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What kind of economy will emerge in a post oil world?

General discussions of the systemic, societal and civilisational effects of depletion.

Re: What kind of economy will emerge in a post oil world?

Unread postby ralfy » Sun 02 Nov 2014, 22:52:16

AgentR11 wrote:I think yall can forget the deflation thing. The Fed's already shown their hand on that one. If they have to hand deliver free cash to every American that can walk to prevent deflation, they will, and will do it without hesitation. For those betting on deflation, the scary thing is that with almost everyone being tied into the electronic banking system either by regular accounts or EBT accounts, the Fed can not only do it, but do it with just a few taps on a keyboard, nearly instantly.

Deflation is history as an issue.

The question really is how close to stable can the Fed manage to keep the currency while insuring some modest degree of inflation? I'm an optimist on this one, in that I believe our trading systems have reach the point that they are faster than human panic reactions; able to buy or sell currency or assets to stabilize the value of the dollar relative to US produced goods and real assets.

Thus, we get an economy that reports "growth" while just about everyone is feeling some kind of squeeze with regard to what they can do or consume.

In benevolent parlance, this is called, "Power Down". I call it the creation of an American feudal regime, as the top 20% experiences modest gains in comfort and power; the top 1% substantial gains, and the top 0.001% experience gains in power never before experienced by humans. A feudal regime in command of a military and industrial economy on the scale of the US should give *everyone* a moment of pause.

This form of Power Down is actually compatible with the economic structures we have now, with some concerns you might not have considered. Everyone thinks its the just-in-time system, or the trucking goods across 3000 miles system that will fail. In reality, those systems are so efficient that they work regardless of any rational price point on fuel. What doesn't work? You driving to the store to buy a few days of groceries or a case of beer. If Walmart is 6 miles away, it currently costs you about $7 to go there and back; which is OK for $100 in groceries, and annoying but tolerable for $20 of beer. Post oil'ish, if that transportation costs you $30 for that same $20 in beer; that's pretty harsh, and even for the $100 in groceries it kinda sucks. OK, I'm a cyclist, I can do it for the cost of 150g of white flour and/or sugar, or 100g cookies; and I can transport about 18kg/20k cm3 of groceries that way. Can Walmart survive if their customers are only buying 18kg of groceries per trip through the checkout line? That's the real problem. Smaller stores provide the correct consumer flow, but smaller stores fail on managing distribution costs.

If the change happens slow enough, the big box guys will have enough pricing power to pay for the required staffing changes, but increased prices on goods purchased (not exclusively) by the lower half of the population, further enhances the creation of a bound peasantry, bound by debt, as opposed to tied to land, but same deal really. Can't feed yourself outside the system, can't rise in the system, assigned an ill maintained box to shelter in, and told to show up at a meaningless exercise often enough that you don't have time to cause trouble.

So, what kind of economy will emerge (is emerging)?. Feudal system defined by debt and investment; a peasantry safely hobbled, a professional 20% operator class absolutely terrified of losing their grasp on the coat tails of their liege, and 1%/0.001% managerial and ruling classes that are empowered and protected on a scale never achieved before in the history of humanity.


The only way to get a return on that investment or higher pay for managers, etc., is for the market to grow. That means the same peasantry has to become richer.
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Re: What kind of economy will emerge in a post oil world?

Unread postby Loki » Sun 02 Nov 2014, 23:53:50

inglorious wrote:I'm trying to wrap my head around how a zero/low-growth economy would play out


Stagnation and decline. Rate depends on severity of crisis, geography, and one's place in the social hierarchy. And luck.

I see the First World undergoing a slow deflationary spiral. Secular stagnation is a term that's become popular among some mainstream economists, seems to fit as well as any other. Deep financial crises will likely occur at shorter and shorter return intervals, followed by recovery to a lower level. Rinse and repeat once a decade or so. A couple generations of this, and the US becomes Argentina. And Argentina becomes Haiti. Haiti becomes Hell.

