[CrudeAwakening]

One of the problems economics has is that it's axiomatically unsound - I mean, all consumers are rational? Who came up with that one? No-one in the marketing industry, that's for sure.

Still, having said that, I think it's a useful subject to gain familiarity with, as long as its limitations are kept in perspective.

[Bas]

Economics has many simple but interesting insights into the workings of human society. However, having studied economics, I know they tend to lose themselves in theoretical models that have little value in the real world, so I quit.

[LadyRuby]

http://www.marketwatch.com/news/story.asp?guid=%7BACA070FB%2D3E67%2D4E8B%2D8D2A%2DEAAD6594989B%7D&siteid=mktw&dist=


$this->bbcode_second_pass_quote('', 'T')he high level of oil prices represents the biggest threat to the U.S. economic outlook, said economist Allen Sinai on Friday.

A rise in energy prices could threaten to unleash inflationary pressures, he said in an interview with MarketWatch at the Federal Reserve's policy conference. This might cause the Fed to hike rates and dampen growth.

Sinai stressed that this scenario was a risk and not his forecast. Sinai is chief economist for Decision Economics, a private consulting firm.

...

But Sinai said the economy has been slowing to a 3% growth rate from a 4% rate.

[h2oaso]

I find, as in James Hamilton's Econbrowser example, that the economics "invisible hand" solution is often either over- or understated. The idea that it is presented as a solution at all is most likely not new, especially on this board or with most of you POers.

What it's got me thinking about, as I've been following the MonteQuest post-PO thread, has been two things: what is a possible post-PO economics scenario (and have we seen it already happening), and the lack of distinction b/t local, national, and global levels as well as economic, geopolitical, environmental, societal, et. al. levels. It would help if, when coming up with a prognostication, that it is exactly that - a prognostication, not a haphazard prophecy. The distinction is that one that has clear basis in reality as can be compared and demonstrated in the face of $66 oil.

In short, most of the scenarios I've been reading about have been a mishmash that have arguably failed to descend to coherent local analysis, for the most part choosing to gloss over this in favor of a more apocalyptic die-off scenario (which I wouldn't at this point really argue isn't going to happen) which will somehow affect "the world."

Don't even get me started on class distinctions...

[whiteknight]

$this->bbcode_second_pass_quote('h2oaso', 'D')on't even get me started on class distinctions...

[MrBill]

You are all screwed! Especially those of you who 'rage against the system'! ; - )) Depletion economics? You do not even understand the economics of plenty? Good luck! Prices rise and living standards fall! Any questions? HAHA!

[RonMN]

MrBill...you're starting to sound like the Mogambo

[vision-master]

Maybe I can get on more Government programs.........

[MacG]

$this->bbcode_second_pass_quote('MrBill', 'Y')ou are all screwed! Especially those of you who 'rage against the system'! ; - )) Depletion economics? You do not even understand the economics of plenty? Good luck! Prices rise and living standards fall! Any questions? HAHA!

[drew]

Schadenfreude, Mr Bill???

lol


drew

[SILENTTODD]

"There are always survivors"- Hermann Oberth

[MrBill]

$this->bbcode_second_pass_quote('MacG', '')$this->bbcode_second_pass_quote('MrBill', 'Y')ou are all screwed! Especially those of you who 'rage against the system'! ; - )) Depletion economics? You do not even understand the economics of plenty? Good luck! Prices rise and living standards fall! Any questions? HAHA!

[seahorse]

Mr. Bill,

You seem to suggest the same thing suggested by Kaplan in his 90s book called "The Coming Anarchy."

My simple thesis is that the rise of the middle class which began using money as a means of exchange (unlike the feudal barter system) goes hand in hand with the rise of resources, and that modern day capitalism and democracy, which cannot be separated historically, are the result of bountiful and exploitable resources, but, as these resources decline, we will see, as you and Kaplan point out, an ever increasing divide between have and have nots, the centralization of power and resources (SCO, BRIC etc), until eventually we become much more feudal, depending on how limited the resources become.

It seems there is a strong link between money supply/creation and resources, and as resources dwindle, money supply could break, control of resources becomes paramount (Michael Klare) which reduces the power of money or in a worse case scenario does away with capitalism/middle class altogether, and we basically rotate full circle to a feudal type system of control/government. The advent of hi-tech systems, globalization, weapons etc make it more and more possible for a few to control all the resources and the many who depend on them.

Its possible with the rise of globalization that we could see a society not based on governments with defined geographic boundaries, but the rise of big corporations, similar to the old 70s book and movie "Rollerball."

[MrBill]

Well, at the moment, we have visible minorities of young, mostly male, anarchists that like to bust things up and light them on fire. They're an umbrella group for the disaffected, although they are more often than not also a product of the middle classes. They have been given their schooling free even if they did not bother to learn anything useful. Along with the economic benefits of growing up in a stable social-democratic country with strong institutions.

