Posted: Thu Sep 09, 2004 10:23 am Post subject: Peak Oil won't change our economic situation much for a whil
We're going to substitute natuarl gas for gasoline/diesel in the near future, I think. With that change, we'll probably be able to retrofit cars and trucks to burn natural gas without too much trouble. That should extend our current economy another 20-30 years!
Collapse is inevitable eventually, but it might not be anywhere near as bad as we think. LNG is coming, and will be here for quite a while. We'll be building electric cars and trucks soon, and that will carry us forward as well. More nuclear plants, cleaner coal, and a little demand destruction will serve us well.
I don't think it'll be the catastrophe I was convinced it was. We'll have cars that get 250+ MPG within the next ten years, thanks to VW. They put out a demo two-seater a little while ago that got 256MPG. Even with gas at $20/gal, that wouldn't make all that much of a difference to my budget, since I'd be getting 8x the utility out of a gallon that I get now. Couple that with bicycle trips for local things, an improved public transportation system, and conservation efforts based on higher prices, and we've extended the economic crash out another 20+ years!
I don't think we'll be seeing the end of life as we know it any time soon. True, we'll have to keep this issue percolating, but it really might not make a huge impact on our lives in the short term.
Posted: Thu Sep 09, 2004 11:13 am Post subject: Re: Peak Oil won't change our economic situation much for a
Ayoob wrote:
I don't think we'll be seeing the end of life as we know it any time soon. True, we'll have to keep this issue percolating, but it really might not make a huge impact on our lives in the short term.
The USA's real economic condition is about as bad as it could be; like I said earlier—it is the most debt-ridden nation on earth, owing about $25,000 U.S. for every single one of it's 290 million men, women and children. It is worse than the position of Indonesia when it imploded economically a few years ago, or more recently, that of Argentina.
Even without the advent of peak oil, we cannot sustain this level of debt. Have you read my Peak Oil Perfect Storm? There is a lot more at play here than you suggest. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
A lot of people don't even own a total of $25,000 in assets and money. Homeless people basically own nothing. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
A lot of people don't even own a total of $25,000 in assets and money. Homeless people basically own nothing.
I miss your point. Could you clarify, please? _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
What you said is that the debt is $25,000 for everyone. That includes people who have lived in poverty their whole lives, and couldn't hope to ever pay that much money. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
That figure is what the per capita national debt is today, not including private debt.
Our national debt is $7.3 trillion dollars or $25,000 per capita, with a projected deficit for this year alone of $521 billion—which exceeds the entire national debt at the end of 1972 which was $449 billion—every cent of it borrowed at interest from somewhere. Check the figures for yourself here: http://www.publicdebt.treas.gov
And I still miss your point. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
I don't understand how national debt can possibly be measured by person. I don't understand how people who haven't made $25,000 in their lives be considered in debt of that much money. What does the "per capita" measurement really mean? You can't slap a debt on someone who has no control over it. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
I don't understand how national debt can possibly be measured by person. I don't understand how people who haven't made $25,000 in their lives be considered in debt of that much money. What does the "per capita" measurement really mean? You can't slap a debt on someone who has no control over it.
The national debt is the money our government has borrowed to finance the business of our country and to pay its bills. What we don't collect in taxes, we must borrow. Per capita debt is how much that borrowed money represents when divided amongst the people on the receiving end, Social Security, infrastructure, Medicare, etc. It is not an amount that individuals owe per se that they must pay back, but a debt that the country owes to those from which we borrowed. In our case, we owe it mostly to Japan and China at the tune of about 3.7 trillion.
When a country finds itself at this level of debt, is becomes unsustainable. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: Aug 10, 2004 Posts: 1104 Location: San Diego, CA, USA
Posted: Thu Sep 09, 2004 12:38 pm Post subject:
And the $7.3 trillion doesn't even include the Social Security and Medicare imbalance. I think the article I posted here the other day brings the effective debt to $37 trillion dollars.
Beyond the $3.7 trillion deficit in 2003, however, the numbers get even worse, because the shadow deficit has been taking its toll ever since the Johnson era. According to the Treasury's 2003 financial statement, the U.S. government has a negative net worth of $34.8 trillion. That $34.8 trillion reflects $36.2 trillion in financial liabilities offset by $1.4 trillion in assets, of which only $0.4 trillion are liquid.
Part of the underlying reality-the actual operating cash shortfall-is reflected in the growth of the federal debt. During fiscal 2003, for example, gross federal debt increased from $6.2 trillion to $6.8 trillion, or by $600 billion, against the unified $374 billion deficit. As of the end of August 2004, the debt had increased to $7.3 trillion.
While gross federal debt is at a record, relentlessly pushing against borrowing ceilings, the markets, press and politicians generally ignore that portion of the debt borrowed from Social Security and similar programs. So, the September 30, 2003 debt level commonly is reported as only the $3.9 trillion owed to the public, instead of the total $6.8 billion. Again, the more accurate GAAP estimate of total government liabilities is $36.2 trillion.
So everyone is really in debt by about $250,000. Take that to the bank. Good news though: the government can print money to pay everything off. That'll solve the problem. Just ask post WWI germans.
And the $7.3 trillion doesn't even include the Social Security and Medicare imbalance. I think the article I posted here the other day brings the effective debt to $37 trillion dollars.
While we are adding logs on this fire, let's add the trade deficit. If the June $55.8 billion is a sign of anything, that extrapolates out to an annual CAD of about $670 billion dollars. And with oil prices going up that will soon be over a trillion, which means our $1.7 billion needed daily investment will soon head over $2 billion. Isn't economics fun! _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Joined: Jul 17, 2004 Posts: 487 Location: Amerika (most of the time)
Posted: Thu Sep 09, 2004 2:15 pm Post subject:
OK people help me out here because I'm an engineer and not an economist. I understand the whole debt situation (to a point) but my question is can this debt ever be realistically dealt with (without seriously harming our wonderful "way of life")? It's not like the US can declare bankruptcy or raise taxes exorbitantly, so what can we do?