Bartering chickens for a liter of gas won't be happening in Canada in the OP's life time :lol: If the OP would read more and pontificate less, "she" might understand that peak oil is not some discrete event, after which everything falls apart. It's just another piece of the puzzle, one feedback loop among many.
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Re: What kind of economy will emerge in a post oil world?

Unread postby careinke » Mon 03 Nov 2014, 04:17:20

MonteQuest wrote:
vtsnowedin wrote:Currency will remain due to it's utility.


But what will it be based upon? Currently, it is debt-based and loaned into existence. And without growth in GDP, there is no debt-based currency possible.

Without debt-based fiat currencies, there won't be the capital for investment and expansion. You'll have to save your money to buy or invest.

There Isn't enough gold or silver In the world to serve as money and it was cumbersome to carry around large amounts, so fiat money was created to allow for expansion of the money supply. In effect; IOU's; a promise to pay, not backed by anything.

But in a world where a promise of growth is not possible, credit will not be available on any scale we are accustomed to.


I think cryptocurrencies, like Bitcoin, may be the ultimate answer. Crypto currencies are the antithesis of central banking. It does for money, what the internet has done for information. It's applications can go far beyond just a currency. Crypto currencies allow you to "program" money to act as permanent records of contracts, cross borders without (or in spite of) government control, and prevent counterfeiting.
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Re: What kind of economy will emerge in a post oil world?

Unread postby joyfulbozo » Mon 03 Nov 2014, 05:23:23

Hey,
I somewhere belief that our economy is fading after referring http://www.profitconfidential.com/. The doom gloom warnings of market crash is increasing. And it seems 1929 crash is returning when i read an article of Mr. Levi and guess what he the grandson of that person who had predicted 1929 crash. Like seriously this prediction can be true, i fear it somewhere...
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Re: What kind of economy will emerge in a post oil world?

Unread postby Pops » Mon 03 Nov 2014, 06:47:37

AgentR11 wrote:I think yall can forget the deflation thing. The Fed's already shown their hand on that one. If they have to hand deliver free cash to every American that can walk to prevent deflation, they will, and will do it without hesitation. For those betting on deflation, the scary thing is that with almost everyone being tied into the electronic banking system either by regular accounts or EBT accounts, the Fed can not only do it, but do it with just a few taps on a keyboard, nearly instantly.

But at the end of the day it is still only paper, barter bucks, and after one iteration everyone realizes it wasn't just their bank account that was accidentally credited and they all double their prices so you are back to square one.
It doesn't matter if you double the number of dollars in circulation if you halve the amount of energy to accomplish work. The actual economy, the one where work gets done, shrinks by half.

MonteQuest wrote: it is debt-based and loaned into existence. And without growth in GDP, there is no debt-based currency possible.

There have been investors trading seashells and buffalo chips as currency for eons. Luckily it is easier to manage the amount of dollar bills (and 0s & 1s) than the number of buffalo chips and seashells. Just ask AR, they can make money at the stroke of a key. LOL

ralfy wrote:The source of growth is profit. The same profit involves money, which is re-invested in the same or in other businesses. There's your capital. That's why not only is financing part of capitalism but capitalism also requires growth.

No, you said capitalism causes profit and I agree, but you merely asserted re-investment causes growth. First, there is no law that all profits be reinvested, second there is a law that things depreciate so must be replaced and third, there is also the theory of creative destruction that says old wealth must be destroyed to create new. Marx thought it would be the end of capitalism but it is certainly true that wealth doesn't last. Marx didn't coin the term but he had it figurted out:
It is enough to mention the commercial crises that by their periodical return put the existence of the whole of bourgeois society on trial, each time more threateningly. In these crises, a great part not only of existing production, but also of previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production.


Loki wrote:Stagnation and decline. Rate depends on severity of crisis, geography, and one's place in the social hierarchy. And luck.

