Monday, August 15, 2005

Converging vectors

(image courtesy U.C. Davis)

As usual, an excellent article by Jerome a Paris in regards to the multiple converging vectors leading to glorious catastrophe. Damn you Jerome, just when I was feeling the tendrils of complacency….

[from the article. I recommend a full read (link above) as well as a read of the comments, as many of the arguments and other pov's are good.]
So we have the combination of Bush (borrow and spend like there is no tomorrow, give money to the rich and to the corporations), Greenspan (flood the zone with money), the US consumer (stagnant wages, but cheap money from home equity withdrawals or plastic, thus still consuming - including lots of gas-guzzling SUVs), and the oil producers (unable or unwilling to invest), and we are getting very near the end of this exercise in burning your reserves:

  • this is supposed to be an economic recovery, yet debt levels are at record highs and interest rates are still low. What will be available to cushion the shock when it comes? Not public deficts, not private debt, and not lower interest rates.
  • this is an economy built on cheap oil. When it stops being cheap, what will happen to those that have suburban houses, 50 mile commutes, 15 MPG cars and no access to public transport? what will happen to the corresponding real estate markets? what will happen to the manufacturers of the gas-guzzlers?

The recent apparent prosperity comes from having burnt through all our capacity to absorb shocks. It can last for a while, so long as there are no shocks, but we all realise that this is not very reasonable (especially when your foreign policy consists in creating massive instability in the most sensitive area of the world). We are highly vulnerable, and the consequences of any shock will be brutal - and we know that shocks are coming on the money and oil fronts.

As an individual, you still have the chance today to protect yourself from these inevitable trends, because the country as a whole will not escape it, and neither will the rest of the world.


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