<DrumBeat: January 6, 2009 The Oil Drum Natural Gas and Credit Situation - Nate Hagens Interview on Global Public Media>

231 comments on Financial Forecast for 2009, Considering Resource Limitations

Comments can no longer be added to this story.

| Show without comments | PDF version

Gail the Actuary on January 6, 2009 - 12:34pm Permalink | Subthread | Parent | Comments top

Regarding where we are going, I think we tend to be very tied to our past experience. We tend to think that if unemployment only went to 11% in a past recession, that is as high as is it will go. I expect what we are doing is moving on a continuum from 100% (or 94%) of us being employed in today's types of institutions, to 100% working at self-sustaining occupations which may not even be counted in today's estimates of what the economy looks like. We could very well end up with 25% of the people losing their jobs in today's economy, in 2009 or 2010. Some of them may figure out a way to do something that doesn't fit in today's economy. Some may grow more o their own food; some may (illegally) work on dismantling buildings that are no longer being used, and selling the scrap for other uses. In the years ahead, I don't see the traditional unemployment rate as going back down, just more jobs moving to the currently uncounted sector.

Regarding what happens first, the problem is that everything is so interconnected that what happens first is almost irrelevant. Perhaps commercial real estate collapses three to six months before bonds, or perhaps it works the other way around. Everything is so inter-connected that each decline helps bring on another decline. If you are thinking that you can put your money in one area, then quickly move it to another, I doubt that you will really be able to accomplish what you plan.

Comments can no longer be added to this story.
Paleocon on January 6, 2009 - 1:04pm Permalink | Subthread | Parent | Comments top

Thanks for the reply.

I wonder if the unemployment rate will also degrade in meaning as the underemployed will grow -- an unemployed banker working as a grocery stocker is "employed" officially, but perhaps not in his view.

I wonder if the collapse of the two-earner family may occur as well, as the combination of lower wages and harder work may well push second-earners back home to help save money (clipping coupons, cooking from scratch, avoiding childcare bills, etc.). A single-wage-earner may travel to find work as well, and send money home to the "wife and kids". I can't see a lot of companies paying relo in a worker-abundant market, and moving a household may be an expensive risk just to follow work, but commuting for contract work, seasonal farm work, hurricane repair, etc. might make good sense for some.

"Betting the farm" on timing or even deflation/inflation seems like an unacceptable risk to me (see other comments in this thread). I'm going to sock away cash to the extent possible, and consolidate real-estate (fewer properties with few/no loans rather than more properties with several loans). It's a deflationary strategy, really, but "safe". Beyond that I just want to stay employed -- that seems like the most important "protection" you can have whether markets are deflationary or inflationary.

Comments can no longer be added to this story.
RobinPC on January 7, 2009 - 8:56pm Permalink | Subthread | Parent | Comments top

Highly unlikely any ex- bank worker will get a job as a shelf stocker, as the retail sector will be forever shrinking too. Those people I saw in their last days at Woolworths will never have a job again, I reckon (though I could not bring myself to tell them).

And not just the collapse of two-earner families. The sums will cease to add up. All sorts of households will go bust, start to starve and become ill, and resort to suicide if not dead by other means first. "Wealthy" people will not be exempt from this, as their wealth is a mere figment of imaginations of varying enthusiasm.

Comments can no longer be added to this story.
pasttense on January 6, 2009 - 2:05pm Permalink | Subthread | Parent | Comments top

The big question is what do I do with my limited retirement funds? So far i am paralyzed with indecision.

Can't TOD produce some articles on this subject?

Comments can no longer be added to this story.
Gail the Actuary on January 6, 2009 - 2:26pm Permalink | Subthread | Parent | Comments top

I think the point is that almost any paper investment will not work, and you cannot expect government or insurance to provide very much. I expect most of us will end up working as long as we are able. If we can team up with children or other younger relatives, that could be helpful.