I think this is the simplest and bestest prediction. Call it punctuated decline, fits in exactly with the wedge driving down the ability to pay for energy, right as energy becomes harder to extract. I think lots of this other stuff is more idealogical wishful thinking, little dogma nuggets expressed as inevitability; collapse of currency, end of capitalism, demise of banks, human die-off, etc.

Really the end of endless free energy simply means less waste and more work.
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Re: What kind of economy will emerge in a post oil world?

Unread postby MonteQuest » Mon 03 Nov 2014, 11:13:00

Pops wrote:
MonteQuest wrote: it is debt-based and loaned into existence. And without growth in GDP, there is no debt-based currency possible.

There have been investors trading seashells and buffalo chips as currency for eons. Luckily it is easier to manage the amount of dollar bills (and 0s & 1s) than the number of buffalo chips and seashells.


Post-it notes, sea shells, buffalo chips...doesn't matter, if their value is based on debt, there use as a currency is not possible without GDP growth.
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Re: What kind of economy will emerge in a post oil world?

Unread postby MonteQuest » Mon 03 Nov 2014, 11:15:38

careinke wrote: I think cryptocurrencies, like Bitcoin, may be the ultimate answer.


But what will the value of Bitcoins be based upon?
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Re: What kind of economy will emerge in a post oil world?

Unread postby AgentR11 » Mon 03 Nov 2014, 11:31:30

Pops wrote:It doesn't matter if you double the number of dollars in circulation if you halve the amount of energy to accomplish work. The actual economy, the one where work gets done, shrinks by half.


It does matter. Because the debt obligations are statically valued. We all know the economy will shrink, and kinda already is; whats important is that the differential between stated CPI inflation and inflation experienced by the peasants is large enough, such that the numerical increase less cpi inflation creates GDP "growth" at the same time the economy shrinks in real terms. That makes the whole debt / finance / inflation thing work. Which means you, and I, and just about everyone else will keep making more money, but we get poorer and less able to buy stuff each year, but we are also able to continue paying mortgage, property tax, etc.

The point of introducing money is to create inflation, not increase the physical size of the economy nor create real growth. Real growth is the enemy, not the solution.

Basically, its the trick that we could not do during the great depression as a result of lack of computational power; but a trick we CAN, and HAVE done in the modern age. Doing something of the magnitude of QE() and my 18ct eggs still cost $2-3??? That's really mind bonglingly amazing in my book.
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Re: What kind of economy will emerge in a post oil world?

Unread postby MonteQuest » Mon 03 Nov 2014, 11:39:44

AgentR11 wrote: Doing something of the magnitude of QE() and my 18ct eggs still cost $2-3??? That's really mind bonglingly amazing in my book.


But QE did little to increase the money supply. It just inflated bank assets, created excess reserves where the banks got more interest from the FED to hold them than to lend them out.

Am I missing something here?
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Re: What kind of economy will emerge in a post oil world?

Unread postby AgentR11 » Mon 03 Nov 2014, 12:09:57

You're close.
The natural cycle that would have occurred, should have destroyed a huge portion of the money supply.. For a brief period, people couldn't even issue short term commercial paper. We were probably within a day or few of a complete, "the party's over, turn off the lights" moment.

QE increased money supply in a manner that matched the destruction, in pretty much the location the destruction occurred. Created inflated balance sheets on both sides of asset and liability as a side effect, which locked at near zero interest, is essentially a wash, so nothing too horrible, though it locks in the requirement for near-zirp probably for a very long time.

The RE financial crash should have knocked us into a deep, deep depression. It didn't. The Fed turned a depression, into a massive, perpetual stall. My eggs should cost 50 cents for 18ct right now; but I also wouldn't have had the 50 cents to buy them with. They locked in "power down"; but a power down that will leave the current elites on top of the pile all the way down to the pit.
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Re: What kind of economy will emerge in a post oil world?

Unread postby careinke » Mon 03 Nov 2014, 12:29:52

MonteQuest wrote:
careinke wrote: I think cryptocurrencies, like Bitcoin, may be the ultimate answer.


But what will the value of Bitcoins be based upon?


