$this->bbcode_second_pass_quote('pup55', 'A')nyway, to get the thread back on-task, the original quesiton posed was:
$this->bbcode_second_pass_quote('', 'd')o you guys think that the oil cycle this time will be different
considering the huge fiscal US deficits, the low saving rate,
the poor real wages of the US worker...or anything
that may be different in this cycle compared to the 1970's ??
PeakOil is You
Comments re 1970s vs today ??
Re: Comments re 1970s vs today ??
by oilluber » Sun 12 Feb 2006, 11:11:24
I would suggest that the problems have been slower to hit in this cycle compared to the 70's, but the effects will be much more severe when they finally do.
a. In the 70's when more of the economy was manufacturing driven if there was a disruption in demand, the manufacturers felt it immediately, and started to lay off employees immediately. This was because unlike now, when somebody lost their job, they stopped consuming. In those days, the average credit card debt was less than $100 per family.
When Volcker raised interest rates in the late 70's the huge factory I worked went from full production to having laid off 2/3 of its workers and threatening to shut the doors altogether, in about 6 weeks.
b. Nowadays, the economy is based on services and other activities and when demand evaporates, which it will, a lot of the economy is just going to go away. Example: lawn services and cleaning services which exist now because people "don't have time" to do it themselves. Per the department of commerce, this is about 40% of the economy today, vs. 28% in 1970.
c. There are whole industries now which developed in the 90's and which contribute really minimal value, but consume a lot of money and generate a lot of gdp. One example of this is the leisure travel business (cruises to cancun and trips to vegas) which were essentially nonexistent in the 70's and will just completely disappear when things get bad enough.
The data is not 100% clear but there is some suggestion that it is about 10% of the DGP, and in some places, like vegas, it is more like 1/3.
The whole support structure, including hotels, airlines, etc. will be really hard hit.
e. Software: There is some question in my mind as to how much of this industry will vanish. Some software is productivity-enhancement and useful, however, some percentage of this is entertainment-based and is discretionary.
f. Farmers: Back in the 70's there were some, now there are a lot fewer. Farm income in 1970 was about 1% of gdp, now it is about .3% of gdp, which means it has dropped by about 70% since then. Part of this is the takeover of family farms by corporate operations, and the rest of it is that they are not getting squat for the crops. I believe if you will check the prices, the corn and soybean prices are pretty comparable today to what they were in 1975, if not lower, in real money not including inflation. Anyway I am really worried about this from the standpoint of reliable domestic food supply. Also, you can make the argument that the .3% of GDP indicates that about 2/3 of the economy is "air" and the rate of core economic activity that will not go away when the next recession happens is only about 1/3.
The interactive DOC tables below are kind of interesting:
US Dept of Commerce
US Dept of Commerce
Travel and Tourism
Thanks PUP !!, your wisdom leads me to think that your are not
a much of a pup, but a wise old dog.
The information you've given me is interesting.
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oilluber - Coal
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Re: Comments re 1970s vs today ??
by oilluber » Sun 12 Feb 2006, 11:11:53
$this->bbcode_second_pass_quote('lawnchair', 'V')iewed from an American perspective, the difference is between the euphoria of the US at-peak, versus the distant euphoria of a world at-peak, but a US thirty years past.
Personally, I've chosen a symbolic date for "Peak USA". That date is 14-December-1972.
That was the day that the Apollo 17 lunar module lifted off the moon. That was the end of human, haul-our-monkey-butts, exploration. A third of a century later, and we have bothered to do no more, nor even go back to the moon. Too bureaucratic, too scared of failure.
In the end, 14-Dec-72 is pretty meaningless, but it makes a good date.
Slightly over a year before, US oil production peaked at a level we'll never return to.
Nixon closed the gold window in 1971. This was not so much a cause of disaster, but an admission that US extractive growth ability was over. 15-Aug-71 would also be a good day to pick, but it took a while for Bretton Woods to collapse. This inflection point is the triumph of the modern system of inflation. Sure it's 'measured', at a 'healthy' 3-5% (except when it's not). But, the collapse of a stable currency has lead to the hypertrophic growth-at-all-costs mentality. Simply owning one's means of production, and making enough to pay the bills, is not enough. You must also grow enough to keep up with Leviathan's (govt and banks) growth rate, or else slowly be whittled away. Except, you have to make more, more, more; Leviathan must simply print money.
