PowerSwitch

OK, firstly let's assume that this financial mess doesn't end with Mad Max roaming the land.

What does the future hold?

Maybe:
- expensive mortgages
- fewer mortgages
- house price falls
- much less credit for houses, extensions, cars, current businesses, new businesses
- reduced economic activity
- maybe increased unemployment
- increased crime

What do you think the place will be like in say 12 months time?

Vortex wrote: - expensive mortgages
- fewer mortgages
- house price falls
- much less credit for houses, extensions, cars, current businesses, new businesses
- reduced economic activity
- maybe increased unemployment
- increased crime

That's a pretty fair summary of our current state of affairs isn't it?

Just wait until TS really HTF.

Aurora wrote:

Vortex wrote: - expensive mortgages
- fewer mortgages
- house price falls
- much less credit for houses, extensions, cars, current businesses, new businesses
- reduced economic activity
- maybe increased unemployment
- increased crime

That's a pretty fair summary of our current state of affairs isn't it?

Just wait until TS really HTF.

Personally, as some may have noticed , I have a REALLY bad feeling about things.

Vortex seems to be assuming life will go on as currently, with just less money swilling around. I, however, think we are approaching a tipping point where the world changes beyond recognition.

Until recently I'd been hoping there'd be a series of big downward economic bumps, and several years of grace before things became totally intolerable. But with Bush himself now saying, "Pass this plan or we're all f***ed", it's clear that the collapse is going to occur overnight.

We shouldn't underestimate the speed with which things can change. When a company goes bust it stops operations immediately: look at the holidaymakers who were stranded when XL went bust. I think we are looking at a huge number of crucial businesses (not just banks) collapsing suddenly and simultaneously, leaving total chaos in their wake.

Let's try and clutch at positive straws.

- expensive mortgages
- fewer mortgages
- house price falls

There's still the same number of people to fit into the same number of houses.

- reduced economic activity

If that means less oil used and less carbon emitted then it should be welcomed.

- maybe increased unemployment
- increased crime

Tricky, but this is where the skills of government and communities have to be developed.

... but all this will mean increased levels of 'greyness' and pettiness.

I have quite enjoyed the 'zingy' high tech decade we have just had.

Sure, the profligate waste has been a horror ... BUT ... everyone has been so positive.

I would like to keep the 'zingy' attitude ... but lose the house price & personal credit crap.

Sadly I doubt that will be possible.

Firstly, you have to look at who this situation affects. If you've got nothing you have nothing to loose. Many peoples lives will not change. i.e. Students as long as they can still get student loans etc. The aged who are already drawing their pensions and living in their own homes should not be affected. Those on minimum wage or low wages in 'safe jobs' lives will not change.

So far this is mostly a problem for BTL landlords, those with excess cash, those that bought houses late in the 'cycle' and those with vunerable jobs (airlines, banks etc.)

Of course this will spread to the wider economy meaning more unemployed and a higher welfare bill for the country. Taxes will probably go up. Social unrest and strikes will occur if inflation continues (not sure that it will as so much money had been destroyed).

My guess is that the rich will be taxed more heavily to subsidise those that loose their jobs.

Long periods of Inflation or deflation can cause trouble. At the moment I would guess that we have deflation. We should have deflation, there was too much money causing inflation (of houses and commodities). We must be careful not to overshoot on the destruction front, i.e. to have too much deflation. This will destroy more jobs than necessary via bankrupcy.

I think this is just another boom/bust cycle, that will sort itself out. When the banks think there is possibility of growth, i.e. when money supply has dropped too much, they should start lending again.

The spanner in the works could be the dollar. If it looses its role as a reserve currency of choice then the US is screwed. The UK and the pound may suffer the same fate. This would mean the US or the UK would have to print money to service debt causing rampant inflation and possibly a collapse of the currency. That really doesn't bare thinking about though.

biffvernon wrote:Let's try and clutch at positive straws.

- expensive mortgages
- fewer mortgages
- house price falls

There's still the same number of people to fit into the same number of houses.

- reduced economic activity

If that means less oil used and less carbon emitted then it should be welcomed.

- maybe increased unemployment
- increased crime

Tricky, but this is where the skills of government and communities have to be developed.

