Tuesday, Oct 28, 2008
The Perfect Storm: Peak Baby Boom Spending Collides With Peak Oil/Commodity Prices in 2009-2010
A New Book By: Harry S. Dent, Jr.: The Great Depression Ahead
Between mid to late 2009 and mid to late 2012, the U.S. will see the next Great Depression and the
deflation of the “three bears,” bubbles in stocks, housing, and commodities. This occurrence will
represent the de-leveraging of the greatest credit bubble in history and will have much greater effects
than we have seen thus far on banking and financial systems. Americans will see the first and last
“Great Depression” of most of our lifetimes. Most people simply are not prepared for this coming
dramatic change in our economy. Aging Baby Boomers will see the worst of the economy in their
retirement years, much as the Bob Hope generation saw the worst in their early years in the 1930s and
in World War II on an 80-year generational cycle.
Posted by sold 2 rent 1 @ 03:45 PM (1878 views) Add Comment
37 Comments
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1. Penbat said...
Press release is June 2008. In view of recent downturn in commodites etc the whole basis of the book needs revising.
2. shipbuilder said...
Mid to late 2009? I'm pretty sure we're seeing this already.
3. malct said...
background basics
The Growth Misconception: ‘Money based on interest can grow forever.’
The graph below shows three generically different growth patterns.
'help!'
Curve A represents an idealised form of the normal physical growth pattern in nature, which our bodies as well as those of plants and animals follow. We grow fairly quickly during the early stages of our lives, then begin to slow down in our teens, and usually stop growing physically when we are about twenty-one. This, however, does not preclude us from growing further ‘qualitatively’ instead of ‘quantitatively’.
Curve B represents a mechanical or linear growth pattern, e.g. more machines produce more goods, more coal produces more energy, etc. This growth pattern is not so important for our analysis. It should be clear, however, that in a finite universe even this pattern will eventually create problems.
Curve C represents exponential growth, the most important and generally least understood growth pattern which may be described as the exact opposite to curve A in that it grows very slowly in the beginning, then accelerates continually faster and finally grows in an almost vertical fashion. In the physical realm, this growth pattern usually occurs where things are out of order, where there is sickness, often leading to death. Cancer, for instance, follows an exponential growth pattern, and, using this analogy, interest may be seen as the cancer on
our social and economic system.
Based on interest and compound interest, our money doubles at regular intervals, i.e. follows an exponential growth pattern.
http://le.org.nz/tiki-index.php?page=BasicMisconceptions
4. malct said...
The Balance Misconception: ‘Interest is needed to counter inflation.’
The fourth misconception relates to the role of inflation in our economic system. For most people, inflation seems like an integral part of any money system, almost ‘natural’ since there is no country in the world without inflation. Few realise this is just another form of taxation by which governments try to overcome the worst problems of increasing debt and interest burdens.
Only as long as public and private debts increase exponentially can the economy keep growing.. If the debt stopped increasing or even if its rate of increase declined, then the economy would collapse. In the present money system we are faced with a dire choice: either economic growth or ecological collapse. Ecological collapse happens because we are forced to bring more and more natural resources into the money economy and make it grow exponentially, following the pathological growth of the money system.
5. malct said...
Because inflation is perceived as a given, economists and most people believe interest is needed to counteract inflation, while in fact interest is the major cause of inflation. And if we can abolish interest we can also abolish inflation. (In addition we certainly need to take measures to prevent speculation in land and other resources as well.)
Economic historian, John L King, links inflation to the interest paid for the ‘credit balloon’. In 1988 he stated, ‘I have written extensively about interest being the major cause of rising prices now, since it is buried in the price of all that we buy. But this idea, though true, is not well accepted. $9 trillion in domestic US debt at 10 % interest is $900 billion paid in rising prices and this equates to the current 4% rise in prices experts perceive to be inflation. I have always believed the compounding of interest to be an invisible wrecking machine and it is hard at work right now. So we must get rid of this mindless financial obsession.’