There might be some things that one can buy that will be helpful for barter. Some argue that physical gold and silver will be helpful. Small, useful objects would seem to be even better (bottles of liquor; medicine; canned food).

Buying land, tools and seed theoretically might work, if we can also learn the necessary skills, can deal with all of the needed inputs (water and compost particularly, also ways of repelling insects and animals), and keep others from stealing what we produce and the government from reneging on our ability to keep the land.

We have started the Campfire series of posts (Wed evenings and Saturdays), dealing with some of the practical aspects of what may be ahead.

Comments can no longer be added to this story.
WNC Observer on January 6, 2009 - 4:08pm Permalink | Subthread | Parent | Comments top

I am assuming that at some point in the next decade, the US government will realize that it cannot possibly make good on Social Security as presently configured. What I expect to see happen is that everyone will just get a minimum amount each month, regardless of prior earnings and contributions. This minimum will be pretty low, and become ever-lower in terms of real purchasing power. Someday it might go away completely.

I also expect that the federal or state governments will increasingly rely on institutionalized programs to deliver food and shelter to those who are unable to live on whatever money they have. The feeling will be that living on one's own in one's own home is a luxury, not a right, and if one doesn't have enough money to afford it, then it is not an increasingly impoverished society's obligation to provide it.

Thus, for those of us approaching retirement, I suggest the following:

1) You MUST liquidate all debts, and own your home free and clear. Don't even THINK of retiring unless and until you are at this point.

2) Try to set yourself up to raise as much of your own food as possible, make your home as energy efficient as possible, and invest in renewable energy if possible. You want to minimize your dependence upon and vulnerability to food and energy supplies.

3) Be prepared to do SOMETHING to bring in some money (or bartered goods) for as long as possible. This might be something different than you are doing now. Forget about "retirement" from all work; at best you might be able to shift to a different and less physically demanding type of work.

4) Reconfiguring one's home so that one can take in a renter is a good idea. Not only will this bring in enough money to help cover property taxes, there are also advantages in having more hands around the house as one gets older.

5) As far as your finances are concerned, don't put all your eggs in one basket, and live below your means. You need multiple retirement income assets, and need to assume that some will lose value or might go away entirely. You need to live on less than what your retirement assets could provide initially, because you might have less in the future.

Comments can no longer be added to this story.
bruce from chicago on January 6, 2009 - 4:56pm Permalink | Subthread | Parent | Comments top

You MUST liquidate all debts, and own your home free and clear.

Are you referring to all debts, or just the secured ones? Credit cards, not being secured, don't provide a creditor much remedy to get their money back. Not being an expert in Cred Rem, (never took the course in law school, not my interest then, wish I had now) it appears it would be difficult to go after real property to satisfy a credit card debt. I'm guessing a lot of this debt will go up in smoke.

Comments can no longer be added to this story.
Gail the Actuary on January 6, 2009 - 5:18pm Permalink | Subthread | Parent | Comments top

I personally have followed this, but I am not as certain that liquidating all debts is necessarily helpful. If the US government has huge debts, it will work as hard as it can at inflating those away (pay them back, but in dollars that aren't worth much). Also, if we go to a new monetary system (similar to rationing coupons), who owes what in the old monetary system may not make all that much difference.

Comments can no longer be added to this story.
WNC Observer on January 6, 2009 - 5:34pm Permalink | Subthread | Parent | Comments top

I come at this from a different direction. I assume that as one enters what we presently know as "retirement age", one's ability to adjust to changing circumstances becomes increasingly constrained. For example, it is fine to say that one simply will not retire and just keep working. Unforunately, your body just might not cooperate with that plan, and employers might not be very keen on it either. Thus, I am suggesting that one forgo the temptation to game the system, and just try to minimize one's vulnerabilities.

Comments can no longer be added to this story.
bruce from chicago on January 6, 2009 - 6:41pm Permalink | Subthread | Parent | Comments top

Thus, I am suggesting that one forgo the temptation to game the system, and just try to minimize one's vulnerabilities.

