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Which sector of economy will be hit first ??

Discussions about the economic and financial ramifications of PEAK OIL

Re: Which sector of economy will be hit first ??

Unread postby vtsnowedin » Tue 01 May 2018, 16:12:15

SUVs come in all sizes today. A Subaru Forester gets 28 mpg combined which matches many sedans. When people demand higher gas mileage they will get it but it will take gas higher then $4.00 to get there.
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Re: Which sector of economy will be hit first ??

Unread postby waterpowerman1 » Tue 01 May 2018, 16:58:18

You're missing one small thing. Ford is a multinational. The majority of CARS that Ford designs & builds are built in europe & asia already. Only the pick-ups are designed & built in N. America. They will still build lots of cars, just not in America. If there is demand for cars in USA then they will assemble(the low tech parts) in USA leaving the higher tech parts to the Asians and Europeans.
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Re: Which sector of economy will be hit first ??

Unread postby Ibon » Tue 01 May 2018, 18:03:37

asg70 wrote:
Ibon wrote:
baha wrote:
I think the travel industry will be hit first. But airlines are always suffering...



Freedom from all those damn ecotourists constantly asking me the name of that bug or bird.


Isn't that how you make a living?


I was joking but regards to this business we only need to cover our operating expenses which we could still do with 1/4 the guests currently visiting us. We do not require an income.
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Re: Which sector of economy will be hit first ??

Unread postby Newfie » Tue 01 May 2018, 18:08:30

I still think that the sector most at risk is financials. It’s global, it’s based on trust, and all players know it’s a Ponzi scheme. Sooner or later there will be an exodus that will turn into a rush.

No proof, no intention to argue the point, just my gut feeling.
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Re: Which sector of economy will be hit first ??

Unread postby vtsnowedin » Tue 01 May 2018, 19:08:09

Newfie wrote:I still think that the sector most at risk is financials. It’s global, it’s based on trust, and all players know it’s a Ponzi scheme. Sooner or later there will be an exodus that will turn into a rush.

No proof, no intention to argue the point, just my gut feeling.

You may be right on that. Even with plenty of oil at present the debt levels both public and private are a real concern. But what is to prevent an oil crisis, post peak event, from creating a boom for those that see it coming and have their assets (bets) in the right place?
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Re: Which sector of economy will be hit first ??

Unread postby Newfie » Tue 01 May 2018, 19:18:20

Doesn’t matter, sooner or later the debts will be called in. There will be no acceptable currency to make the payment. Then stuff happens.

Oil, wheat, whatever the commodity. The difference between perceived wealth, (ie stock market digits), and real wealth (oil, wheat) will be made abundentaly clear. That’s when the fight starts and things get interesting.
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Re: Which sector of economy will be hit first ??

Unread postby baha » Wed 02 May 2018, 05:33:13

vtsnowedin wrote:SUVs come in all sizes today. A Subaru Forester gets 28 mpg combined which matches many sedans.


AWD has become a fad. It is not necessary unless you drive in snow a lot (in VT). Or go off-road. Any vehicle pays a 10% efficiency penalty for AWD. My Front WD Ford Transit Connect turbo gets 28 mpg when I drive like a maniac. It gets 30 most of the time and can get 35 if I baby it.

It was made in Valencia Spain and shipped here whole :)

waterpowerman1 wrote: Only the pick-ups are designed & built in N. America. They will still build lots of cars, just not in America.


So true. That means in order for me to have job security as a design engineer I have to build pick-up trucks...I hate pick-up trucks. There has never been a more useful, butt ugly, thing invented. I like vans :)

There are people in this world who live by their principles. I bought a Ford Ecoboost because it had what I wanted and was forward thinking. It is all about efficiency and at least the profit stays in the US...maybe.

But the Ford CEO just said to me 'I don't care about CO2, gas milage, or efficiency. I just want to take your money'. So I will never buy a Ford again. There are a lot of people who feel that way...most of them live in CA :) But we have a few in NC.

They have already eliminated a big chunk of their business by making this decision.

Newfie wrote:I still think that the sector most at risk is financials.


I know your right Newfie, but I don't put as much weight on money. Money is just how you keep the books. The processes themselves are supported by energy and I feel, even if the books get all screwed up, they will find a way to keep the energy flowing.

Newfie wrote:That’s when the fight starts and things get interesting.


I think that's when things get real. Shooting people doesn't help. I think that will soak in quickly. Dumping our ponzi scheme monetary system would actually help :)

At this point I would like to be paid with bread and meat :)
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Re: Which sector of economy will be hit first ??