6. malct said...
The corporatisation and privatisation of large parts of formerly state owned services (hospitals, telecommunications, electricity, railways, airlines etc) is at the same time reducing government debt and increasing the listed private debt, thus masking the economic burden of debt servicing. Every New Zealander therefore pays interest on not just Government borrowing but also on all private borrowing through the prices we pay. We even have to pay extra if a private but essential corporation suffers from too much debt. In 2001 the New Zealand Government paid $1 billion to prevent Air New Zealand from collapsing.
With most of our banks being owned overseas, a large part of the interest New Zealanders pay now goes overseas. In the year ended June 2001 we sent $5.2 billion overseas, and now more and more of our debts are denominated in US dollars, so we earn in New Zealand dollars and pay in US dollars. This makes our currency vulnerable to attack from financial speculators.
7. malct said...
The Collapse of a 300 Year Ponzi Scheme
All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on "fractional reserve" lending, which allows banks to create "credit" (or "debt") with accounting entries. Banks are now allowed to lend from 10 to 30 times their "reserves," essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.5 The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough "money" (or "credit") to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years -- ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly. As British financial analyst Chris Cook observes:
"Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources."6
The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own.
Financial Meltdown: The Greatest Transfer of Wealth in History
How to Reverse the Tide and Democratize the US Monetary System
by Ellen Brown
8. malct said...
THE MYTH OF THE TRAGEDY OF THE COMMONS
by
Ian Angus
Ian Angus is editor of Climate and Capitalism, www.climateandcapitalism.com
and an associate editor of Socialist Voice, www.socialistvoice.ca
From The Bullet, a Socialist Project e-bulletin, No. 133, August 25, 2008
Will shared resources always be misused and overused? Is community ownership of land, forests and fisheries a guaranteed road to ecological disaster? Is privatization the only way to protect the environment and end Third World poverty? Most economists and development planners will answer “yes” and for proof they will point to the most influential article ever written on those important questions.
Since its publication in Science in December 1968, “The Tragedy of the Commons” has been anthologized in at least 111 books, making it one of the most-reprinted articles ever to appear in any scientific journal. It is also one of the most-quoted: a recent Google search found “about 302,000” results for the phrase “tragedy of the commons.”
For 40 years it has been, in the words of a World Bank Discussion Paper, “the dominant paradigm within which social scientists assess natural resource issues” (Bromley and Cernea 1989: 6). It has been used time and again to justify stealing indigenous peoples lands, privatizing health care and other social services, giving corporations “tradable permits” to pollute the air and water, and much more.
9. malct said...
World Prout Assembly
Economy of the People, For the People and By the People!
Put Economic Power in the Hands of the People!Moralists of the world - unite!
PROUT stands for PROgressive UTilization Theory. It means, the progressive utilization and rational distribution of all the earth's natural resources. PROUT advocates another type of revolution called "nuclear revolution." In nuclear revolution, every aspect of collective life - social, economic, political, cultural, psychic and spiritual - is completely transformed. New moral and spiritual values arise in society which provide the impetus for accelerated social progress. The old era is replaced by a new era - one collective psychology is replaced by another. This type of revolution results in all-round development and social progress.
10. Amos said...
Interest on money is not charged because of inflation(though the rate may be increased because of it).
Interest is charged because of the time value money has. ie money today is worth more than the same amount in the future
because you can do something with it (ie invest it) and earn a return in the interim.
11. malct said...
The Prophecy of Global Collapse between Greenspan and LaRouche
October 24, 2008 (LPAC)--Websites and publications throughout the Arabic language world have been posting an October 22nd article by Kareem Al-Hazzaa', called “The Prophecy of Global Collapse between Greenspan and LaRouche,” comparing the “accurate and scientific” economic forecasts of Lyndon LaRouche to the disaster of Alan Greenspan. The article was published in Arabic on October 22, 2008 in Kuwait's Awan daily newspaper, www.awan.com.kw. The article, translated by Hussein Askary of EIR, says:
12. malct said...
