<DrumBeat: October 13, 2008 The Oil Drum Revisiting an April 2007 Forecast Regarding The Connection Between Peak Oil and the Collapse of the Monetary System>

152 comments on Herman Daly on the Credit Crisis, Financial Assets, and Real Wealth

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Gail the Actuary on October 7, 2008 - 12:52pm Permalink | Subthread | Parent | Comments top

It seems like the lower level of debt will reduce natural gas production. We have already seen cutbacks in planned drilling from natural gas companies, related at least in part to the loss of available credit markets.

It may also interfere with oil production and distribution, because there are many smaller entities (oil and gas service companies, gas stations, various kind of subcontractors) involved in the distribution chain, and they rely heavily on debt financing. Utilities are similarly likely to be affected. They are likely to have a more difficult time buying fuel and trading for electricity over the grid.

All of this is likely to lead to disruptions of many types--loss of electrical power, shortages of gasoline and diesel, and probably some interference with agriculture.

At the same time, we no longer have factories for a lot of basic things we need--repair items for the electric grid; new nuclear reactors; fertilizer; clothing and shoes; items to repair the cars we drive. One can think of a lot more.

With the disruption to fuel supplies and utilities, we will most likely have a lot less that we can manufacture or produce from agriculture. At the same time, our needs for imports will be as high, or higher, then ever before. How do we bridge this gap?

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Paleocon on October 7, 2008 - 1:01pm Permalink | Subthread | Parent | Comments top

A working capital market will arise again, with or without gov't help. It'll cost more, for sure.

Beyond that, I think there will be some cases of VC-funding (but small scale, family and friends) and shoe-string entrepreneurship to address observed manufacturing niches, and re-purposing of some existing businesses. For example, about half of my wife's employer's business was related to luxury toys like personal watercraft and high-end motorcycles, and the rest to things like generators and lawn equipment parts.

Boats are down, but generators are up. Expensive motorcycles are down, but they're looking at a growing scooter market. Interestingly, they'll go for some shared-risk development with new companies, but not much credit-risk for any customers.

I fear, though, that the primary solution for the nation will be the same as for individuals as credit runs out -- they'll sell assets to raise cash to live. For the nation that means we may take outside investment to get some oil and some capital. That will only work as long as SOMEBODY has capital to invest. A spiraling decline could wash out a round of investments and close that spigot as well.

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ormondotvos on October 8, 2008 - 6:52pm Permalink | Subthread | Parent | Comments top

Your incorrect axiom is that we NEED those imports. Incorrect. We WANT those imports.

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152 comments on Herman Daly on the Credit Crisis, Financial Assets, and Real Wealth

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