Repossessions

[Mick Dundee]

only the people who didnt manage budgets effectively will end up being repo'd.

thats the bottom line, and so i cannot feel any sympathy for them.

there may be one or two exceptions, but its mainly due to over borrowing.

you borrow it, you spend it, you pay it back.

its not rocket science.

besides. whats the worst that can happen. they have to rent.

its not the end of the world and for most here its been the norm for 7 years.

ii shed no tears for the plainly stupid and ignorant who refused to believe in anything but fairy stories that played into their impossible dreams, failing to accept there were any other victims to this gold rush on property. or rather just ignoring them totally.

financial failure.

a dish best served cold.

+2

[Prof]

I have seen a few of the repro programs on tv and some of the cases are beyond belief, one couple bought their council house for £40k but now owe £160k because they said they mewed a few times to upgrade the property and now they cannot afford to repay the mortgage. Why did they not stick with a low mortgage,they have just been totally irresponsible. Bail these type of people out today and they back in the same position in a few years time.

I saw that couple on TV, and I agree, it is almost beyond belief. I expect that although this case is not that common, it has been repeated quite often up and down the country. Why doesn`t the thought of owing £100K+ frighten the life out of these people ? These people should not be bailed out, and neither should the bank that lent them the money. Hard lessons need to be learned. In hindsight, the council house that they tried to buy on the cheap, should still be a council house, with them paying rent to live in. Before the government start pumping tax payers money into Northern Rock to lend out for homebuyers, they should be introducing some pretty strict criteria on how and who the money should be lent to. Lack of regulation and control over mortgage lending has contributed the the problems we see now, it would be madness to continue with the hands-off approach.

[buzzardo]

It's funny how they are always an investment on the way up, but a home on the way down.

Feckin' spot on observation Harry Monk.

I love your posts - no sh!t and straight to the heart of the issue. BRAVO!!

B

[matchmade]

I saw that couple on TV, and I agree, it is almost beyond belief. I expect that although this case is not that common, it has been repeated quite often up and down the country. Why doesn`t the thought of owing £100K+ frighten the life out of these people ? These people should not be bailed out, and neither should the bank that lent them the money. Hard lessons need to be learned. In hindsight, the council house that they tried to buy on the cheap, should still be a council house, with them paying rent to live in. Before the government start pumping tax payers money into Northern Rock to lend out for homebuyers, they should be introducing some pretty strict criteria on how and who the money should be lent to. Lack of regulation and control over mortgage lending has contributed the the problems we see now, it would be madness to continue with the hands-off approach.

They should also pay a commercial rent to live in the council house, to reflect the capital tied up in the property and its maintenance costs. Our council house system is a disgrace - all those people living in nice three-bedroom houses and paying miniscule rents on a lifetime tenancy. All council houses should be sold off and the proceeds used to build new ones - this will also help push down house prices still further, which will be brilliant.

[Guest Steve Cook]

Thanks for your explanation Steve. But this is the bit I don't understand. Money is an abstraction of the work that people have done. Past tense. To take a simple example: if I dig someone's garden, I've put the work in and that can't be undone. He then pays me fine. If he doesn't pay me, what can I do? I can't "undig" the garden. I could expend more work and mess it up but that involves more activity. So the reality is the work has been done, the economic activity has been generated and can't be taken back.

How does that lead to a future generation having to pay for something that happened in the past? I can see that a future generation might suffer the consequences of past activity but does that equate to having to pay for it with money.

The short answer is "fractional reserve lending"

The rather longer answer is:

In many earlier civilisations, much money was in the form of precious metals and/or other relatively rare commodities. The reason for this is because they posessed particular qualities that made them particularly suitable as money. which leads me to have to digres slightly and describe what money is and why some things are inherently better at being money than others.

However, before I can do that, we need to go back even further and describe the operation of a non-monetary based economy.

In a very simple (pre-civilisation) economy where there are relatively few economic agents and also relatively few goods and/or services, money is not really necessary. Trade can be conducted via direct barter. Thus, if I produce and possess arrow heads and you produce and posess moccassins, we can come to an agreement as to what the exchange rate is between these two commodites and then perform a direct exchange (say, 10 arrow heads to one pair of moccasins). Obviously, the exchagne rate between these two commodities will vary somewhat from trade to trade depending on day-to-day needs of the individual traders concerned. However, over many trades an average is arrived at and so this tends to be what most traders most of the time operate on in terms of their exchange rate assumptions. Nevertheless, the exchange rate will still fluctuate at the macro level based on two essential factors. Supply and demand.