The same thing every other currency is based on, faith. Only this time, the faith is based on math, not some centralized bank.

In addition, it has a lot of advantages over current currencies. Since I know about Bitcoin, I'll use it for an example.

1. There is only a finite amount of Bitcoin (21 million)
2. You can divide a Bitcoin out 8 decimal places, which means you can have .00000001 of a bitcoin. This eliminates the problem using precious metals (ie there is enough of it.
3. you can cross boarders or leave a country with it without the government knowing you have it. Because there is nothing physical to find.
4. you can transfer it across borders very cheaply without having to pay exhorbinent fees charged by banks.
5. you don't need a federal reserve or other centralized banking system.
6. There are more "wallets" to hold your bitcoins than there are atoms in the galaxy, making them hard to steal, (but easy lose).
7. There are a lot of other useful things you could do with bitcoin that are beyond the scope of this post but include such things as a fraud proof voting system, contracts, and wallets that require more than one persons approval to spend the bitcoin.

Today, you can use bitcoin for anything you use cash for. Heck even politicians, the Red Cross and Peakoil.com accept it. Finally, by it's limited supply, it is inherently a deflationary currency which makes savings less risky (once it gets through the volatility stage).

So I guess the real answer to your question is it's value comes from it's usefulness unencumbered by manipulation from central banks.
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Re: What kind of economy will emerge in a post oil world?

Unread postby furrybill » Mon 03 Nov 2014, 13:38:12

dolanbaker wrote:
Ibon wrote:Is it not a valid conclusion that as growth slows wealth will move more and more away from stock ownership and put more into tangible assets like property, farm land, factories, etc.

Yes, it think that it is. In the early 19th century, it was not unusual for a member of the landed gentry to look out his (elevated) bedroom window and see his wealth as he owns all the land in view.

If property prices around the world continue to rise (relatively speaking) out of reach of the average employee & family, we're already long past the point where a single income could finance that house purchase. More and more property will be owned by fewer and fewer wealthy landlords.


Yup, after reading Piketty I'm convinced this is where we're heading. The "rentier" model is actually what is "normal" and the last few decades since WWII are not. As FF's are phased out and there's less energy it'll exacerbate concentration of wealth into fewer hands.

A still nebulous plan in my head is to buy as much land as possible, building a few efficient houses and renting them to people with similar philosophy, thereby creating a "community" to weather out the coming storm.
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Re: What kind of economy will emerge in a post oil world?

Unread postby MonteQuest » Mon 03 Nov 2014, 20:00:16

careinke wrote:
MonteQuest wrote:
careinke wrote: I think cryptocurrencies, like Bitcoin, may be the ultimate answer.


But what will the value of Bitcoins be based upon?


The same thing every other currency is based on, faith.


Fiat currencies are based on faith that there will be GDP growth to repay the IOU'S.

With little or no growth, there is no faith that the IOU will be repaid, is there?
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Re: What kind of economy will emerge in a post oil world?

Unread postby Loki » Mon 03 Nov 2014, 22:56:38

AgentR11 wrote:Basically, its the trick that we could not do during the great depression as a result of lack of computational power; but a trick we CAN, and HAVE done in the modern age. Doing something of the magnitude of QE() and my 18ct eggs still cost $2-3??? That's really mind bonglingly amazing in my book.

QE for the public is certainly possible. Bush et al. made a trial run in 2008, obviously didn't do much. Twist the volume a bit and it'd likely goose inflation, but only temporarily. Twist the volume too much and we slip into hyperinflation. Hyperinflationary episodes also tend to be short in duration.

Deflation, on the other hand, is a long-term process. It may be punctuated by short bouts of artificial inflation, and maybe even hyperinflation in some places, but the default will still be deflation.

Japan has proven that deflation can drag on for decades despite the flailing about of a central bank desperately pumping money into a failing system. Check out Japanese housing values (2013 chart):

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Re: What kind of economy will emerge in a post oil world?

