone up by at least a factor of 8. Well, it didn't.
We can afford a doubling of our fuel costs because they are a small enough percentage of total costs. We'll be poorer after that doubling, but not totally wiped out.
The US economy is doing $13 trillion a year. At $100 per barrel and 21 million barrels a day that would count up to $767 billion. Double that and we are at about $1.5 trillion. Still a much smaller number than $13 trillion. But at $200 per barrel lots of ways to reduce oil usage become cost effective. So we will buy less oil at $200 per barrel and even less at $300 per barrel.
Your simple analysis omits one fact. In 1973 the US imported only 25% of its oil consumed. Today that fraction is 2/3 or 65% (when counting refined petroleum products). So if oil were at $200 per barrel and US still using 21m per day, the annual capital outflow would be $1 trillion per year for oil energy alone. Add in consumer goods of around $500 billion and you get a drain on capital that is not sustainable.
The simple fact is that we cannot afford $200/barrel for very long as the oil dollars leaving the country cause a further decline in $$ value and result in foreign countries and companies owning our corporations, housing stock and eventually our land. Food price increase due to high cost of imported oil is just the tip of the iceberg for economic problems
We'd have to sell more stuff if we needed to spend more on oil. That size of flow of money into the US would give oil producers a lot of money to buy goods and services that we produce. They'd spend that money.
right, those ayerabs need lots of greezy burgers and as the price of oil goes to $ 200, $300 .......they will consume even more, just to keep the balance of payments in line.
This petrodollar recycling has enabled a lot of oil dollars to flow right back to where they came from in an endless upward spiral.
The real crunch for the US could come when this cosy system -setup since the war- of the dollar being the defacto reserve currency begins to falter and we may be seing serious cracks now. Already Venezula, Iran, Russia and others are talking of oil priced in baskets of currencies, Roubles, etc. As they increasingly control the supply over the next decade a new oil purchase currency could emerge as an alternative (The Arabs originally wanted to be paid in Gold but where convinced to take paper).
At this point the US really could find itself in a difficult position as then no one would need to buy its currency in order to purchase oil. As a result Interest rates would have to rise significantly in order to bolster the currency and attract foreign cash inflows. There would be little room for the type of manouvre that Greenspan and Bernanke pulled off without toasting the dollar and the US Economy.
My family came out of WW2 dirt poor, basically with the clothes on our back. I was a kid then, but I remember.
What people fail to understand is that if everything is taken away from everyone, in a free system the old ranks are reestablished in a relatively short time.
I was raised by grandparents who lived thru it.Grandmother who lost here first child to starvation in a soddy in Oklahoma while her husband tried to find work on the railroad
I would say they have colored my thinking a bit.I ALWAYS have 6-12 months food,which has served me well in the past,when layoffs were a normal part of my workyear,due to Paul Volker.
"This decade has featured record debt levels, extreme income inequality not seen since 1928 -- according to the New York Times [registration required] in 2005 the top 1% (over $348,000 in income) took home 21.8% -- their largest share of national income since 1928, and a negative savings rate of -0.7% -- last seen in 1933 -- the depths of the Great Depression."
"They thought we could ape Japan and have a weak currency AND a powerful military empire at the same time. This is, of course, impossible. Rome, Spain, China and England all tried that in the past 3,000 years and the results are always the same: bankruptcy and collapse.
The most irritating thing about the news media and online commentary has been the flood of nit-picking. It is as if the USA were reading our death sentence and then feeling triumph because we detect a grammatical error. The many messages appearing in front of our eyes via the news stream can't be ignored but the job of connecting all these things, the environment, diplomacy, economics and wars, is often not attempted. The need to keep a sense of glory and power is so great, all other information is ignored to our collective peril."
Nonsense! The events that caused the Great Depression started well before 1929 but not the depression itself. The events that will cause TEOAWKI are happening right now, but the but not the collapse itself. Causal events are not the same thing as the actual event itself.
I remember, as a kid, going out with the family and wandering the river banks in Scotland picking blackberries for jam, and preserves. And we were not alone, you could see families out almost every weekend during the season.
This summer when I went back, the bushes were laden, and not a picker in sight. (Well perhaps one - and I still had to scrub my hands to hide the stains).
In 1992, on our first trip to the UK, we made the trip to Haworth, in Yorkshire (my wife is a Bronte fan). We made the pilgrimage up to the ruins of an old farmhouse that was supposed to be the inspiration for Wuthering Heights. On the way down, we stopped at the "Bronte Waterfall" and had a picnic, finished off with wild blueberries.