Yeah, I agree. Overall this is a good thing. As long as capital is removed from those with excess (as seems to be happening). Of course there will be innocent civilian casualties who aren't making money simply from investments, and that is a shame.

Vortex wrote:... but all this will mean increased levels of 'greyness' and pettiness...

I would like to keep the 'zingy' attitude ... but lose the house price & personal credit crap...

I think this is what the Transition guys are trying to do. And the chap who wrote Carbon Detox, who pointed out all the new shiny-stuff opportunities from energy-saving, renewables, kit-for-making-things, etc. Of course, you'd have to do the shopping while it's still possible...

I'm sure everything will work out just fine!

SunnyJim wrote:
I think this is just another boom/bust cycle, that will sort itself out. When the banks think there is possibility of growth, i.e. when money supply has dropped too much, they should start lending again.

I feel you're drifting away from the core issue here, i.e. that lending necessitates return on investment which necessitates ever-increasing energy use which can't happen any more. A new lending spree would very rapidly come up against this insoluble problem and even the dumbest and greediest banker would see that he wasn't going to get his money back, let alone interest.

The spanner in the works could be the dollar. If it looses its role as a reserve currency of choice then the US is screwed.

That is precisely what the US Govt. is panicking about. The chances of a collapse in the dollar are, I fear, very real indeed: else why the current sense of desperation?

Why does the dollar deserve to keep its role as reserve currency of choice? For a long time now, America hasn't actually been producing much that the rest of the world wants except debt.

The UK and the pound may suffer the same fate. This would mean the US or the UK would have to print money to service debt causing rampant inflation and possibly a collapse of the currency. That really doesn't bare thinking about though.

I can't stop thinking about it

Ludwig wrote:Why does the dollar deserve to keep its role as reserve currency of choice? For a long time now, America hasn't actually been producing much that the rest of the world wants except debt.

Don't forget the US has the largest manufacturing output of any nation and export well over a trillion dollars of stuff (agricultural products, industrial supplies, transistors, aircraft, motor vehicle parts, computers, telecommunications equipment, consumer goods...) per year, from CIA world factbook.

Vortex - your first post describes where we are NOW, imo.

Ludwig - your scenario of complete imminent collapse is increasingly possible imo. although at the extreme end of what I think will happen. The last week's events have increased the probability in my head from just over negligable to a possibility. The main reason being that events are speeding up and even if the $700bn rescue package is accepted, I have no faith in it actually succeeding - then where are we?? Also the interconnected state of everything in our current complex world increases the vulnerability of system failure.

Biffvernon, if business' go under and employment increases dramatically as I expect to occur this winter and people are short of money/food, the skills of Governments will be irrelevant imo.

Jim, I usually agree with much of what you post, but on this occasion I disagree. One of my sons is a student and I can assure you that every bill he gets has increased considerably and it is really impacting him (and thus me!), eg. food, gas, electricity prices have all increased substantially, even bus and train fares. All the above applies to pensioners too......

I don't see these things improving in the future. When total oil production goes into actual decline, they will get worse.

Yeah, I know. I was just trying to be a bit optomistic.

I do think the banking industry will squeeze another cycle out of us though.

Think about this;

Banks have seen that taxpayers pick up the crap.
If money deflates too much, they know that it needs to inflate, hence growth hence profit. Even if over the long term they know the economy is to shrink they will make money and lend for short term profit, and the goverment can take the can when it busts again.

So the banks can still make money in a shrinking economy, by passing the losses onto the government. This means the system can continue for a while. At least until foreign deposits disappear. And this is the worry isn't it?

What's stopping the US dollar from loosing status as a global reserve currency??

This;

I think we will know that a fast crash is on the way when oil companies start laying of workers because they can't get the credit to pay their wages.

(apparently, a lot of smaller oil companies that do the small developments and old field reworkings are heavily leveraged based on future income. If short term credit dries up they can go broke. Heard this on TOD, as usual).

SunnyJim wrote:Yeah, I know. I was just trying to be a bit optomistic.

I do think the banking industry will squeeze another cycle out of us though.

I hope you are right, I would like to see BAU (ie an easy life) go on for a few more years, before we are all forced to change to a dramatically different way of life.

Don't get me wrong there are things in modern life I don't like, but in general I much prefer current life to life like in the 1950s or 1930s or earlier.