Also if our boy Dubya is re-elected (which I think is a very strong possibility these days) and my taxes stay low, can we possibly get through the next four years of more outrageous deficit spending without having to pay the piper?
Joined: Aug 13, 2004 Posts: 34 Location: Brooklyn, NY
Posted: Thu Sep 09, 2004 2:32 pm Post subject:
Out of curiosity, what would happen if the US ultimately came to war with China over oil, taiwan, etc? What would become of this debt? Is it nuts to think that we could wipe out the entire debt we owe to the Chinese by merely stating we will not honor those notes? Obviously there would be some international backlash, but isn't debt after all merely paper? I know zilch about international banking and finance, and hate to sound entirely ignorant but am hoping someone might shed some light on this. I keep reading that the national debt is a loan we never intend to pay back. Is the idea that as long as the economy grows faster than the interest payments on the debt the system is stable?
OK people help me out here because I'm an engineer and not an economist. I understand the whole debt situation (to a point) but my question is can this debt ever be realistically dealt with (without seriously harming our wonderful "way of life")? It's not like the US can declare bankruptcy or raise taxes exorbitantly, so what can we do?
Also if our boy Dubya is re-elected (which I think is a very strong possibility these days) and my taxes stay low, can we possibly get through the next four years of more outrageous deficit spending without having to pay the piper?
Big, there are no easy answers, but I'll give it a go. Most currencies in the world are fiat money, meaning they have no backing like we did on the gold standard. In 1973 Nixon took us off the gold standard when France started seeling its dollar reserves for gold. Even the silver certificates that were around in the sixty have been declared fiat money, even though it says right on the face "payable to the bear on demand in silver."
Since then, every bit of money issued by the federal reserve, save the coins, is debt money with nothing behind it but our promise to pay. For a long time, that wasn't an issue, but with our debt as high as it is now, the ability for us to pay is questionable.
To create the money supply, the govt prints treasury notes which are bought by the FED, the govt places that money in the Fed bank to pay its bills. Now the Fed with the Treasury notes as "security assets" can print $9 dollar for every $1 dollar, a 10% reserve. Other countries buy these notes as well, to the tune of 3.7 trillion held by Asian banks alone. We have to have 1.7 billion dollars of this foreign investment in our "security assets" every day to keep us afloat. In another post, I stated:
Quote:
Bottom line, foreign demand for the U.S. dollar funds the U.S. federal budget deficits. Foreign investors flush with dollars typically look to U.S. treasury securities as a means of secure investment. With a large reduction in such investment, the country could potentially go into default. For example: If you owe your bank $10,000 and you can’t pay it back, you’ve got a problem. But if you owe your bank $3.5 trillion and can’t pay it back, then the bank has a problem. In finance, at least, size does matter. Things could turn very bad, very quickly. Investment money would flee the country, real estate values would plummet, and Americans would shortly find themselves living in Third-World conditions. We'll be like the monarch used to riding around in an extravagant litter, only to find ourselves dropped to the ground with no hands to carry us.
If the dollar tanks, this 3.7 trillion worth of bad checks is going to hit the bank. People will trade in their dollar reserves for, most likely the euro. It is estimated that there is billions of dollar squirrel away in Russian mattresses just ready to be dumped on the market. This is one of the reasons for the new currencies we have seen in the US. Lots of counterfeit $100 dollar bills floating around.
When the dollar drops in value, the FED will have to increase the money supply which creates inflation. Once it starts, there might not be and end. Look at Indonesia, Argentina, and Weimar Germany in 1922. the printing presses literally couldn't print the money fast enough. Since the US dollar is the reserve currency in the world, every one has to have it to buy oil. The banks has to have a dollar reserve in the banks. But they don't just stack it there, they buy US securities with it. Do you now see how this goes round and round?
With the CAD (current account deficit) at over 5% of GDP, unless someting new in economics arises, we will have a major market crash like in 1987 that could tumble a lot of dominoes. What can we do about it? Well, the Bush neo-cons think their colonial adventure in Iraq ight help. What do you think? Are things working?
To answer your question directly, I see no way out of this mess unless we start spending the money into existence, rather than lending it, and take an across the board 75% reduction in the standard of living and work from free market enterprise rather than capitalism. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Out of curiosity, what would happen if the US ultimately came to war with China over oil, taiwan, etc? What would become of this debt? Is it nuts to think that we could wipe out the entire debt we owe to the Chinese by merely stating we will not honor those notes? Obviously there would be some international backlash, but isn't debt after all merely paper? I know zilch about international banking and finance, and hate to sound entirely ignorant but am hoping someone might shed some light on this. I keep reading that the national debt is a loan we never intend to pay back. Is the idea that as long as the economy grows faster than the interest payments on the debt the system is stable?
Well, in the past the conquering country didn't have to pay squat back. If we said we wouldn't honor those debts, in other words, not make good on the Treasury notes, which are a promise to pay a specific rate on a specific amount at at specific date, the world world exchange our dollars for euros and the same scenario plays out like in my last post.
Yes, the theory is that if the debt is X amount of the GNP, it is not an issue if you can have infinite growth infinitely. When the trade deficit exceeds 5% of GDP it historically becomes unsustainable. Folks , it's like peak oil, once we go over that curve, its downhill all the way. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
If the American economy collapsed, the rest of the world would loose a huge market. The global demand for oil would go down, so in a way, it might be a good thing in the long run.
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