As a student of The Derpression, I can say that its first victims were in the farming sector, which started its slide into depression in 1920-21, and was very immesierated by 1929. A combination of weather and depressed prices crippled most farmers who used credit to expand their production to take advantage of very high prices caused by WW1 (Europe's farms essentially shutdown).
A second point is the new electric appliance based consumer age could only count on about 1/4 of the populace as buyers for its new products; and those folks that bought the new-fangled radios, toasters, etc., only bought one (and those products were built to last--planned obsolescence hadn't been put into practice yet) because our modern "Buy, Buy, Buy" mantra and its plastic cash hadn't become ingrained. And people were still prudent with their money--They saved it in anticipation of the hard times that always come, which slows down the velocity of money.
Remember, there were no "automatic stabilizers" operating in the economy then--unemployment and disability insurance, social security and medicare (devices the neoliberalcons have tried very hard to destroy). So before 1929, the US economy was already in a world of hurt, unless one was a member of the Leisure Class engaged in Conspicuous Consumption (Great book, by the way--Theory of the Leisure Class by Veblen). Perhaps the best small book to document this is "The Economic History of the United States, Volume VIII: Prosperity Decade, From War to Depression 1917-1929" by George Soule (1947)[1964]. When we talk of the great discontent in agraria, it must be recalled that by FRR's innauguration in 1933 those folks were in many cases at the end of thier ropes. We talked about this just last night, and I asked the question: Imagine if the Joads (Grapes of Wrath) had modern firearms (there's currently more than one firearm per person in the USA, not counting military weapons)?
I am hearing True American Speech here, it's really pronounced "derpression" here you know. Also, the US has no use for professionals, it's "perfessionals" and has been for quite some time.
karkof, there was another Black Swan in the run-up to the second Great Depression ( the first Great Depression was in the 1890's, as I recall, and was called 'The Great Depression' at the time). That would be the Hurricane of 1926, which caused a crash in the Florida real estate bubble (perhaps I should say "the first Florida real estate bubble : )
History may or may not repeat, but it sure as hell rhymes.
There was a farm sector depression before 1929, but I guess it wasn't considered significant. That the farm sector crisis was related to overproduction and environmental factors certainly is worth considering today. Unlike that time, though, now food is getting expensive.
And even today, the farm sector is not considered very important outside of farming communities.
I saw a report sometime back that modeled the loss of productivity due to climate change in the U.S. I am drawing from recollection but it was something like 20% drop in productivity and higher variance. Now what did the economists think of that?
No big deal, because the ag. sector is only ca. 5% of our GDP, a loss of 20% there means only a 1% decline in GDP.
I believe this attitude prevails today among the elite economists who even care about the environment. Breathtaking ignorance about what butters their bread.
This is similar to the logic that says since energy is a smaller portion of the GDP we have less to worry about with scarcity of oil. My own take is exactly the opposite, a greater portion of the GDP depends on a smaller amount of an increasingly scarce resource.
It work both ways without, I think, there being a contradiction.
The increased COST of oil will have less effect on the economy, but the decreased AVAILABILITY will have more effect on the economy.
While the western economies can afford the oil they need, which they will be able to do at higher prices than otherwise expected, business as usual.
Once nowhere is left to squeeze efficiencies or profit to pay the heigher oil prices, and consumption starts to actually drop (ie: demand-destruction / supply-constraint) the fun begins.
This reminds me of the libertarians who think we should eliminate farm subsidies and "let the free market work." As if food is no different from Tickle-Me-Elmos.
Don't get me wrong; our farm subsidy system is flawed. But to eliminate it? That would be crazy. There's a reason why food production is subsidized in just about every nation. Namely, the customers will starve to death waiting for the free market to work.
The farm bill has been stalemated between the House and Senate since House approval in April, an amazingly long time for the bill. The present bill expires Jan 1.
A major reason is thought to be convincing urban reps that farmers even need a bill, or support, in these times of high prices.
Jason, I couldn't agree more. But, why are you surprised? I don't know about WELL, however, Sustainable Laytonville isn't doing squat even among those who showed interest. Why? My guess is that it hasn't come up and hit them with a 2x4 (so why expect economists to be any different). The only activity is that three of us meet for a long 1 1/2-2 hour lunch once a month. And, we DO discusss economics along with peak energy and how the future might play out. We even bring "handouts" and these often contain material pertainent to economics although I have to admit that I usualy bring handouts dealing with survival/making do. As an aside, I don't think the others would care if you came up to participate. Our next lunch is either Jan 2nd or 9th - I can't remember. Give me a call if you're interested. I'm in the phone book.