All other things being equal, if the demand for a given commodity contracts (or deflates) in the absence of a commensurate contraction of supply, the exchange value of that commodity will fall. Conversly, if the demand for a given commodity expands (or inflates)without a commensurate exapansion of supply, its exchange value will rise.

I wont bother going through the other inflation/deflation permutations relating to the supply/demand ratio between commodites as they can be quickly surmised by you I am sure.....

....I am going to continue this first thing tommorw morning because I need to get to bed now.....

Please bear with me as I intend to answer your question. It's just that this preamble really is necessary...

Edited January 25, 2009 by Steve Cook

[sleepwello'nights]

Morning, I just want to bring this post into View New Posts while I wait for Steve to complete his explanation helping me understand what I'm missing.

I came across this view point in : http://www.housepricecrash.co.uk/forum/index.php?showtopic=102244&st=15 this morning. It reinforces my opinion that repossession and eviction is not a good course of action.

Robert J. Shiller

http://www.moneyweb.co.za/mw/view/mw/en/pa...8&sn=Detail

What Is the Next Step?

The subprime crisis may be the worst financial dislocation since the Great Depression, but that means it provides a comparable opportunity for reform. The U.S. didn't have long-term mortgages before the Depression. Homeowners took out short-term financing and rolled it over, but the credit climate of the Great Depression made that impossible.

The present subprime crisis calls for change on a similar scale, including these steps:

Bailouts - Bailouts will be necessary, even though they are disagreeable. Yes, bailouts will compel taxpayers to pick up the tab for other people's bad financial decisions. But, in many cases, the people whom the bailouts will help made those bad decisions because they were uninformed and aggressive lenders exploited their ignorance. Leaving the victims to fend for themselves now that the loans have gone bad would be mercilessb and would further erode trust in society. Moreover, it would mean accepting potentially very dire systemic consequences.

[Bloo Loo]

Morning, I just want to bring this post into View New Posts while I wait for Steve to complete his explanation helping me understand what I'm missing.

I came across this view point in : http://www.housepricecrash.co.uk/forum/index.php?showtopic=102244&st=15 this morning. It reinforces my opinion that repossession and eviction is not a good course of action.

Robert J. Shiller

http://www.moneyweb.co.za/mw/view/mw/en/pa...8&sn=Detail

What Is the Next Step?

The subprime crisis may be the worst financial dislocation since the Great Depression, but that means it provides a comparable opportunity for reform. The U.S. didn't have long-term mortgages before the Depression. Homeowners took out short-term financing and rolled it over, but the credit climate of the Great Depression made that impossible.

The present subprime crisis calls for change on a similar scale, including these steps:

Bailouts - Bailouts will be necessary, even though they are disagreeable. Yes, bailouts will compel taxpayers to pick up the tab for other people's bad financial decisions. But, in many cases, the people whom the bailouts will help made those bad decisions because they were uninformed and aggressive lenders exploited their ignorance. Leaving the victims to fend for themselves now that the loans have gone bad would be mercilessb and would further erode trust in society. Moreover, it would mean accepting potentially very dire systemic consequences.

Schiller, a housing and mortgage VI I beleive....Case Schiller Index??

[sleepwello'nights]

Schiller, a housing and mortgage VI I beleive....Case Schiller Index??

I haven't read any of his published statements but I believe he is a respected economist. The Case Schiller index is a well researched and objective measure of the US housing markets. Are you saying that his work is biased or skewed towards an optimistic view of the American economy?

If so you may just as well say that Roubini's opinions should be disregarded because he has a vested interest in encouraging a pessimistic outlook on the global economy so that more people will subscribe to his research. Same goes for Peter Schiff, Jonathan Davies. Need I go on.

Your comment seems intended to disparage his opinion without foundation. Any substance to back up your assertion?

[Laura]

I think that the current financial situation is working out just fine.