“When it comes to the prophesies regarding the coming of the current crisis, Alan Greenspan (Former Federal Reserve Chief) stated the following in a radio interview with NPR earlier this year, and was published on the news site MoneyNews.com: " What I have to forecast is that something will happen which is unexpected, which will knock us down.... The odds of that happening, I think, are rising, because we are getting in vulnerable areas." Greenspan added: "What I point out is that we're in a turning phase, and that the extraordinary improvements that have occurred in the world economy in the last 15 years are transitory, and they're about to change ... So, I think this whole process will begin to reverse." On interest rates, Greenspan said: "now are set by the supply of investment money worldwide; a force much larger than the concerted efforts of central banks, including the Fed.... We and all other central banks lost control of the forces directing higher prices in homes."
“In contrast to Greenspan and generally most economists in the West, the record of economist [Lyndon] LaRouche in economic forecasting has been, and still is, the most accurate and most scientific. Many years ago, LaRouche forecast this systemic global financial crisis and the collapse of the post-Bretton Woods floating dollar system. In a speech made on July 25, 2007, LaRouche said that the financial and banking crisis had entered its terminal phase in that month. One week after that speech, the chain of collapse of international banks started, beginning with what was falsely called the U.S. subprime loan market.
http://cecaust.com.au/main.asp?sub=articles&id=2008_10_24_prophecy-global-collapse-between-greenspan-and-larouche.html
13. sold 2 rent 1 said...
shipbuilder,
The author thinks oil will peak at $200 in late 2009.
My Mayan Calendar model says spring 2010 is the peak and with a USD collapse $400-500 is my target.
Remember gold, silver and oil have ended their 5th Elliott wave (from the last decade) bull run.
A brand new Elliott wave cycle is about to start in spring 2009. Oil could even go up ten-fold from its low.
14. malct said...
The IMF's gold holdings
The IMF holds 103.4 million ounces (3,217 metric tons) of gold at designated depositories. The IMF's total gold holdings are valued on its balance sheet at SDR 5.9 billion (about $9.3 billion) on the basis of historical cost. As of August 31, 2008, the IMF's holdings amounted to $86.2 billion (at then current market prices). A portion of these holdings were acquired since the Second Amendment of the IMF's Articles of Agreement in April 1978, amounting to 12.97 million ounces (403.3 metric tons), with a market value of $10.8 billion as of August 31, 2008. As noted below, this part of the Fund's gold holdings is not subject to restitution to members.
The IMF's policy on gold today
The Second Amendment to the Articles of Agreement in April 1978 eliminated the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right (SDR). It also abolished the official price of gold and brought to an end the obligatory use of gold in transactions between the IMF and its members. It furthermore required that the IMF, when dealing in gold, avoid managing its price or establishing a fixed price.
The Articles of Agreement now limit the use of gold in the IMF's operations and transactions. The IMF may sell gold outright on the basis of prevailing market prices, and may accept gold in the discharge of a member's obligations at an agreed price, based on market prices at the time of acceptance. These transactions in gold require an 85 percent majority of total voting power. The IMF does not have the authority to engage in any other gold transactions—such as loans, leases, swaps, or use of gold as collateral—nor does it have the authority to buy gold.
http://www.imf.org/external/np/exr/facts/gold.htm
15. icarus said...
So we don't blame the bankers and governments after all. It's the simultaneous troughing of clockwork cycles that causes these slumps. I don't think so. No more clockwork historical cycles please.
16. malct said...
IMF to sell gold as it faces budget deficit
The Associated PressPublished: April 8, 2008
WASHINGTON: The International Monetary Fund's executive board has approved a broad financial overhaul plan that could lead to the eventual sale of a little over 400 tons of its substantial gold supplies.
what happened?