Finally, within a year after Apollo 17, the OPEC nations had the US in a vice-grip over oil. Ever since, more and more of our efforts go to the people who still-have providence-given hydrocarbons under their sand. Since we extract less, and make less, every year since 1973 has been eating away at our infrastructure. Roadways, railroads, water projects, urban investment, quality of education... business investment, too... we've been gnawing away ever since, to send it overseas.
None of this was clear in 1970. It may not be clear to Americans of 2006, but it is a part of their psyche. Those of us in the US under 35 know a very brash and very hollow superpower.
Personally, I've chosen a symbolic date for "Peak USA". That date is 14-December-1972.
That was the day that the Apollo 17 lunar module lifted off the moon. That was the end of human, haul-our-monkey-butts, exploration. A third of a century later, and we have bothered to do no more, nor even go back to the moon. Too bureaucratic, too scared of failure.
In the end, 14-Dec-72 is pretty meaningless, but it makes a good date.
Slightly over a year before, US oil production peaked at a level we'll never return to.
Nixon closed the gold window in 1971. This was not so much a cause of disaster, but an admission that US extractive growth ability was over. 15-Aug-71 would also be a good day to pick, but it took a while for Bretton Woods to collapse. This inflection point is the triumph of the modern system of inflation. Sure it's 'measured', at a 'healthy' 3-5% (except when it's not). But, the collapse of a stable currency has lead to the hypertrophic growth-at-all-costs mentality. Simply owning one's means of production, and making enough to pay the bills, is not enough. You must also grow enough to keep up with Leviathan's (govt and banks) growth rate, or else slowly be whittled away. Except, you have to make more, more, more; Leviathan must simply print money.
Finally, within a year after Apollo 17, the OPEC nations had the US in a vice-grip over oil. Ever since, more and more of our efforts go to the people who still-have providence-given hydrocarbons under their sand. Since we extract less, and make less, every year since 1973 has been eating away at our infrastructure. Roadways, railroads, water projects, urban investment, quality of education... business investment, too... we've been gnawing away ever since, to send it overseas.
None of this was clear in 1970. It may not be clear to Americans of 2006, but it is a part of their psyche. Those of us in the US under 35 know a very brash and very hollow superpower.
You are absolutely right about the 1970s as being a peak for the average,
blue collar US citizen, atleast in my observations, though not the peek
for the concentration of wealth for the rich.
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oilluber - Coal
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Re: Comments re 1970s vs today ??
by pup55 » Sun 12 Feb 2006, 12:05:30
$this->bbcode_second_pass_quote('', 'I')s this first paragraph a real stat? I'd like to read the study that made this conclusion.
Not a real stat, just an observation: There was sort of a class structure in college back in the 70's, at least where I went, not necessarily directly related to GPA but based on whether the kids were "smart" and "competent" (as defined by me at the time) and had some general knowledge base and could understand that you have a problem and if so, how to solve a problem.
We had a lot of respect for most of the pre-med types, and most engineering types you could sort of tell kind of had their act together, and maybe the pre-law and pre-business types were kind of middling but it seemed like those kids that went into education, although mainly friendly and kind of squishy, you would not want to be stranded on a desert island with, if you know what I mean.
I am not sure this is reflected on the standardized testing, and it definitely had nothing to do with grades, because plenty of those characters graduated cum laude despite their apparent lack of ability to design, build, create, or fix anything.
I review the alumni newsletter periodically, and I think these observations, if not measurable, are mainly how people actually turned out.
So the school boards and boards of education, and administrations in the school systems in the country are now populated by these characters. A lot of them are former football coaches, as Ross Perot pointed out at one point.
I don't know how you define this in a more measurable way.
$this->bbcode_second_pass_quote('', 'i')nformation you've given me
I will give you a human body metaphor.
It's like one of those overweight contestants on "the biggest loser". You take away their supply of calories, and eventually you get down to the muscle and bone that is making the whole thing work.
The GDP only measures the mass of the economy. You take an economy and feed it cheeseburgers for a decade or two and a lot of excess blubber will develop. You still count it as part of the body, but it is just along for the ride.
When the supply of cheeseburgers is cut down, the blubber will evaporate, and the underlying muscle and bone of the economy will be what is left.
So the question of the day is, are we in better shape now than we were in the 70's and there is plenty of evidence to suggest that there is still a core economy deep under this mass of blubber that is real, and at this point it is probably 1/3 of the economy, where you can make the argument that in 1970 it was maybe half or 60%, depending on what you count, and the exact percentages are up to the economists to decide.
So who will fare better when the cheeseburgers are taken away? Maybe the lean, productive economy will feel the pain before the one with the excess blubber, but at the end of the day, about 2/3 of the fat guy is vulnerable to being gone.
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