The economic meltdown is yet to really hit here in Australia - there's bits and pieces about it affecting a shift at the car manufacturer here, (but that is probably because they insist on making big V6 cars here in Adelaideand making the much more sensible in oh so many ways smaller cars overseas) or a mine here, or an exporter here, but as yet it's not Really Hit Home. I find the web is therefore a REAL eye opener about people losing their jobs suddenly and horribly for that reason.
Comments around various blogs about the manufacturing issue with the USA - applies here too. We lost our entire clothing/footware manufacturing not that long ago, and not only did we lose the skills but there was also a move away from blue collar work being available to people, and towards people having no choice but to be unemployed because they can't (or granted, won't) do the work available.
In some ways I agree with the throwaway comments being made about "bring on another depression". People are soft. They don't know how to cook, or sew, or grow, or look after animals, or bake, or live communally, or raise children, and that means they are chasing something unreal and "higher" and ?more laudible than making a home and family work.
I just read a rambly post about this topic from the perspective of Gen X. It talks a lot about the change that people are making to going back to their hearth and raising children and running on one income rather than outsourcing childcare and food making and clothes construction, and chasing a bigger house and a second car and more and more debt. So many things have been outsourced and that makes us all very vulnerable when the economy contracts and people aren't able or willing to do those things.
And I include myself in all of this - I rely on society to do things for me that I don't want to do. Society is about that at a basic level (we can't do everything for ourselves!) but it costs money to do that, and it costs more for Jane to do x for me than it would me for to do said x for me, so there is an inflation involved in that. As more things are outsourced, I have to earn more or rack up more debt to get the same things as before, and so I am now living beyond my means. Multiply that by the whole economy and we're suddenly screwed. And there will be a day/year/decade of reckoning of this and it's going to hurt.
Where are the communes these days? Not so much in the free love kind of way, but in the "farm with workers" or the "boarding house with employees living in" or the "large house with family running it" etc. We live in way more space than we need or use and have spare rooms just in case, and a craft/yoga/study/library room that we use hardly ever and try to fill with stuff that we can't afford to have and don't use and so we spend more money that we don't have to entertain ourselves instead of reading a book or doing a workout or crafting.
And raising families - it takes a community to do this. An article I read recently suggested that what defines Gen X and Y from the previous generations is that we count our friends as or above families in terms of how much we see them and what we ask of them or do for them.
This also comes at the same time as peak oil is more part of the discussion, and people are worried about the impact that the reduction in cheap energy will have. I see so many of my friends getting bikes and scooters, and moving close to where they work, and reskilling, and embracing crafts and reuse/recycling/repurposing, and living in share houses even when in adult years.
I am trying to work through what this means for having a family plans in the next year or so as well. If the economy does implode here, I am relatively safe as I will always be able to find work. I can't say the same for many of my friends and family though, which is distressing.
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It is the economy and Peak Oil.
"Peak Oil and the Global Economy"
Recent news headlines reveal that the U.S. economy is deteriorating rapidly: “Be Prepared for More Cutbacks,” “Mass Layoffs Continue at Rapid Pace,” and “Economy’s Plunge is Worst in Quarter-Century.”
The Work Bank forecasts that the recession of 2008 will extend into 2009 and probably to 2010:
“A pronounced recession is believed to have begun in mid-2008 in Europe, Japan, and most recently, the United States. This recession is projected to extend into 2009. The possibility of a serious global recession cannot be ruled out. Even if the waves of panic that have inundated credit and equity markets across the world are soon brought under control, the crisis is likely to cause a sharp slowdown in activity stemming from the deleveraging in financial markets that has already occurred and that is expected to continue.”
The World Bank sees some signs of optimism for 2010, but concludes that “global recession is likely to be protracted” and “an even sharper recession is likely.”
A variety of analysts of The Wharton School, forecast a deep recession extending through 2010 and possibly beyond.