Unread postby ralfy » Mon 03 Nov 2014, 23:01:41

Pops wrote:No, you said capitalism causes profit and I agree, but you merely asserted re-investment causes growth. First, there is no law that all profits be reinvested, second there is a law that things depreciate so must be replaced and third, there is also the theory of creative destruction that says old wealth must be destroyed to create new. Marx thought it would be the end of capitalism but it is certainly true that wealth doesn't last. Marx didn't coin the term but he had it figurted out:
It is enough to mention the commercial crises that by their periodical return put the existence of the whole of bourgeois society on trial, each time more threateningly. In these crises, a great part not only of existing production, but also of previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production.


The only way for profit not to be reinvested is to see most people hide their money under their beds.

When new wealth is created to replace old wealth, then that doesn't mean that wealth doesn't last but the opposite.

The rest of the quote reinforces my points about capitalism requiring growth for obvious reasons.
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Re: What kind of economy will emerge in a post oil world?

Unread postby Loki » Tue 04 Nov 2014, 00:12:24

There isn't a monolithic "capitalism." There is only capitalism-as-we-know-it, and it will have to change, whether it wants to or not. The financial branch especially. Big Finance has a shelf life, and it's smelling a bit off these days.

Entrepreneurialism, on the other hand, will likely thrive during the Long Emergency. Not at the Apple/Microsoft level, more like the apple seller on the street corner. Buy 100 apples at 5c/ea, sell for 10c/ea = profit!
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Re: What kind of economy will emerge in a post oil world?

Unread postby joyfulbozo » Tue 04 Nov 2014, 03:03:47

Must say.. a good analysis people have... !!! Great going...!!!
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Re: What kind of economy will emerge in a post oil world?

Unread postby radon1 » Tue 04 Nov 2014, 03:54:05

careinke wrote:
1. There is only a finite amount of Bitcoin (21 million)
2. You can divide a Bitcoin out 8 decimal places, which means you can have .00000001 of a bitcoin. This eliminates the problem using precious metals (ie there is enough of it.


Kinda 1 conflicts with 2, no?
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Re: What kind of economy will emerge in a post oil world?

Unread postby careinke » Tue 04 Nov 2014, 16:05:49

radon1 wrote:
careinke wrote:
1. There is only a finite amount of Bitcoin (21 million)
2. You can divide a Bitcoin out 8 decimal places, which means you can have .00000001 of a bitcoin. This eliminates the problem using precious metals (ie there is enough of it.


Kinda 1 conflicts with 2, no?


Not really, it answers the problem with using hard metals in todays world. With metals and todays 7 billion population, you would have to produce gold coins that would weigh around 1/50,000th of an ounce. Thats a pretty small coin! Bitcoin (an entry into the block chain) has no mass, so is not constrained the way precious metals are.

As the value of bitcoin rises you just use a smaller percentage of each bitcoin. It is inherently a deflationary currency.

Monte, I understand very well that BAU currencies today, are based on debt and centralized banks. But they don't have to be.
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Re: What kind of economy will emerge in a post oil world?

Unread postby joyfulbozo » Wed 05 Nov 2014, 02:58:19

careinke wrote:
radon1 wrote:
careinke wrote:
1. There is only a finite amount of Bitcoin (21 million)
2. You can divide a Bitcoin out 8 decimal places, which means you can have .00000001 of a bitcoin. This eliminates the problem using precious metals (ie there is enough of it.


Kinda 1 conflicts with 2, no?


Not really, it answers the problem with using hard metals in todays world. With metals and todays 7 billion population, you would have to produce gold coins that would weigh around 1/50,000th of an ounce. Thats a pretty small coin! Bitcoin (an entry into the block chain) has no mass, so is not constrained the way precious metals are.

As the value of bitcoin rises you just use a smaller percentage of each bitcoin. It is inherently a deflationary currency.

Monte, I understand very well that BAU currencies today, are based on debt and centralized banks. But they don't have to be.


Totally agreeing with you careinke... (y)
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