In the case of Ag, I am especially worried that a lot of people believe that they'll just stick some seeds in the ground and get instant food if production Ag fails to deliever the goods.
"In the case of Ag, I am especially worried that a lot of people believe that they'll just stick some seeds in the ground and get instant food if production Ag fails to deliever the goods."
Me too. And there's a lot of misunderstanding about land requirements for ag. People get flush with tomatoes in August and think they have the midas touch and with a little more effort they could be self-reliant. But trying producing a million calories for yourself, which is more about what you'd need to keep the cellular metabolism going for a year.
WELL is doing nicely. We have a lot of interest and activities still. It is less of a love-fest-oh-my-gosh-we are the ones we have been waiting for here we go changing the world...and more of a long, slow, slog beating back the forces of stupidity and getting mutually inspired from occasional flashes of brilliance and breakthrough.
I feel great having a small farm so I don't get sucked up too deeply in the events of the world or local politics, which can rapidly suck the life out of a quasi-introverted person like myself who thinks and cares.
Someone did a great chart a few months ago--an inverted pyramid--showing how the rest of the economy is so dependent on the tiny number of food & energy producers. Here's the article:
http://www.energybulletin.net/32718.html
Upside down economics
Kurt Cobb, Resource Insights
The entire economy stands on the shoulders of agriculture, forestry, and mining (especially the extraction of oil, gas, coal and uranium) and on the utilities that deliver the energy mined in usable form.
first published July 29, 2007.
This method for depicting the economy was suggested to me by two things.
First, Liebig's Law of the Minimum states that an organism's growth is limited by the amount of the least available essential nutrient. In the case of world society that nutrient would be food, though many would argue that fossil fuels are the essential nutrient since so much food production depends on the use of fossil fuels and their derivatives including fertilizers and pesticides.
Second, a piece by Dmitry Podborits argues that it is nonsense to say that the U. S. economy is less vulnerable to oil supply disruptions today than in 1970s because it produces twice as much GDP per barrel of oil. Instead, Podborits suggests, we are more vulnerable to oil supply disruptions because we have so much more GDP balanced on each barrel of oil. The same argument might be made with respect to agriculture which in the United States in 1930 employed 21.5 percent of the workforce and made up 7.7 percent of GDP. In 2000 the numbers were 1.9 percent of the workforce and 0.7 percent of GDP. We are balancing an ever larger total economy on an agricultural economy that on a relative basis
A new Finance Round-Up by ilargi has been posted at TOD:Canada.
Foreclosure Avoidance
A Society that is Psychologically Bent On Avoiding the Brutal Facts
If memory serves, the ratio of total public and private debt to GDP for the US was around 150% in the late Twenties, doubling to about 290% in the Thirties, as GDP collapsed.
Recently, the ratio was over 300%.
A question I asked last year was the following. What percentage of GDP in the Roaring Twenties was related to non-discretionary spending?
In other words, if we look at the ratio of total debt to GDP, not only are we now far worse off in total terms than in 1929, our debt relative to non-discretionary GDP is probably far greater.
I've used Thom Hartmann's' description of a high tech company that he consulted for. They had the appearance of enormous economic activity--until they ran out of venture capital funding and closed their doors without ever delivering a real product.
All of this suggests an absolutely ferocious collapse in discretionary spending in the US.
...and consider that upto 70% of the American Economy is driven by the US consumer...
Has it started, the shopping malls over here in the UK seem packed with people 'loading up their credit cards'?
I think 2008 could be a very very bad year. Note StuartSs article on how a recession may mask PO by curtailing demand just as we approach peak...
Nick.
I don't know about the other old farts who post on TOD but the Depression impacted my life tremendously even though I was born toward the end of it. My dad's father lost his business and went from lower upper class to upper poor while my mom's parents have several families living in their house.
I looked at all of this and swore I would do my best to insulate myself from the vagaries of the economy so far as possible. This eventually included giving up my career in the chemical industry and millions in potential income to move to the boondocks where I could produce most of my food if necessary and provide my own heat and power. And, naturally, with no debt.
It is saddening that so many people today do not have the historical perspective to understand how things can collapse.