People in the country and others, but I dont give a stuff about them. They walk around with 5+ credit cards in their pockets, loans to go on £5k+ skiing holidays. Dabble and ultimately get burnt investing in property and take out many multiples of their annual pay.

Did they ever stop and think for one minute, what would happen if I lost my job ? No.

Did they ever for a minute say to themselves. Maybe I cant afford this lifestyle, I should cut back ? No.

How about thinking about the effect on their childrens lives when everything goes pearshaped and the Bailiffs are at the door giving them 30 minutes to collect their effects before being thrown on to the streets. Did they think about that ? No.

Personal responsibility is a lesson some people have chosen to forget. Blame the Government, the economy, the credit crunch, blame the estate agent who sold you the house, the bank who lent you the money. The only person they can blame is themselves and self critism is a very hard thing to do, but they will have plenty of lesson to be learnt.

The people of this country need to suffer a little, we have had it too easy for too long and we have forgotton, some of the hard fought for principles of the second world war. Hard work, honesty, living within their means and a lot of people have forgotton about self respect and respecting others.

Is there any wonder children run the street like packs of wild dogs, when their parents count their cash from credit cards and make a mockery of working hard.

The more credit you took out by showing comptempt for saving but instead chose to max out the credit cards, loans and MEW. Then the harder this lesson will be.

This is only the beginning.

Bump & thrice bump!

+ a touch of compassion to the otherwise prudent ones who were suckered by the morally reprehensible:- 'if you don't buy now you'll never get another chance' VI mantra

[Pindar]

I would have sympathy really I would but the same little bastards have tortured my 8 year at every opportunity about her lack of forgein holidyas, my 3 year old car, your baby wears cloth nappies, you name she's had it thrown at her and of course it's been overheard from the parents so not really the kids fault but there are some bloody horrible "middle class" brats I cannot wait to see eating asda's value beans and it might just save them.

The parents are not really middle class, they are like Wayne and Waynetta Slob when they win the lottery - except in the case of the sneering parents and their offspring, they are drunk on cheap credit. The UK has become a truly unpleasant place because of the attitudes you've highlighted.

[time 2 raise interest rates]

I would have thought repossessions are good for a number of reasons. Mainly, they're the only properties

selling at the moment helping to keep estate agents in business and raising much needed stamp duty and

cash for a bankrupt Government, but the most important reason of all is the fact that those getting repossessed

now will thank their lucky stars in a year's time because the property getting repossessed today will be worth

30% less a year from now.

If they get repossessed now, chances are the difference between their mortgage owed and the price sold

for will be much more advantageous for them than if they wait another year. £20,000 difference between

the mortgage owed and the selling price today will be much better for them than say £60,000 difference next year.

Edited January 25, 2009 by time 2 raise interest rates

[time 2 raise interest rates]

I am right in thinking the person being repossessed will still owe the difference between the mortgaged owed and the

selling price or has this changed.

[Guest Steve Cook]

Following on from yesterday evening's post....

as soon as an economy progresses beyond the most simple, direct barter becomes ever more cumbersome and difficult to manage. This is becasue direc tbarter requires a conincidnece of needs. In other words, it requires that two or more agents are in the same place at the same time and that they all posess the tiems for exchange that the other agent requires. This is relatively easy to achive if the agents live in the same place and have very few item to exchange within an economy. As soon as their is a requirement to trade with people over great distanceand once a a situation is reached where a very large nuinmber of items to exchange is the norm, direct barter no longer works.

This is where money comes in. Money, in its most essential form, is just another commodity like any other. To take a simple example. Let's say I posess rabbit skins. Lets assume I need a new plough. Lets say the guy who manufactures the ploughs is my next door neighbour. The trouble is, he doesn't need rabbit skins. He does, however, need iron ore. It turns out that the guy who makes iron ore lives over in the next vally. He doesn't want a plough. however, he could use rabbit skins because he knows he can then subsequently exchange them for a new donky that he need in his iron mine. so, i set off with my rabbit skins over to the iron ore miner. I exchange my rabbit skins for some iron ore. I then bring the iron ore back to my neighbour who then happily exchanges his plough for the iron ore.

The key point here is that while I was holding that iron ore in my possession, it was money. In other words, money is simply a way og holding your exchange value is a form that is useless to you in and of itself. however, you hold it in the confidence that you can then exchange it at a later date for something you do want.