17. jack c said...
malct - I wonder if Gordon bought it at the top of the market?
18. mountain goat said...
good find S2R1, I too believe we are in for a bounce early 2009 (yes in the UK too) before the big meltdown next autumn.
19. sold 2 rent 1 said...
mountain goat,
Today is 28 October 2008
THREE years to the day until global enlightenment - 28 October 2011.
The question is - who will actually make it?
20. crash n burn said...
Crock of ...
This says it all
http://www.suite101.com/article.cfm/investing/112570
The Dow hitting 40,000 by the end of the decade
21. mountain goat said...
I can't claim to be a great investor but what I have learnt is that there are never one-way bets. Currently everyone says housing is going to fall at least another 15% in 2009 recession depression etc etc. Well markets don't move in straight lines. There will be a bounce and it will include housing IMO. Banks may be forced to lend the bailout money they have received for example. Then we get the relief deadcat bounce as everyone goes "bargain hunting" you can imagine...
22. stillthinking said...
malct,
A great series of posts, I have bookmarked this page and will go through your wise words. Particulary 4. "interest is the major cause of inflation". I never really twinned the two directly in that way but you are right of course.
I am not a great fan of debt as money myself, too unpleasant and too forced.
Great stuff !
23. bellwether said...
Mountain goat there are very few certainties right now but here's one:there is not the remotest of possibilities of housing bouncing in 2009. None
24. letthemfall said...
malct
Your comments seem to be growing exponentially. At this rate graphical analysis predicts that this boom in comments will result in an hpc.co.uk crash sometime late this year. Could be something to do with peak oil/boomer/publication of books predicting peaks.
25. planning4acrash said...
First of all, UK had record food production this year, and oil production has been rising. The peak oil thing is nonsense. The free market, if allowed to operate, would bring forth alternatives if peak oil were a reality. Recent fluctuations from $140-$65/barrel prove that the bull market has been pure monetary inflation that has receded as liquidity is sucked from the system, and after high prices bought forth some significant new oil fields, such as the ones in Brazil and Indonesia.
The cycles S2R talk of are not mystical, they are caused by the Keynsian business cycle, caused by government intervention in the supply and price of money, it being totally artificial and immoral. The Austrian economists can explain this at mises.org
26. shipbuilder said...
p4ac, I suspect you would like the writings of Ayn Rand, if you have not been there already. As for the free market - I read this interesting quote today on Wikipedia -
"The Nobel Prize economist (2001) Joseph E. Stiglitz says: "the reason that the invisible hand often seems invisible is that it is often not there." (Making Globalization Work, 2006) [3]. Stiglitz explains his position:
Adam Smith, the father of modern economics, is often cited as arguing for the “invisible hand” and free markets: firms, in the pursuit of profits, are led, as if by an invisible hand, to do what is best for the world. But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. As I put it in my new book, Making Globalization Work, the reason that the invisible hand often seems invisible is that it is often not there.
Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. Some of the important instances have been long understood—environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research. (Remember, the government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and most of the advances in bio-tech.)
But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.
Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights.
The real debate today is about finding the right balance between the market and government (and the third “sector”—non-governmental non-profit organizations.) Both are needed. They can each complement each other. This balance will differ from time to time and place to place."
I would tend to agree. I think your view of free markets is a bit one-sided and utopian.
27. planning4acrash said...
Often the invisible hand is stamped on by the boot of government planning. Because their actions are to, by force, destroy the market, because government do not like the excesses it creates, that make people independent of government, and the elite do not appreciate the competition in a free market that make oligarchy and monopoly nigh on impossible. In short, the invisible hand of the market is often hidden, because it is lying bloodied on the floor under a socialist boot.
But it still survives in isolated pockets. You know hat 25% of food production was in back yards, in 3% of the land, in Soviet Russia? Why, because in a person's back yard, the free market and invisible hand of the market survives, and barter between individuals thrives. With that vast land, 75% of the food was produced on the remaining 97% of land. This is why free(er) market North America propped it up with grain exports, because the socialist system stamps upon the price signals that let the free market meet the needs of the populace.