Todd
I've put it this way: produce or perish. We are going to be forced to once again become a nation of producers.
http://mentatt.blogspot.com/
Tuesday, December 11, 2007
“The End of Cheap Food” Cover Headline of Economist Magazine, December 10, 2007
My neighbor had her lawn people out earlier this week, spraying her lush green St Augustine with a combo herbacide/feed. (Of course some of it drifts toward my otherwise organic garden.) Yup, with all we know about what's going on in the world, making sure that grass stays looking good strikes me as one of the best possible uses of my time and money.
The same issue places much of the blame for the high increases in food prices on the devotion of corn to ethanol. Food prices have jumped 75% in real terms since 2005. "This year biofuels will take up a third of America's (record) maize harvest".
Yes, perhaps we need to produce or perish. But let us not lose site of what is driving these record food prices. Why people are not protesting in the streets is a mystery to me. Have they not noticed?
If we are going to be forced to be a nation of producers, let it not be because of this misguided policy on encouraging biofuels, especially corn based ethanol.
I suspect the reason is the same as for why $3+ gasoline has not caused the meltdown some expected. Over the last three to four decades the portion of our income that we spent on both gasoline and food has decreased. So, while we are being forced to spend more on these items, the impact is not what it would have been in the past. We are likely shifting our spending from non-essentials into these areas without feeling it as excessive pain (especially as we can get those low low prices at Walmart).
through the Chinese subsidies in fuel and labor.
Talking of food (from the FT, so subscription may be required):
Concerns over food inflation as harvests fail
My local chain grocery store is starting to sell more fruit with a "Grown in Missouri" label...
Martha Stewart milking a goat.. now that's something I would like to see!
Jeff,
The cost of oil went from $12 to around $90 dollars. By the line of reasoning above the cost of food should have gone up by at least a factor of 8. Well, it didn't.
We can afford a doubling of our fuel costs because they are a small enough percentage of total costs. We'll be poorer after that doubling, but not totally wiped out.
The US economy is doing $13 trillion a year. At $100 per barrel and 21 million barrels a day that would count up to $767 billion. Double that and we are at about $1.5 trillion. Still a much smaller number than $13 trillion. But at $200 per barrel lots of ways to reduce oil usage become cost effective. So we will buy less oil at $200 per barrel and even less at $300 per barrel.
Your simple analysis omits one fact. In 1973 the US imported only 25% of its oil consumed. Today that fraction is 2/3 or 65% (when counting refined petroleum products). So if oil were at $200 per barrel and US still using 21m per day, the annual capital outflow would be $1 trillion per year for oil energy alone. Add in consumer goods of around $500 billion and you get a drain on capital that is not sustainable.
The simple fact is that we cannot afford $200/barrel for very long as the oil dollars leaving the country cause a further decline in $$ value and result in foreign countries and companies owning our corporations, housing stock and eventually our land. Food price increase due to high cost of imported oil is just the tip of the iceberg for economic problems
We'd have to sell more stuff if we needed to spend more on oil. That size of flow of money into the US would give oil producers a lot of money to buy goods and services that we produce. They'd spend that money.
right, those ayerabs need lots of greezy burgers and as the price of oil goes to $ 200, $300 .......they will consume even more, just to keep the balance of payments in line.
This petrodollar recycling has enabled a lot of oil dollars to flow right back to where they came from in an endless upward spiral.
The real crunch for the US could come when this cosy system -setup since the war- of the dollar being the defacto reserve currency begins to falter and we may be seing serious cracks now. Already Venezula, Iran, Russia and others are talking of oil priced in baskets of currencies, Roubles, etc. As they increasingly control the supply over the next decade a new oil purchase currency could emerge as an alternative (The Arabs originally wanted to be paid in Gold but where convinced to take paper).
At this point the US really could find itself in a difficult position as then no one would need to buy its currency in order to purchase oil. As a result Interest rates would have to rise significantly in order to bolster the currency and attract foreign cash inflows. There would be little room for the type of manouvre that Greenspan and Bernanke pulled off without toasting the dollar and the US Economy.
Nick.
Sure, it changes your whole outlook on life.
My family came out of WW2 dirt poor, basically with the clothes on our back. I was a kid then, but I remember.
What people fail to understand is that if everything is taken away from everyone, in a free system the old ranks are reestablished in a relatively short time.
I was raised by grandparents who lived thru it.Grandmother who lost here first child to starvation in a soddy in Oklahoma while her husband tried to find work on the railroad
I would say they have colored my thinking a bit.I ALWAYS have 6-12 months food,which has served me well in the past,when layoffs were a normal part of my workyear,due to Paul Volker.
That things can collapse....and DO
The Depression started before 1929.