However, even the above form of ad-hoc temporary money creation becomes somewhat unmanagable as an economy get ever more complex. this is becase you still have the problem of ensuring that all of the relevant commodiies are in place in an econopmy such that peoplec an hold the required commodity short term until they find another agent who wants to exchange something for it.

Please see my next post.....

[Guest Steve Cook]

this is where a universal unit of exchange comes in. Over time it became necessary to fiond a commodity that could be used such that everyone would be likly to agree on its function as money. for this to occur, this commodity had to have some particular qualities. These arE:

Portability

The reason for this is rather obvious. It m,eans that one can carry ones exchange value arpo8und on ones person and so store and transport it easily

Lack of deradability

the reason for this is because if the commodity to be used for money had a tendancy to degrade (or rot away) you would immediately have a supply demand issue. Namely that the supply would drop and so the exchange value would rise. This would mean that it would be difficult to plan ones finances and trades aahead.

Rarity

This is becasue if a given commodity was common we could all be millionaires. The trouble with this would be that a loaf of bread would cost a kings ransom. In other words, this is the opopoisite prolem to a tendancy to degrade. If the supply of a given commodity is exxessivley inflasted without a commensurate inflastion of demand, its excahgne value drops.

All of the above reasons is why gold, silver and copper have been used repeatadly since the dawn of civilisation as money. They have allof the the above qualities to a relatively high degreee. In particular gold and silver. It's no surprise that we still insist on colouring our coins in gold, silver and copper, even though the content of actual precious metal is miniscule or even non existent. This is becase we have a millenia old cultural memory of when nmoney was in fact these commodites

This then leads onto early useage of gold coins and how this led onto fractional reserve lending pactivces.....

Please read next post

[Guest Steve Cook]

In the early days of gold coin production this was done by organisations known as goldsmiths. These early coiun producers would allow people to store their coins at their premises which werw well fortified. They would be issued with promisory note that stated that the bearer of the note was entitled to go and collect their gold from the goldsmiths whenever they chose.

all so far so good......

However, over time these promisory note became in sufficienty wide circulation and also became sufficiently trusted in terms of the promise that was written on them (namely that whoever possessed such a promisrory note could, if they wished, go to the gold smith to claim their gold) that eventually they began to be used as units of exchange in and of themselves. In other wrds, people bean to be quite happy to take a promissory note in exchange for their plough or their cabbages or their horse etc. They did this "safe" in the knowledge that they could take this promissory note to the gold smith and exchange it for the actual gold money. In practive, this rarely happend since they woul;d take this promisory note and exchange iut themsleves for other goods and services they needed. so, in reality, the gold in the goldsmiths vaults didn't actually leasve it in particularly great qwuantities at any one time. In fact, the golkdsmiths noted that only about 10% of the cepositorsd ever claimed their gold at any one time

which is when the goldsmiths hit on a rather fiendishly clever idea........

please see next post

[time 2 raise interest rates]

I would have thought repossessions are good for a number of reasons. Mainly, they're the only properties

selling at the moment helping to keep estate agents in business and raising much needed stamp duty and

cash for a bankrupt Government, but the most important reason of all is the fact that those getting repossessed

now will thank their lucky stars in a year's time because the property getting repossessed today will be worth

30% less a year from now.

If they get repossessed now, chances are the difference between their mortgage owed and the price sold

for will be much more advantageous for them than if they wait another year. £20,000 difference between

the mortgage owed and the selling price today will be much better for them than say £60,000 difference next year.

What no replies, where is Sibley these days.

[Guest Steve Cook]

Having realised that only a small percentasge of the depositors ever claimed thir gold at any one time the goldsmiths then realised that they could lend the vast proportion of the gold they held in their vaults to people who wanted to borrow it. as long as the number of depositorsd demanding their gold never rose above the small percentage mentioned earlier, they could get way with it. So, this is what the goldsmiths did. they way they made a profit was by adding an intereestr charge on the lent gold such that when it was repayed with this interest, the interest represented the profit. Of couse, if ever the deposiutors lost fsith in the gold smith and arrived, en masse, to denamd their gold with their promisory note, the game was up. this was an early examply of a bank run.

however, having also having relaised that the promosory notes for the gold were being used as functional units of exchange for real goods out there in the real economy, the gold smiths also realised that they could lend "gold" in the form of promisory notes to people who might need the money to purchase a large item.