Unread postby KaiserJeep » Wed 02 May 2018, 09:40:02

I believe that a more economical Jeep Wrangler that finally had a hybrid powertrain would have debuted in late 2019. Now it probably will not, because the new model JL Wrangler no longer has to achieve the 36mpg that Obama set as a CAFE goal.

Meanwhile my beloved Jeep Corporation is now controlled by Fiat-Chrysler. This has already resulted in Jeep models with diesel powertrains and lighter aluminum body parts and some really fairly efficient powertrain components such as 8-speed automatic transmissions and lighter weight axles and engines. The new 3.7L V-6's have lightweight molded plastic high performance variable geometry air intakes that were inspired by Porsche in the decade of the 2000's, and also variable valve timing, all controlled by the omniscient digital computer, which now has severed the throttle linkage and replaced it with a digital "fly-by-wire" technique. Wranglers are getting more streamlined, with curved winscreens that are reclined at greater angles, with new backup cameras and the aftermarket option for a camera focussed on each tire for precise tire placement off-road.

Meanwhile, not a chance all the extra complexity enhances reliability. It has already happened that my 15-year-old 2003 model has no more "smart parts" available from Fiat-Chrysler, if my PCM (Powertrain Control Module) packs it in, I have to rely on aftermarket re-programmed parts salvaged from junked vehicles. There are still 78-year-old Jeeps manufactured for WW2 on the road, but keeping the current generation going for that long is a more difficult challenge.

But I'm a techie, and I'm already driving around with an Android Tablet interfaced to the DRB2 port of the wiring harness via BlueTooth, and software that gives me a glimpse into the digital heart of my beast. I have come to realize that the whole powertrain has digital sensors everywhere, and that the reassuringly analog guages were actually shams whose needles were tweaked by the PCM.

Fortunately, I have the time. There are lots of aftermarket digital tuner mechanics here in the Silly Valley, and I'm acquiring the expertise and software needed to truly understand and modify the digital beast.
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Re: Which sector of economy will be hit first ??

Unread postby Revi » Wed 02 May 2018, 10:10:43

Food might be the first sector to be hit. There is no extra sitting in grain elevators any more. It's all shipped really quickly nowadays. We could be one bad harvest away from hunger. With hundred degree temperatures happening already, we could end up with a shortage of food pretty quickly even in developed countries.

https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/key-statistics-graphics.aspx#foodsecure

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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Wed 02 May 2018, 11:09:33

The questions about finance might be justified, but for reasons not yet cited in this thread. If the world is on the cusp of an anti-globalization period, then finance will probably suffer. And if companies can't get money they can't expand or start up. People with ideas won't be able to get them off of the ground in the easy manner that the profusion of financial services has made possible. That could result in a slow down in innovation. That's not guaranteed, though. It could just as easily result in the biggest fish getting all of the business when it comes to financing innovation, absent the swarm of competition they have faced previously. Or it could be that new players, like Face Book, get all of the business, due to their expertise related to dealing with sorting information.

Incidentally, It's the financial and legal professions that will probably be hardest hit by artificial intelligence. Yes, low skilled positions have been hardest hit up until now. Artificial intelligence works best at replacing those tasks that are repetitive. Well, many financial and legal tasks performed by highly rewarded people are repetitive. They've just been a little bit more complex, and, therefore, harder to get a handle on. Unlike low skilled labor intensive positions, they haven't been replaceable by the sort of automation that has ruled, that which might still include a mechanical aspect. In the new era, there will be a lot of automation that doesn't require anything mechanical to make it operate. The real question is whether management will integrate those things into the operations. They'll need to see a tangible impact upon sales before they do, or such cost savings in sales support that it makes it worth their while.

That's not the end of the world either. When people in those positions lose their jobs they don't necessarily have to rely upon the existence of some other outfit to provide them work. They may create their own work at a higher rate than factory workers would. They just need capital. If the financial world is not offering that they could lead the way in forming the next sort of innovation in finance, due to their demand and their recognition that people like them need money. The greatest bottleneck over this might actually be in the legal structure, as societal norms fail to move as fast as the changes on the ground. I suppose a good metaphor for this would be the snow sports industry, where at first it was impossible to get snowboards up onto a mountain. Then, when they were allowed, skiers complained about them left and right. Now they are a staple. People don't see it, but snow bikes are on the horizon, because people are getting older.
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Re: Which sector of economy will be hit first ??