"This decade has featured record debt levels, extreme income inequality not seen since 1928 -- according to the New York Times [registration required] in 2005 the top 1% (over $348,000 in income) took home 21.8% -- their largest share of national income since 1928, and a negative savings rate of -0.7% -- last seen in 1933 -- the depths of the Great Depression."
http://www.bloggingstocks.com/2007/03/29/income-inequality-near-1928-rec...
And only ended with Pearl Harbor.
"Depression conditions of 1930 began to affect the county by March of 1930."
Pink Slips, Christmas Parties and Burning Warehouses-
typical Depreesion entering fare.
"They thought we could ape Japan and have a weak currency AND a powerful military empire at the same time. This is, of course, impossible. Rome, Spain, China and England all tried that in the past 3,000 years and the results are always the same: bankruptcy and collapse.
The most irritating thing about the news media and online commentary has been the flood of nit-picking. It is as if the USA were reading our death sentence and then feeling triumph because we detect a grammatical error. The many messages appearing in front of our eyes via the news stream can't be ignored but the job of connecting all these things, the environment, diplomacy, economics and wars, is often not attempted. The need to keep a sense of glory and power is so great, all other information is ignored to our collective peril."
http://elainemeinelsupkis.typepad.com/money_matters/2007/12/elaine-meine...
Nonsense! The events that caused the Great Depression started well before 1929 but not the depression itself. The events that will cause TEOAWKI are happening right now, but the but not the collapse itself. Causal events are not the same thing as the actual event itself.
Ron Patterson
I remember, as a kid, going out with the family and wandering the river banks in Scotland picking blackberries for jam, and preserves. And we were not alone, you could see families out almost every weekend during the season.
This summer when I went back, the bushes were laden, and not a picker in sight. (Well perhaps one - and I still had to scrub my hands to hide the stains).
In 1992, on our first trip to the UK, we made the trip to Haworth, in Yorkshire (my wife is a Bronte fan). We made the pilgrimage up to the ruins of an old farmhouse that was supposed to be the inspiration for Wuthering Heights. On the way down, we stopped at the "Bronte Waterfall" and had a picnic, finished off with wild blueberries.
http://www.haworth.yorks.com/
As a student of The Derpression, I can say that its first victims were in the farming sector, which started its slide into depression in 1920-21, and was very immesierated by 1929. A combination of weather and depressed prices crippled most farmers who used credit to expand their production to take advantage of very high prices caused by WW1 (Europe's farms essentially shutdown).
A second point is the new electric appliance based consumer age could only count on about 1/4 of the populace as buyers for its new products; and those folks that bought the new-fangled radios, toasters, etc., only bought one (and those products were built to last--planned obsolescence hadn't been put into practice yet) because our modern "Buy, Buy, Buy" mantra and its plastic cash hadn't become ingrained. And people were still prudent with their money--They saved it in anticipation of the hard times that always come, which slows down the velocity of money.
Remember, there were no "automatic stabilizers" operating in the economy then--unemployment and disability insurance, social security and medicare (devices the neoliberalcons have tried very hard to destroy). So before 1929, the US economy was already in a world of hurt, unless one was a member of the Leisure Class engaged in Conspicuous Consumption (Great book, by the way--Theory of the Leisure Class by Veblen). Perhaps the best small book to document this is "The Economic History of the United States, Volume VIII: Prosperity Decade, From War to Depression 1917-1929" by George Soule (1947)[1964]. When we talk of the great discontent in agraria, it must be recalled that by FRR's innauguration in 1933 those folks were in many cases at the end of thier ropes. We talked about this just last night, and I asked the question: Imagine if the Joads (Grapes of Wrath) had modern firearms (there's currently more than one firearm per person in the USA, not counting military weapons)?
am i hearing Helicopter?
I am hearing True American Speech here, it's really pronounced "derpression" here you know. Also, the US has no use for professionals, it's "perfessionals" and has been for quite some time.
Damn! I even proof read the body. At least I capitalize I and the first word of a sentence.
Hi Fleam. The book title you wanted is The Jungle.
it was a joke about somebody not the spelling.
karkof, there was another Black Swan in the run-up to the second Great Depression ( the first Great Depression was in the 1890's, as I recall, and was called 'The Great Depression' at the time). That would be the Hurricane of 1926, which caused a crash in the Florida real estate bubble (perhaps I should say "the first Florida real estate bubble : )
History may or may not repeat, but it sure as hell rhymes.
