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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