[Pops]

It seems to me that there should rightly be a spike in oil and other commodity prices when markets overheat and investment and production rise at a rapid clip. In the oughts China was increasing consumption rapidly having moved from producer to consumer at the same time the N Sea and Mexico were slowing.

OTOH, a spike in oil price unassociated with consumption, such as the Arab Embargo would obviously affect the overall economy too.

But can there be a big deflation if there isn't a big inflation—short of some outside calamity? A bust must be preceded by a boom, right? Here is a picture of the price earnings ratio according to Shiller:


Typically around 16, it's back at where it was in '08 and nearly '29...

OTOH, bonds aren't paying anything so...

http://www.multpl.com/shiller-pe/



The economy is changing. I remember when ... uh, our late corny guy.... said that the economy won't be making things, it will be based on cell phone billing.?!

Maybe that is the thing, everyone is busting it to keep up with the cell bill. Is Pokemon the great engine of the postmodern economy?

[Newfie]

Pops,

That last point you make is important. The whole economy is running on some kind of Matrix like idea of reality. We don't make anything of real value anymore. More precisely, we make somethings, we grow somethings, but our economy is "service" based. 10,000 hairdressers can't out produce one farmer.

Therefore our economy is already bust, we are just living off the backs of the few real producers. All the rest is funny money.

Now if something takes out those few real producers, or the money guys swallow enough red pills, then we may have a sudden crash. When, not if.

[ralfy]

I think the effects of the credit market (both crashes and "recovery") are covering the effects of peak oil (high production costs), leading to volatility in prices but also weakened trade and slow growth. At some point, relying on credit will not matter, as that won't lower production costs.

[vtsnowedin]

Pops,

That last point you make is important. The whole economy is running on some kind of Matrix like idea of reality. We don't make anything of real value anymore. More precisely, we make somethings, we grow somethings, but our economy is "service" based. 10,000 hairdressers can't out produce one farmer.

Therefore our economy is already bust, we are just living off the backs of the few real producers. All the rest is funny money.

Now if something takes out those few real producers, or the money guys swallow enough red pills, then we may have a sudden crash. When, not if.

I don't follow you there Newfie. The total volume of commodities being produced, grain, meat, steel, automobiles oil etc. is at record levels.

[Ibon]

But there is no correction for overpopulation and underearth.

Nice phrase, can I steal it from time to time?

You guys just made the overshoot predator chuckle.

[vtsnowedin]

I don't know who will win the election tomorrow but regardless I will predict, and bet a gallon of VT. maple syrup on it, that the economy will crash in march 2017.
Any takers and what is your stakes?

[EdwinSm]

You mixed up the place where the 'l' should go, so I am having to fix it for you

No gluts no gory.

[Newfie]

VT,

Services are 77% of the GDP. By comparison commodities are small. Also that's by dollar value. I don't have the stats but my gut tells me that much less than 23% of the workforce is responsible for the commodities. And that ignores a large part of the population not in the work force. So all in those commodities are created by something on the order of 10% of the population.

With minor exception all the money, all value, all the wealth created by those few feeds the many. Our economy is a massive redistribution scheme.

Not criticizing, commenting.

[Pops]

We still make stuff as vt says, it's just that the "we" ain't people (blue line)



Notice the brown line on the chart has flattened out as well, that's total employment, basically unchanged since 2000, here's a close up:



Lots of us are still dreading a EOTW event that igs us overnight all the while the water in our pot is getting closer and closer to a boil.

An economy "crashes" for lots of reasons but I'd guess the biggest is simply production and investment outpacing demand. So the question is, when an automated factory overestimates demand and overproduces, who gets laid off? Robots?

And, if there is no effect on workers - because there are no workers - then what difference does it make that the economy crashes?

A bit of hyperbole there but you get my drift. Computers, containers and automation have changed everything and will continue to do so. There will be fewer jobs in all but the darkest Olduvai future.

we need to update our nightmares
.

[Newfie]

Yes Pops, we are in uncharted territory. From many aspects.

[Subjectivist]

I don't know who will win the election tomorrow but regardless I will predict, and bet a gallon of VT. maple syrup on it, that the economy will crash in march 2017.
Any takers and what is your stakes?

Why March in particular?

[vtsnowedin]

Well if 70 percent of the economy is services then it could shrink by 70 percent and we would still have all the food and steel that we have now. They say 17 percent of the US economy is health care which is a service but no matter how much of it we buy we always end up dead just at a later date.
A major reordering of how much we spend on services is probably in our futures as we are coming to realize that there is not sufficient income to support us in the manner to which we have grown accustomed.

[vtsnowedin]

I don't know who will win the election tomorrow but regardless I will predict, and bet a gallon of VT. maple syrup on it, that the economy will crash in march 2017.
Any takers and what is your stakes?

Why March in particular?

No special inside knowledge, just a hunch that it will take that long after inauguration day for the bean counters in Washington to tell Congress and the President what the real state of the balance sheet is.

[ralfy]

The problem is that production is higher but at higher costs. A global capitalist economy requires higher production at the same or lower costs.

Also, in terms of ecological footprint (i.e., in terms of material resources needed for steel, food, etc.), the world population is likely in overshoot. But the same economy needs the opposite.

[Pops]

I don't think it is Ralphy. A crappy mechanic in the neighborhood charges $90/hr yet I bought a perfectly serviceable monitor for a couple hundred bucks vs $3k 20 years ago. I can get a walmart t-shirt for $5, the average expenditure share on food is a third what it was 100 years ago.

[kublikhan]

I already offered a bet on another thread. Nobody took me up on it. No guts no glory.

What was the bet?

[Revi]

I think Vtsnowedin offered a gallon of Vermont Maple Syrup if the economy doesn't crash in March 2017.

A gallon is worth around $80, so that's a pretty hefty thing to offer!

Any takers? I'm not wagering any maple syrup. I'll be too busy making it in March!