Evenutally, over time, the vast majority of the moiney in circulation int he economy was in the form of these promissory note. Actual gold became ever more sel;donm used as the actual unit of exchange. Instead, it was merely there in the backgound to back these notes up.

At which point, the promiosory noite themselves began to be seen as being precious. as such, people began to need a safge place to store their notes. which is where the gold smioths came in again. Not only were they safwely storing the gold that was backing up all of the promisoiry notes, they were also storing the promisory note themselves for the depositors.

As with the trick the goldsmiths had pulled off with gold in terms of lending out the vast majority of it ant any one time, they also engaged in this practive with the promisory note.

In principle, this meant that bank runs could no longer occur becase all the goldsmith had to do was print up the necesasary number of promissory note if anyone came back to ask for their money since they were the ones who owned the printing press for thie issueance of the notes.

but, there are problems with the above

please see net post

[Guest Steve Cook]

Printing up ever mjor epromisory notes to cover for depositors asking for their "money" back inevitably led to inflastion of the moiney supply. this would then mean that the money became less valuable for the resons relating to supply and emand i mentioned ealrier. So, a collapse of the currency would occur. this has happend many tiomes over history. In addition, there was the practical prolem of their being no overarching regulation such that there could be serveral "curernecies in operation at any one time in a single economy due to different golsmoiths issuing the note. At this point, rulers and governm,ent became involved. They took over htis proto banking system and bwecame the only ones who were allowed to lend money into existence in the form of promisory note. In the early days, these notes were still notionally backled by gold held by the governement of the day. In other wrds, thjey were not supposed to lend out into the economy in the form of promissory note mroe than eas actually held physically by them.

At this point we should stop calling the goldsmiths aby theor old name and start caloigjthem by the name they have bneen known for the last few centuries...namely "banks"

please see next post....

[Guest Steve Cook]

the system essentially worked on the following (simplified) principles......

The governemt sets up a cenral bank

this central bank holds gold as money in its vaults.

this gold is the abstract representation of econic activity that has already occured

They accure this gold in the form taxation, primarily

They then lend out this gold (in the form of prommisory notes) to the banks at a notional interst rate

The wbanks then lend these promisory nbotes out into the wider economy at a slightly higher interest rate than they are haveing to pay to the central bank

The profit, for the banks, is the difference between the tow interets rates

further to the above, the govenment puts certian regulations in place that still allows the banks to lend some of thioer depositors money held on account. however, this ratio is regulated to be a resobale one and as such should mionimise the risk of bank runs.

However, government being what it is, the twemptationto lend out more that it held in the form of gold was overwhelming and so governments have regulary done this over history.

this is where the problems of infl;ation come back in

If more money is brought into an economy than there is a reqwuirement for it one of two things happens. either the currency is debased, or the economy must grow in order to bring back into equilibrium the manout of money in cuircuylation and the coinomic requirement for it.

As it turns out, a small upwards pressure on the money supply wiulla ctually stimulate economic growth in that people will be encouraged to produce more goods as theire is an incrwasded amount of money looking to be exchangedf for it

This is a fine balancing act though. If the money suppy is inflasted too quickly, then the economy cant keep up and a drop in exchangwe value o the curerency will ensue. If the money supply is alowed ot drop too quickly then people will eb encouraged to down tools and simply sit on it as their overall wealthis incrwasding 9in the form of the raising excvhange value of their money) such that producing goods makes no sense.

Please see net p[ost

[Guest Steve Cook]

This balancing act has failed on a number of spectacular occassions in history and I wont bore you with them as I am sure you aware of them

The masin thing to remember is that if money is lent into existence that did not previously exist in an economy, inflation and all of the prices rises in commidities will result unless 1 of two things ahppen. eithert the money must be siucked back out of the economy, or the economy must grow to accomodate the new money

In the end, it really does come down to simply that. There really is no such thing as a free lunch

To come right up to the rpesent day......