Gerald Celente, Editor and Publisher of "The Trends Journal," forecasts a global economic collapse beginning in 2009 (interview summary, not quoted directly):
The global economy will collapse in 2009, resulting in the worst recession in the post WW II period. The commercial real estate sector is highly leveraged and will collapse beginning in late February or early March as major retailers fail, leaving vacant rental space that will not be filled. This will lead to further failures in the finance and banking sectors and higher unemployment which is at 13% and growing.
Some two-thirds of the U.S. economy is based on consumerism, which is declining rapidly due to increasing unemployment. Declining personal income means a shrinking tax base and a need to raise state, local, and federal taxes and user fees.
This economic collapse, Celente believes, will lead to the "Greatest Depression," more corporate fraud, increased street crime, taxpayer revolts, rioting, and revolution. Survival is now a real concept as people lose investments and jobs. A return to frugality and self-sufficiency will characterize the economy in years to come.
Financial analyst Gail Tverberg explains the economic crisis in terms of a “Tower of Debt.” Because most debt ultimately rests on personal income, as personal income declines most debts are at risk: unfunded pension liabilities, unfunded Medicare and Medicaid, Social Security debt, publicly held federal debt, government sponsored enterprises (such as Fannie Mae and Freddie Mac), state and local government debt, financial businesses, businesses, and household debt (mortgages, credit cards, and education loans). This supports Gerald Celente’s forecast. When personal income declines (due to increasing unemployment), consumerism declines, retails businesses fail, highly leveraged commercial centers fail and default on loans, causing banking and financial institutions to collapse.
ASPO-Ireland examines the economy in light of Peak Oil (excerpts from the ASPO Newsletter):
“Oil demand had begun to outpace supply around 2005, when the production of Regular Conventional Oil passed its peak. The shortfall was however relatively small and was partly met without undue difficulty by a modest reduction in consumption.
But as prices began to firm, oil traders and other speculative financial institutions began to take a position in the market, which had the effect of driving up the price. Gradually the process built momentum as huge notional profits were reaped from the appreciating asset. In a conventional market such movements would soon be countered by increased production, but in the case of oil, there was no spare capacity to release, and the speculative surge fed on itself leading to an extreme escalation in price which reached about $150 a barrel by July 2008. However as this peak [in prices] was approached, the traders began to conclude that a limit was close and began to buy future options at lower prices, which began to undermine the price in a self-fulfilling process. In parallel the high prices began to undermine many other aspects of the economy with for example airlines and automobile manufacturers facing difficulties. They themselves relied heavily on debt, which itself was traded between banks without adequate genuine collateral, and were forced to unload their speculative oil positions in order to try to shore up their failing businesses. Gradually the whole edifice collapsed, and oil prices fell to around $50 a barrel, although nothing particular had changed in the actual supply/demand relationship.
The flaw in the system was to treat a finite resource whose production was largely controlled by the immutable physics of the reservoir as if it were a normal commodity capable of responding to ordinary market pressures. If the price of potatoes increases, farmers can grow more and the market responds, but oil is different.
Governments responded to the crash by pouring yet more money, itself lacking genuine collateral, into the system in the mistaken belief that this would restore the position of assumed eternal growth, and quite possibly the stock market will respond positively as traders sense a new upward direction. They have no real interest in reality: their job being to try to reap rewards from short term movements.
But if there is an economic recovery, that would serve to increase the demand for oil, which is in a sense the lifeblood of the modern world, and oil prices would again begin to surge. Probably, it will take several such vicious circles before governments and, more important, people at large at last come to grasp the reality of the situation, which will likely prompt radical changes in the human condition.
Meanwhile, desperate efforts are being made around the world to shore up the crumbling financial system. For example, the Bank of England has radically reduced interest rates in a country facing a severe recession, effectively taking money from savers to give to spenders.
The Government has evidently failed to grasp the underlying causes of recession and hopes that pumping a bit of money into the system will restore it to its previous condition. That was premised on eternal economic growth, which is a somewhat unrealistic proposition for a Planet of finite dimensions, but Governments subject to re-election are by nature short-term in their thinking.
