PeakOil is You
Where will they get the money to fund a $700 billion check?
Re: Where will they get the money to fund a $700 billion che
by threadbear » Sat 27 Sep 2008, 16:41:45
$this->bbcode_second_pass_quote('BigTex', '')$this->bbcode_second_pass_quote('threadbear', 'R')eal estate dove in Japan, but what did the general cost of goods, at the supermarket do? Also, oil wasn't a strong determining factor in the Japanese depression. Oil prices are likely going to remain surprisingly resilient, going forward, as most fiat is going to be debased, in the short term. You're basing your argument on the idea that prices tend to drop to match what the masses can afford. I can tell your age, by this argument. Having lived through 70's stagflations, I can guarantee that this is not always the case.
I was born in 1970, so I lived through it as a child. Nothing was ever more expensive than someone was willing to pay.
I totally agree that oil prices will remain high, but production is likely to drop as a result of demand destruction more than peak oil (though the effect will be exactly the same).
If you have credit you can absorb high prices today by promising to pay tomorrow, but if you don't have credit, this fact lower the ceiling on high prices a bit.
What in the 1970s cost more than people were willing to pay?
The point I am making may basically be describing a path to civil unrest as people begin to realize that the $10 in their pocket won't begin to cover the $50 of expenses they have just to survive.
But prices will come down to the level of income available to spend, one way or another.
Everything that is presently made in China, particularly clothing, was very expensive. Food--very expensive. I ate a lot of Kraft Dinner, as I'd just left home in '73. Most of the population was under the age of 30, and really struggling. Nobody had their own apartment. Rent, relative to income was crushing. We lived communally, often.
People get the concept of demand confused with desire. I would have preferred, I desired to eat more meat, but it didn't translate into demand, because I couldn't afford it. It's this economic atmosphere that encourages businesses to merge, consolidate, and then, ultimately cater to the upper 10% of income, because that is pretty much all that THEY can afford to do.
Last edited by threadbear on Sat 27 Sep 2008, 16:46:52, edited 1 time in total.
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threadbear - Expert
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Re: Where will they get the money to fund a $700 billion che
by threadbear » Sat 27 Sep 2008, 16:44:06
$this->bbcode_second_pass_quote('Tyler_JC', 'C')hina is investing in the United States government.
They are buying influence.
When the time comes to attack Taiwan, they will call in the debt, and ask if we're willing to sink our economy in exchange for the island.
We'll threaten to nuke them, etc.
The end result will be the cancellation of most of the debt and the surrender of the island to the Chinese.
It's a business transaction.
They are buying influence.
When the time comes to attack Taiwan, they will call in the debt, and ask if we're willing to sink our economy in exchange for the island.
We'll threaten to nuke them, etc.
The end result will be the cancellation of most of the debt and the surrender of the island to the Chinese.
It's a business transaction.
This is likely a done deal. There is probably an implicit understanding that the US CANNOT threaten Iran, and cut off China's oil supply, nor can they interfere with China's desires in Taiwan. Don't worry about Taiwan, they'll be okay.
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threadbear - Expert
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Re: Where will they get the money to fund a $700 billion che
by BigTex » Sun 28 Sep 2008, 00:06:00
$this->bbcode_second_pass_quote('Duende', 'B')ig Tex, while I agree with your basic premise - that 'in an environment of credit contraction and static wages, you will see demand destruction in the face of rising prices' - it will not happen quickly.
This is because people will continue to use those credit accounts which are plentiful and so easy to overexploit - credit cards. As long as the interest rates are "low" for credit cards (under 20%), people will use them to bridge the gap. Yes, they will paint themselves into a corner eventually, but this may slow down the collapse quite a bit.
It may be interesting to watch the personal debt figures over the next few months rise. Hell, for all we know at this time next year we'll be talking about a bail out for people with high credit card balances?
This is because people will continue to use those credit accounts which are plentiful and so easy to overexploit - credit cards. As long as the interest rates are "low" for credit cards (under 20%), people will use them to bridge the gap. Yes, they will paint themselves into a corner eventually, but this may slow down the collapse quite a bit.
It may be interesting to watch the personal debt figures over the next few months rise. Hell, for all we know at this time next year we'll be talking about a bail out for people with high credit card balances?
Here is a link to a story about banks reducing credit limits on a large scale in response to the current credit situation. We will see more and more of this I think, especially when people start using their credit card convenience checks to buy krugerrands.
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