The deregulation of the banking system across much of the western world over the last few decades has mean tthat a shadow banking system has been allowed to develop that has access to depositors money in the main banking system. They have been able to use that moiney in ways that bust wide open the fractional reserve ratios that are place to contrain the activies of that main banking system the resault of this is that quite literlly uniumaginable amounts of money has been brouht into existence on the back of this.

fuirther to the above, central banks have had tint interest rates on their monjey that they have lent into existence to the banks themsleves. In addition, their is now no longer any actual commoity used by the central bakjks to back their prommosiry note up. Indeed, it's not even prommirsoiry notes anymore...its numbers on screens.

The above paragraph is horribly simplified and could bve the subject of another twenty posts. ans so that is as far as I am going with that part.

suffice to ssay, biblical amounts of moiney has been brouight into existence over the last few decades. This money would ordinarily have brought on massive price rises of goods and services. In fact, in the broader economy itr did not. why? Because thismoney found a singular new home to go to. Namely, real esate. so, in fact massivce price rises have occured, in one particuylar asset class.

all of the above could convieplably carried on without it all fallinhg apart as loing as our economies continued to grow. as long as that happend, future economic activity could have continued to sioak up all of theis new money.

however, thios has not happned

Please see nexct post

[Guest Steve Cook]

Going for a cup of tea and a fag. will continue in five mins

apologies to anyone reading who already knows all of this.

My last few posts have been a detailed repsonse to particular poster's quetion that was put to me...

[Guest Steve Cook]

As i have said in my previous post, all of the shenanigans in the global financial system could , conceivably, have carried on regardless as long as continued future growth was assured. Even then, though, such growth would have to be ever greater than occurred before due to the rapid expansion of the global money supply. This, in itself is questionable. Though, if disaster were to strike under such circumstances, it would be of a type we have historical experience of. In time, our economies would recover, growth would resume and we would be able to carry on as before (barring a world war in the interim, which is often how these economic collapse end).

This time it really is different..

All goods and services are based on raw materials and the energy required to process ethem in some way prior to exchange. to reiterate earlier point made…..

Money is the abstraction of economic activity. In other words, you do work of some form. This work is then abstractly represented in the form of "money". This is so you can carry your exchange value around with you in a portable form that you can exchange for other goods/services that you need/want at a later time.

Economic activity is the physical manifestation of the transformation of raw materials that are either dug our of, or are grown on the land into good and/or services

Thus, money is the ultimate abstraction of those raw resources.

It's also worth pointing out that dur to the opractive of fractional reserve lending, over 60% of the global money supply is in the form of debt (credit). Maining over 60% of the gloabl money supply is in the form of growth that has been borrowed for othe futures....which is what debt is...

We have now hit the limits of our planets capacity to support us in terms of the raw materials and energy required. We have used a one time draw down of hydrocarbon based energy to fuel this draw down. That energy supply has now peak and is set to begin an inexorable decline from now on. All of this in an economic system which, for reasons of fractional reserve lending mentioned earlier, simply has to keep growing

Our "money" supply has been contracting because people have been defaulting on their debts. People have been defaulting on their debts because they have been less productive. People have been less productive because there is a growing constraint of supply of resources that they can be productive with.

As the raw materials (most notably, hydrocarbon based energy) supply contracts, so must our economies and so, in turn, must our money supply?

To keep the money supply artificially aloft via the current monetary bailouts is to defy the laws of economic gravity.

Or, to put it another way, to keep the money supply aloft is to deny the physical reality of a finite resource supply

As soon as the world tries to grow again, those same resource constraints will still be there waiting for us. At which point the exchange value of essential commodities will hit the roof again. This, initially, will not, necessarily, be as a result of monetary inflation. But, rather, will be as a result of a relative deflation of supply of the commodities that money is exchanged for.

Meanwhile, there is still all of this money sat in the banks (assuming no-one broke ranks before then). The temptation of the banks to then throw this wall of otherwise worthless money at a newly rising commodity market will be irresistible. At which point, the price of said commodities goes to the moon.

I repeat, running below our money supply problem is a deeper one. Namely, that of a lack of real economic activity due to a lack of raw materials at affordable exchange values. This is fundamentally why credit defaulting began to happen in the world. Of course, with a collapsing financial system, a vicious feedback loop has now started leading to credit default occurring simply as a result of a lack of available ongoing credit to keep the wheels on the bus actually turning. But, to reiterate, without a contraction of real economic activity in the first place, we could have conceivably carried on partying for quite some time longer "safe" in the knowledge that tomorrow’s growth could continue to pick up the bill.