One is led to conclude that the entire Stock Market, including especially the oil market, has become a thoroughly debased speculative institution. In earlier years, investors clubbed together to build a specific project, such as a canal or railway, with the resulting dividend being the prime motivation. Things seemed to have gone wrong when such investments were traded on markets by financial institutions which naturally can have no serious knowledge of the underlying business or the true value to be placed upon it.”
Energy investment banker Matthew Simmons, like ASPO-Ireland, notes that today’s low oil prices and credit shortage will reduce investments needed for oil production, resulting in lower oil production in the future, followed by increasing oil prices as demand out strips supply, which will then cause another economic downturn in the future. Simmons also notes that the aging oil infrastructure of drilling rigs, rusting platforms, pipelines, and refineries must be renovated, requiring trillions of dollars in investments at a time when credit is tight..
Independent studies indicate that Peak Oil occurred between 2005 and 2008 and that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil the U.S. conserves will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly. More and more oil is expended in oil production and processing as lower grades of oil are extracted from an increasing number of smaller oil fields that are located in hard to access ocean depths. These factors will increase the oil production decline rate above the six percent that is forecasted in a few years
These Peak Oil factors suggest that there will be no economic recovery following the economic collapse of 2009 and that the recession will deteriorate into a permanent economic depression that will worsen over time.
In 2007, the U.S. General Accountability Office (advised by a panel of 13 scientists of the National Academy of Sciences) examined the potential of alternative energies for replacing liquid fuels (that are vital for transportation and food production):
“An imminent peak and sharp decline in oil production could have severe consequences. The technologies we examined [ethanol, biodiesel, biomass gas-to-liquid, coal gas-to-liquid, and hydrogen] currently supply the equivalent of only about 1% of U.S. annual consumption of petroleum products, and DOE [U.S. Department of Energy] projects that even under optimistic scenarios, these technologies could displace only the equivalent of about 4% of annual projected U.S. consumption by around 2015. If the decline in oil production exceeded the ability of alternative technologies to displace oil, energy consumption would be constricted, and as consumers competed for increasingly scarce oil resources, oil prices would sharply increase. In this respect, the consequences could initially resemble those of past oil supply shocks, which have been associated with significant economic damage. For example, disruptions in oil supply associated with the Arab oil embargo of 1973-74 and the Iranian Revolution of 1978-79 caused unprecedented increases in oil prices and were associated with worldwide recessions. In addition, a number of studies we reviewed indicate that most of the U.S. recessions in the post-World War II era were preceded by oil supply shocks and the associated sudden rise in oil prices. Ultimately, however, the consequences of a peak and permanent decline in oil production could be even more prolonged and severe than those of past oil supply shocks. Because the decline would be neither temporary nor reversible, the effects would continue until alternative transportation technologies to displace oil became available in sufficient quantities at comparable costs. Furthermore, because oil production could decline even more each year following a peak, the amount that would have to be replaced by alternatives could also increase year by year.”
There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and surface mining equipment.
The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”
"By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."
With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work.
We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair.
When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances.
With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.
Governments, business and individuals should prepare for the impacts of Peak Oil.
http://survivingpeakoil.blogspot.com/2009/02/peak-oil-and-global-economy.html/
It seems to me that another reason people outsource things is that their time is worth more (in either monetary or intangible ways) than the cost of someone else. For example, my boss is a GP who works 6 days a week, often 12 hours a day. Her work time is worth easily $100/hr, her leisure time therefore at least that, so she hires a cleaning lady.
Perhaps this outsourcing is the new blue collar work? People who would previously work in a factory are now cleaning houses, starting a dog-washing business, mowing lawns, etc.
So, if this economic downturn gets worse, it may be the responsibility of those still swell-off to outsource as much as they can in order to provide work for those who have no other employment.
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