28. planning4acrash said...
It is obvious that government intervention causes the business cycle. We only had the houseprice boom because interest rates were forced artificially low. PERIOD!!
29. shipbuilder said...
Can you explain how rates set by a private institution such as the fed is either government intervention or socialism?
30. malct said...
22. letthemfall said...
malct
Your comments seem to be growing exponentially. At this rate graphical analysis predicts that this boom in comments will result in an hpc.co.uk crash sometime late this year. Could be something to do with peak oil/boomer/publication of books predicting peaks.
Tuesday, October 28, 2008 09:17PM
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
glad someone still has a sense of humour. we won't get through this in one piece otherwise.
btw didn't mean to be offensive re monitoring the other day
31. planning4acrash said...
Even if you disagree with my Libertarian viewpoint, you surely see that we have way too much government and that they have totally failed? I mean, why are we fighting wars in Iraq, when they posed no threat, our government lied to get us there, and now we don't have enough money to prop up our own currency. Jefferson was right when he said that big government and the printing of fiat money are the greatest threats to a country. More so than foreign invaders.
32. malct said...
here's an odd one - just looked up garnet (precious stone) for Mrs malct and found this
The GARNET Network of Excellence
GARNET is a Network of Excellence on Global Governance, Regionalisation and Regulation: The Role of the EU funded under the European Commission’s 6th Framework Programme and comprising 42 leading research centres and universities. It is coordinated by the Centre for the Study of Globalisation and Regionalisation at the University of Warwick.
GARNET’s aim is to develop a world-class multi-disciplinary network of scientific excellence of researchers, analysts and practitioners with expertise in key issues and themes in global and regional governance. Particular focus is placed on: (i) those elements of the global regulatory framework (trade, finance, security) that (to a greater or lesser extent) structure the modern world system and (ii) an analysis of Europe’ role within that framework.
oh heck
33. planning4acrash said...
Rates being set by a central bank is socialism, because government prints money for themselves, to pay for things like Iraq, by sending treasury notes to the central bank, which issues credit in return. So, the system legitimizes government socialism via fiat. At the same time, it is a form of corporate welfare, corporatism, or, if you will, fascism, because the central bank props up the fractional reserve banking system in a number of ways. They provide liquidity to avoid high interbank rates (such as 900% in Hungary) during times of hardship, but, the banks just hoard that money and the inflating just causes more problems down the line, so its always a race to the top, until you get the crash, when banks stop lending, and need more money, so they suck everything up, destroying the business economy on a race to the bottom. So, socialism and corporatism are one and the same. The left-right paradigm is a lie, the historic symbol of this is the eagle, seen on so many government badges, two wings of the same beast. The old Babylonian system of debt and usery to benefit big government and business.
34. shipbuilder said...
p4ac - i've never disagreed that there's too much government intervention in general, just that I think that free markets are not all you claim.
In your ideal monetary system, who would create money?
Your idea of socialism and corporatism being one and the same is a nonsense. To argue that, you will have to argue that socialism was the system of government in the US at the time of the creation of the modern corporation.
35. planning4acrash said...
In the ideal market, money would be made privately, with fiat and fractional reserves outlawed so as to protect private property from inflation. Private coinage, By Murray N. Rothbard
36. planning4acrash said...
The modern corporation was created by the free market, monopolies were created by corporatism, i.e. government intervention, to regulate/tax out competitors and by providing preferential treatment, including tax breaks, etc to the monopoly, in return for political favor.
37. planning4acrash said...
I mean, if Goldman Sach's need for cash to maintain hedgemony, and government's willingness to provide it weren't a big enough example of that, well, maybe a government sponsored Darf Vader Death Star may do the job? Oh, I forgot, the derivatives death start, legalised by Thatcher and Greenspan.