Attempting to borrow yet more growth from the future via these bailouts is sheer insanity and will fail.

Now, I know that some will immediately point out the current price of oil at roughly $40 per barrel. This won't last I can assure them. Indeed, they should consider this; it has taken a demand destruction of unprecedented proportions to bring it back down to this price. What might we suppose is going to happen to that price as soon as we try to grow again? $150 per barrel....$200 per barrel?....and beyond?

805 of the enertgy footprint of the food we eat is in the form of hyrdrocarbon use in the form of diesel, the enerrgy used to mione the rae materials to make the machines to proiduce and distribute the food etc. Over the course fot he next few decades a great many of the humans on this panet will persih as it will be no noger possible to sustain them on what is left.

I have included a graph of human population prior to and inclusding the industrial revolution which ios when we stasrted using hydrocarbons on an industrial scale/ ask yourself where you thionk that population is now headed assuming hydrocarbons are now set to deline in supply

There is potentially good news for those who are left a century from now. There is terrible news for the 80% or so who will not make it.

Whether or not you think you should hold up your hands in despair at all of the above depends on how optimistic (or lucky) you feel with regards to whether you think you and/or your descendants will be on the right side of that equation.

There are alternative to hydrocarbons, of course. The trouble with these is that they are either limitless but have a piss-poor speed of flow. Or, they are "blue-sky" solutions that may come on stream at some indeterminate point in the future. We need these solutions yesterday

However, free market capitalism (being, as it is, modelled on Darwinian evolution) doesn't (didn't) plan for the future that is now hurtling towards us at an ever increasing speed.

Momentary manipulations are buying time for our government, that is all Fiddling with the money supply won’t change the fundamental reality that lies behind all of this.

It will buy some psychological time though. By this, I mean that when the world wakes fully up to the fact that we cannot return to boom because we don't have the resources, all hell will break loose. Fiddling with the money supply puts of that panic for a little longer. That is all.

What are they buying the time for? Well, not much really, apart from the vain hope that something will come up in terms of a technological fix or maybe we can take over a few countries that hold what remains of the key resources (most notably, hydrocarbon based energy) in order to secure it for ourselves.

In the end, all will be in vain. All will be for nothing. The world's economy will contract, as sure as night follows day. The trouble is (and, I suspect our leaders know this only too well), a lot of humanity is going to have to go into the night over the next few decades in order for this new, resource degraded reality to add up.

Basically, the world is in the sh*t and there is no way out.

Throwing money at this bit is simply making the problems we face much worse

This crash probably provides us with our very last chance to step down from our energy intensive industrial civilisation with some degree of order......Our very last chance.

However, if the example of human history is anything to go by, we will probably not take advantage of this opportunity.

right, you'll no doubt be peased to know that's it

hope my posts have stimulated some more thohygt on this subject even if you don't necessarily agree

steve

Edited January 25, 2009 by Steve Cook

[Mick Dundee]

hope my posts have stimulated some more thohygt on this subject even if you don't necessarily agree

steve

A good set of posts, but how we reduce our energy even further.

Lightbulbs - check

Smaller and less polluting car - check

Very expensive double glazing - check

New boiler (energy effiecient) - check

Buying food locally.

I have pared down my exisitance to practically shivering in the corner wearing nothing but a hair shirt.

The problem as you put it is this. THERE ARE TOO MANY HUMAN BEINGS THAT LIVE ON THE PLANET.

Solutions :

Let the banks go bust, let people lose there jobs and let market forces reach a whole new equilibrium.

or

Let start world war 3, it will kill just enough people to let the rest of us resume of capatalist ambitions. (sick isnt it).

or

Lets start a whole new industrial evolution and actually get the country back to making something again, for which we can trade with other countries.

We will never see economic recovery when our industries are financial services and retail. We have spent too long making easy money, we have forgotton how to make long money.

Thanks for some good Sunday posts Steve Cook, I enjoyed reading them.

Edited January 25, 2009 by pinbacker

[Si1]

duplicate post

Edited January 25, 2009 by Si1

[Si1]

duplicate post

Edited January 25, 2009 by Si1