Basically, they have nothing to complain about in comparison to the social movements that gave rise to unions and socialism/communism in response to real abuses in market power over the masses. Their injustices are more imagined than real compared to 1850-1930s. But they are no less angry. So we have to ask why?

A strong middleclass means that for every angry youth there is one working towards a good education and hopefully a promising job afterwards. And a stable base of working middle class workers who do not want to see their communities burned down or destroyed by wild youths.

On the third night in Denmark, you started to see more and more ordinary Danes come out to help put out the impromptu fires that the anarchists were starting. They received less TV coverage, but they were obviously concerned about their community as well.

A shrinking middle class becomes more polarized. Fewer middle class to shelter the rich from the poor. Fewer verticle avenues for the poor, but motivated to climb. A Brazil or Argentina instead of a Germany or France. It makes everyone poorer in the end.

I have not read Kaplan. But I just get the feeling that a) we are becoming more polarized even if absolute incomes are higher, and b) that this anarchism we are seeing by relatively well-off youths is a symptom of plenty, not too little. However, against the context of declining natural resources and fiercer competition that many workers will fall further behind and then it will be their children throwing petrol bombs and clashing with the security or police.

The police are not guarding the assets of the rich, who can afford the security and to pay for their replacement, but also the communal assets that have to be paid by taxes as well. Here they think nothing of trashing a public building because someone will re-build it using someone else's taxes. In another age rough justice would have meant the community would have turned on anyone or any group who deliberately made everyone poorer.

[Bas]

depletion economics is quite unchartered territory and so is the psychology of transition from growth to long term decline; maybe we should try and analyse the big depression in this context.

[MrBill]

$this->bbcode_second_pass_quote('Bas', 'd')epletion economics is quite unchartered territory and so is the psychology of transition from growth to long term decline; maybe we should try and analyse the big depression in this context.

[MacG]

$this->bbcode_second_pass_quote('MrBill', 'O')ver the past two summers we have seen a lot of riots by dissaffected youths in Europe and I have to ask myself why? France, Spain, Italy, the UK and now Denmark last weekend. The flashpoints have all been different from football to race riots, but the common theme is bored youths with too much time on their hands. And their outlook on life may lead them to be pretty disconnected from the system so to speak. So they attach great importance on football or some other reason to rage against the system.

[Bas]

I'm aware of the shortcomings of the big depression when comparing it to the coming crisis, but it's still the best we have for comparison. For instance the bank defaults in America led to alot of american credit being withdrawn from Germany, leading to Hitler's rise. Now suppose something like that happens to China propelling the rise to power of a fascist leader there ----> China marching into the ME to capture the remaining oil. (alot of speculation I know)

[IslandCrow]

$this->bbcode_second_pass_quote('MrBill', 'W')ell, at the moment, we have visible minorities of young, mostly male, anarchists that like to bust things up and light them on fire. They're an umbrella group for the disaffected, although they are more often than not also a product of the middle classes.

[MrBill]

I agree. For example, say demand destruction destroys 25% of the energy needed to fuel unnecessary economic or recreational activities. Then the jobs dependent on those activities are gone as well, and that labor needs to be re-deployed, which many here have correctly said needs energy as well.

But let us also argue that in the future 25% of our needs come from renewables (wind, solar, hydro, nuclear, geo-thermal, bio-mass, etc.). Well, if you think about it, that percent has to increase if existing supplies from non-renewables fall. Less absolute supply from petroleum the greater the percent replaced by renewables even if overall supply decreases.

As overall supply decreases in nominal terms then the economic value of the remaining or existing supply increases in real terms. If you have a reliable source of energy like a hydro-electric dam then the future value of its output climbs in value as traditional sources of electricity like nat gas are depleted. So even though energy output falls in real terms the value of the remaining supply can increase in value in real terms. It 'almost' has to because certain manufacturing practices are more efficient using machines rather than human labor including the food needed to feed that labor.

I say 'almost' because of our experience in the developing world (and Iraq for example). When thieves steal the copper wires of the electricity grid then the village and that factory go without power. Anarchy makes everyone poorer. And in the face of declining resources everywhere and the inputs needed to to keep existing infrastructure running, like energy, that economic output cannot take place, and therefore the potential power the hydro-electric plant can produce is worth less as well.

So how can you plan for the economics of resource depletion if you cannot factor in social factors? Will I be able to run that factory based on the power from the hydro-dam, if I am not sure the grid will survive intact to supply the needed power? From a dry analytical point of view you have to put a lower future value on those income generating assets because of their uncertainty as well as not knowing the future costs of maintaining and replacing the physical plant.

But if you and your family depend on that factory, power plant and electric grid for your economic survival, and alternative sources of income simply no longer exist like government hand-outs, then you will be much less tolerant of angry youths or theives destroying your livelyhood. Rough justice will no doubt be dispensed.

Does that lead to fascism? Well, it does if that is the only model of government that protects income earning assets and their economic wealth generation from the displaced mobs. As well as communities becoming smaller, more cohesive as well as less tolerant of outsiders and dissent. It is economic survival.