PLAN, PLANt, PLANet
Errol in Miami
There was a farm sector depression before 1929, but I guess it wasn't considered significant. That the farm sector crisis was related to overproduction and environmental factors certainly is worth considering today. Unlike that time, though, now food is getting expensive.
And even today, the farm sector is not considered very important outside of farming communities.
I saw a report sometime back that modeled the loss of productivity due to climate change in the U.S. I am drawing from recollection but it was something like 20% drop in productivity and higher variance. Now what did the economists think of that?
No big deal, because the ag. sector is only ca. 5% of our GDP, a loss of 20% there means only a 1% decline in GDP.
I believe this attitude prevails today among the elite economists who even care about the environment. Breathtaking ignorance about what butters their bread.
This is similar to the logic that says since energy is a smaller portion of the GDP we have less to worry about with scarcity of oil. My own take is exactly the opposite, a greater portion of the GDP depends on a smaller amount of an increasingly scarce resource.
Economists!!!!
That's my view as well - we are told that because of efficiency a gallon of oil today supports more of the economy than ever before.
Therefore does it not follow, take that gallon of oil away and you lose more GDP than ever before!
Is it (you and) me?
Bizarre, to say the least!
I think economists are just like most of the population (including us to some extent!) - in denial!
It's probably just normal human nature, to get us all safely through the day.
It work both ways without, I think, there being a contradiction.
The increased COST of oil will have less effect on the economy, but the decreased AVAILABILITY will have more effect on the economy.
While the western economies can afford the oil they need, which they will be able to do at higher prices than otherwise expected, business as usual.
Once nowhere is left to squeeze efficiencies or profit to pay the heigher oil prices, and consumption starts to actually drop (ie: demand-destruction / supply-constraint) the fun begins.
the phrase you are looking for is:
i feel like i am taking crazy pills
No farmers, no food.
No oil, no farmers. TEOAAWKI
This reminds me of the libertarians who think we should eliminate farm subsidies and "let the free market work." As if food is no different from Tickle-Me-Elmos.
Don't get me wrong; our farm subsidy system is flawed. But to eliminate it? That would be crazy. There's a reason why food production is subsidized in just about every nation. Namely, the customers will starve to death waiting for the free market to work.
The farm bill has been stalemated between the House and Senate since House approval in April, an amazingly long time for the bill. The present bill expires Jan 1.
A major reason is thought to be convincing urban reps that farmers even need a bill, or support, in these times of high prices.
Jason, I couldn't agree more. But, why are you surprised? I don't know about WELL, however, Sustainable Laytonville isn't doing squat even among those who showed interest. Why? My guess is that it hasn't come up and hit them with a 2x4 (so why expect economists to be any different). The only activity is that three of us meet for a long 1 1/2-2 hour lunch once a month. And, we DO discusss economics along with peak energy and how the future might play out. We even bring "handouts" and these often contain material pertainent to economics although I have to admit that I usualy bring handouts dealing with survival/making do. As an aside, I don't think the others would care if you came up to participate. Our next lunch is either Jan 2nd or 9th - I can't remember. Give me a call if you're interested. I'm in the phone book.
In the case of Ag, I am especially worried that a lot of people believe that they'll just stick some seeds in the ground and get instant food if production Ag fails to deliever the goods.
Todd
"In the case of Ag, I am especially worried that a lot of people believe that they'll just stick some seeds in the ground and get instant food if production Ag fails to deliever the goods."
Me too. And there's a lot of misunderstanding about land requirements for ag. People get flush with tomatoes in August and think they have the midas touch and with a little more effort they could be self-reliant. But trying producing a million calories for yourself, which is more about what you'd need to keep the cellular metabolism going for a year.
WELL is doing nicely. We have a lot of interest and activities still. It is less of a love-fest-oh-my-gosh-we are the ones we have been waiting for here we go changing the world...and more of a long, slow, slog beating back the forces of stupidity and getting mutually inspired from occasional flashes of brilliance and breakthrough.
I feel great having a small farm so I don't get sucked up too deeply in the events of the world or local politics, which can rapidly suck the life out of a quasi-introverted person like myself who thinks and cares.
Thanks for the invite. I will check into it.
Someone did a great chart a few months ago--an inverted pyramid--showing how the rest of the economy is so dependent on the tiny number of food & energy producers. Here's the article:
http://www.energybulletin.net/32718.html
Upside down economics
Kurt Cobb, Resource Insights
The entire economy stands on the shoulders of agriculture, forestry, and mining (especially the extraction of oil, gas, coal and uranium) and on the utilities that deliver the energy mined in usable form.
first published July 29, 2007.