That probably is the smart choice, and the one I'm taking. However in a situation in which one has to make the choice between paying off unsecured debt, especially if it was made for an emergency such as unforeseen medical bills, versus paying day to day bills or keeping some cash stashed in a secure place to give one some flexibility, I'd go for the latter, and consider bankruptcy as an option. What good is being debt free if the credit market has collapsed and you have no cash or assets to help you through?

Comments can no longer be added to this story.
aangel on January 7, 2009 - 12:18am Permalink | Subthread | Parent | Comments top

The ideal would be to pay off the credit cards AND have cash, but if the former is isn't possible in a reasonable time frame I'd rather have cash on hand, too. Thus I'm "hoarding" cash right now and will get back to paying down the credit cards once I've reached a certain level of cash.

The cash hoarding would go quicker except that I'm also making other preparations i.e. building my personal library, stocking the disaster kit (which got up there in $$'s once I was done), etc.

Comments can no longer be added to this story.
jewishfarmer on January 7, 2009 - 10:34am Permalink | Subthread | Parent | Comments top

WNC, realistically, I think that the longer term future of baby boomers is something like what happened in Russia - they now will need to rely on their children or other family members, or on non-family relationships that trade long-term support for home and land. I don't think that most older people will be physically or economically able to go it alone - Orlov observed that this was particularly tough on the grandparents who had been able to help their children and now depended on them. Elder work is often likely to be child care so that the adult children can bring in income - I expect to see a lot of older folks lose jobs and never be able to find them again. Cottage industries are good too.

I agree strongly about paying off the house - because boomers have a disproportionate portion of wealth, and frankly, there's a good chance their kids and grandkids are going to be living in it with them. The family home and its capacity to produce food and cottage industry will probably matter a lot more than it has.

But if I had to add a number to that list, it would be "begin to get along with your family." Right now with one exception, our parents are all comparatively more affluent than we are - but they rely on invested funds, not on earned income, and I have long term concerns about what they will live on. I'm not a totally atypical case - my husband and I between us, in our mid-thirties have 7 parents - divorce and remarriage on both sides. For my husband's four parents, he is an only child. Our personal nightmare ;-) is the arrival of previously divorced exes, all in crisis.

Sharon

Comments can no longer be added to this story.
ccpo on January 8, 2009 - 12:52am Permalink | Subthread | Parent | Comments top

Should we see a collapse of biblical proportions, on the order of something between the Dark Ages (though a bit of a misnomer) and the Stone Age, I wonder if the practice of discarding the infirm and unproductive might begin to arise? Seems euthanasia and suicide might become more accepted options for the formerly-affluent current generations unable to cope well with the reduced standard of living.

Caveat: unlike many, I see the only things preventing everyone being well-fed are ignorance of farming methods, politics and Big Money. It is, in my opinion, absurdly easy to feed all 6.7 persons currently alive. However, people (in the sense of the entirety of humanity, are selfish and stupid, so...) Thatis to say, I am not advocating the above measures in any way, shape, or form.

Cheers

Comments can no longer be added to this story.
Consumer on January 8, 2009 - 1:00am Permalink | Subthread | Parent | Comments top

I agree. I consider myself a techno-cornucopian, and a political doomer.

We could solve these problems, but we won't.

That's really the most frustrating part of all of this. It doesn't have to be this way, but it will.

Comments can no longer be added to this story.
pragma on January 8, 2009 - 1:35am Permalink | Subthread | Parent | Comments top

You and I might disagree on the level of mitigation possible but more and more I think it's moot.

Politics are barrier 1
Disaster capitalists are barrier 2
Foreign bad actors are barrier 3

Mix this all in with a healthy dose of denial, BAU and a credit crisis and I think we're toast.

Comments can no longer be added to this story.

231 comments on Financial Forecast for 2009, Considering Resource Limitations

Comments can no longer be added to this story.

| Show without comments | PDF version