Since long ago I was planning to write a separate article on the benefits of the recession. But today I came across the Marketwatch article covering the topic pretty well. In short, the recession is a necessary part of the economic cycle, the way the economy is fixing itself.
Am I suggesting that I don’t care that people feel the pain during the recession? No, I care, but I think that they have to feel the pain, like any medicine is painful.
If the problem is that we off-shored our production away to China and became a nation of real-estate brokers that just borrow the money from China and sell homes and mortgages to each other then I think the fix of the problem will be that all those fat-assed people seating behind glass doors in various agencies lose their jobs, foreclose their homes and go to factories and start assembling a new generation of fuel-efficient cars and windmill electricity generators.
And the new generation will know that if you want to live well you need to work with your hands or your head and not flipping real estate
November 24, 2007 at 2:23 pm
theroxylandr wrote:
“…foreclose their homes and go to factories and start assembling a new generation of fuel-efficient cars and windmill electricity generators.”
Here is my comments:
1. Most of those workers are not qualified to work in factories. Do not believe that modern US factory workers are unskilled. Also consider that most modern US factories are highly automated and mechanized. A manfacturing plant that required thousand of workers, now only requires dozens. I don’t see these people working in the service sector moving over to manufacturing. Plus building new factories requires capital and demand. With the capital market drying up, and demand falling for goods, how do these new factories get built?
I would also like to add, some of the other reasons why US manufacturing exited the US:
1. High Corporate Taxes (35% in the US)
2. Excessive Labor rates and expensive healhcare benefits (highest on the globe)
3. Lack of resources including water and natural gas. (Plastics, Agraculture petrochemicals, etc) have or are in the process of living the US to where natural gases and other industrial resources are still abundant.
4. High property taxes.
I don’t see any of these issues will be addressed.
2. Fuel efficient cars are not going to save the day. We have not be able to increase Oil producting since May 2005 (see http://www.eia.gov) (ie Peak Oil). Its just a matter of time before personal transportation for the commoner goes extinct (probably less than 20 years). Sooner or later, major Oil exports will begin to recognize the strategic importance of Oil, and begin husbanding there remain reserves. You can see this is already happening as several exports have begun to nationalize their Oil assets (ie Venzuela, Russia, etc). Other nations such as Austrialia and Canada have had closed door meetings about the future of their energy exports (including Oil and Natural gas).
3. Windmills have serious flaws:
a. The don’t generate power when the wind does blow, I have read many articles over the past few years about disappointing output from many windmill farms. The Power output averages only about 30%. This makes it increditable difficult because loads cannot be reduced when the wind is blowing less.
b. Wind farms need to be backed up with storage systems and Hydro storage is the only pratical method available. The problem is that we lack water and land situable for hydo storage.
The only realistic sources of energy are coal and nuclear. Athough both have issues:
a. There currently is insufficient rail available to expand coal fired production. We have already maxed out the rail system.
b. Lack of nuclear fuel. Only 0.07% of Uranium ore contains fissable U235. There are only a few dozen locations globally that have economically recoverable Uranium.
c. Both plants required large quanitities of fresh water to operate. We are already running into water shortages in many parts of the country.
d. NIMBY. Nobody wants a Nuke or coal plant in their back yard. Hell most don’t even want Windmills near them either!
To sum it up, We simple have too many people and we are exceeding the resources available to us. (limits to growth).
What I see in our future is another economic depression, as we have a dollar crisis, and energy crisis, and a credit crisis. I think that politicians will move available resources into entitlements rather than re-invest it in infrastruction, factories, non-fossil energy production. The unemployeed, underemployed, those living on gov’t entitlements, are easy prey for politicans to pick up as votes. Make a campaign revolving around bigger gov’t handouts and they are assured election. This game will continue until the system breaks. It may start this winter as poor people can’t afford to pay for heat and the politicians leverage this to provide fuel subsidizes. But as energy prices continue to rise (do to the falling dollar, increase overseas demand and declining production), more and more people will file for benefits. Thus resources for for retooling our economy will vanish under a sea of entitlements.
Starting next year the boomers will be elegable for retirement. The existing gov’t projections assume that boomers will work past retirement age, but I think a recession/depression changes that. If a boomer can’t find work, they are almost certianly going to file for SS benefits. I think this is going to put a drain on the Gov’t finances much sooner than they gov’t has anticipated.
The FED seems bent on destroying the US Dollar in a false belief that lowering (Interest rates) (really only Treasury rates) is going to open investors wallets to invest in MBS. Sorry Benny, even if you drop to the rates to Zero, they aren’t comming back! The only possible way out was a Gov’t bailout, but I think that window of opportunity is fading as investors are increasing losing faith. Once they have lost faith, it will be very difficult to get it back. If Benny keeps lower raises, it going to remove the US dollar as the worlds reserve currency and that spells disaster. We import more than 10 mmbd of oil priced in USD and we recieve more than $2 Billion per day in credit from overseas. If Oil is no longer priced in USD, gasoline prices (as well as everything else imported) will probably more than double with in a very short period.
November 24, 2007 at 4:30 pm
I’m going to get out of selling strip malls and start an ammunition factory right after I get my Canadian citizenship.
November 25, 2007 at 1:24 am
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