Unread postby Revi » Thu 03 May 2018, 12:36:14

Transportation in the US may not fare so well either. The car of the future:

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Re: Which sector of economy will be hit first ??

Unread postby Newfie » Thu 03 May 2018, 15:51:58

Revi,
Thats a really salient post. We have a tremendous amount of waste in our personal transport system. Which means there is a lot of ways to improve in face of high fuel prices or depression. Lots of resilience in the system.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Thu 03 May 2018, 16:20:04

Revi wrote:Transportation in the US may not fare so well either. The car of the future:

Image

Based on what facts about either oil production or green energy or BEV advancemement?

Or only on your intuition?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Which sector of economy will be hit first ??

Unread postby Newfie » Thu 03 May 2018, 17:29:41

From what I saw in the Dominican Republic even very poor folks can afford these things. By the bazzillion. I’ve seen many fitted to carry two milk cans. But also a few guys transporting outboard motors.

How many of these things can you buy for the cost of a SUV?

Of course they don’t work for beans in the snow.
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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Fri 04 May 2018, 11:55:05

I was just thinking about this thread. It occurred to me that people almost never voluntarily quit doing anything that works for them, even if it works less and less well over time. I've talked about how it was high gas prices that killed the economy during the Great Recession. I know, it was housing, but the boots on the ground thing that made for the straw that broke the camel's back was gas prices. I watched the big work trucks, so many men had gotten into construction, keep going when there was a diminishing marginal utility to their continued use, until gas prices actually made it enough of a loss to even go out and look for work that people quit doing that. I think we are about to enter a period of rising prices. Inflation is going to eat at people. They'll either use pricing power to combat that, or they will economize. I can see the economizers losing at some point. I just don't know if there is a group right now that can be identified as easily as men doing construction was before. I said previously that I fear for gig workers, especially Uber and Lyft types. They seem pretty vulnerable to inflation to me. They already economize to make a living right now. However, I don't think their numbers are sufficient to tank the rest of the economy, should they wind up on the bread line.

Personally, I've noticed a lot more RV's and trailers appearing parked on my city's streets. Sometimes they are clustered, but mostly they are one off's. I can see people adapting to high real estate prices, and yet continuing to participate in the gig economy this way. It's a way of economizing that lands short of living in a tent or pushing around a shopping cart. The gig economy seems to work best in urban areas. At the same time, I did hear that a million more people left California last year than moved there. The article cited high real estate prices as the primary reason. What it didn't say was how many went to urban areas in other states vs. rural. Nor did it say what percentage were gig economy workers.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Fri 04 May 2018, 13:08:29

There are things that are getting better in the economy besides GDP. The value of derivatives has dropped by over two thirds since it peaked in 2008.

Holding one's breath for financial armageddon, as usual, is likely to result in being blue for a long time, even if one has the direction right eventually.

https://www.cnbc.com/2018/05/04/the-val ... nging.html
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Re: Which sector of economy will be hit first ??

Unread postby onlooker » Fri 04 May 2018, 16:46:00

Evil, can I ask you what you believe will be the prime catalyst to initiate the next Great downturn in the Economy?
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Re: Which sector of economy will be hit first ??

Unread postby evilgenius » Sat 05 May 2018, 12:00:31

onlooker wrote:Evil, can I ask you what you believe will be the prime catalyst to initiate the next Great downturn in the Economy?

I think the prime catalyst will be interest rates. The move upward is a a move to halt inflation, which has been low. I know, you can always find somebody who has a lot to say about how they are paying more for everything. About a year or two ago I started to actually watch what was happening at the grocery store. I didn't write things down, but I deliberately kept a lookout, to see how much things were actually going up. Prices went up some, but not as much as the ranting. In fact, Kroger stock tanked during that time because they were not perceived as having much pricing power.

We could use some inflation, especially of wages, in the United States. It's sad that the same $10 per hour 'good enough' wage has maintained its dominance amongst the lowest paid for decades. There was a huge fight over paying fast food workers $15 per hour partly in a battle over people's perceptions. Those who work for little money mostly just want to survive. It's telling that many of those who work at those places where the push for $15 per hour took place didn't want it because it would probably screw up other things they relied upon for survival, winding up costing them more out of their own pockets to live their lives. But I don't bring this up to highlight some social justice issue. I bring it up to highlight how locally it impedes demand. The fewer people there are in a local economy with discretionary income, the less money local business has to market toward.

In the absence of inflation there is a perception that it exists. I assert that perception is a symptom of low local money supply rather than inflation. People work harder and make less than they used to when they worked less. There is some inflation, even if the level is low, and its effects are cumulative. The obvious solution is higher wages to match inflationary pressure, but that hasn't happened. I'll step out on a limb and tell you who the real culprit is, a misidentification on the part of the lower classes based upon an emotional understanding of how America works. People in America believe in supply and demand. As such, they see things like unions as artifice. They want the pure version of supply and demand to be true, so they deny the viability of those constructs, like unions, designed to achieve results because of power in numbers. Likewise, people want principles of management that promote nut cutting to be true over those which support empowering employees. It hasn't been hard for the rich to bring about legislation helping this along. Unions are messy. They are run by others and the focus is not on the individual. Americans love any tale where the individual triumphs. To that end, the struggle to survive is not one that people engage in alone. They also have to constantly fight the judgment of others. When people fail in America there is always a wagging finger saying they deserved it close by. And that wagging finger probably belongs to someone who is just as close to failure. The wagging finger easily mistakes chance success for virtue. The wagging finger most likely stands upon the pure version of supply and demand as it utters its pronouncements. Meanwhile, the rich live in a completely different world. They have the power to create demand. They mold what people think, rolling it out to them in complex marketing schemes and campaigns which are highly effective. Too much of everything is focused toward the top. And too many people suffer under the illusion that they can get there. People simply discount luck too much. Likewise, they discount the power of those at the top to ensnare them into their schemes. They can't see how much their own biases help the rich get richer.

Into this mix comes higher interest rates. The thing that these rates are most about doing is keeping local wages low. Milton Friedman taught them to watch for that, so, by God, they will. The rich have no idea what sort of boat the non-rich are in. They don't know that Uber drivers sleep in their cars as they work 12-14 hour days. Their statistics don't catch sleepy bus drivers because they don't follow them through their other jobs. They have no idea how many homeless people there really are. They just want to keep a good thing going. The good thing of the rich almost doesn't need the rest of us. It has foreign investment to bolster it. It has US dollar dominance to ensure a certain amount of money flow into the system that helps the rich stay rich. Higher rates encourage investment by those outside the US in US treasuries. High rates also take advantage of the natural financial barrier to entry into being rich, destroying the positions of those who are over leveraged. The top can't remain the top if too many are at it. They think they can keep milking the poor for what part of them, some form of consent and a vast structural consistency to their marketing devices, that they really do need the poor to provide. Little quarter point moves are only going to drive prices up, as the system realigns itself after each stage. Rent isn't going to get any cheaper. Crucially for the entrepreneurial poor, gas prices are going to go up. The poor aren't going to offer any mercy to the other poor. They won't organize. The homeless ranks will grow. People will keep doing what has worked, even if it works less well. At some point it will quit working for enough people. The structure that the rich use to stay rich will quit working. No one will be able to figure it out, even though the answer is quite simple, because everything has always been made more out of what people want the world to be like rather than what it really is like. There is room for compassion over dog eat dog, but not in the system of virtues which America's pure version of supply and demand engenders.
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Re: Which sector of economy will be hit first ??

Unread postby onlooker » Sat 05 May 2018, 15:51:02

Thank you for that great analysis Evil. I tend to agree with your answer.
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Re: Which sector of economy will be hit first ??

Unread postby Outcast_Searcher » Sun 06 May 2018, 13:48:15

baha wrote:At this point I would like to be paid with bread and meat :)

And when you have all the bread or meat you want or need in storage, then what? The reason money was invented was it's a hell of a lot more efficient and more flexible than bartering physical goods.

Hell, I'd rather need to use a smart phone and apps to buy things than lug around chickens or shiny rocks when I want to buy a flannel shirt.

If debt needs to be repudiated, the markets will do that in time. That doesn't mean money shouldn't exist, but perhaps (for a time) people will be wiser about accepting debt.

OTOH, outfits like Greece and Puerto Rico, and even Japan don't make me confident in peoples' ability to recognize questionable debt.

I actually like the idea of going back to money actually backed by real rare metals. Needing to make money BETTER in the long term doesn't have to mean all money is bad. Of course, modern politicians can't easily loot/debase such money, so that won't be popular among elected officials.

And that doesn't mean we'd have to cart around physical gold. Cash used to be exchangeable for gold and silver in the US -- so the money actually stood for something real. No reason such a system can't be used in the modern world.
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