Not your ordinary recession: New Year's outlook for UK

[JohnB]

As far as I'm concerned, money is a way of storing of wealth. I want my wealth to be in land, a home and assets that can be used to generate wealth. That may be from renting for money or in return for food or labour, or it may be an office or workshop where I can work to earn money. Any money I acquire is only used as a store for my wealth until I can convert it into something that I can actually use.

I may be moaning about almost zero interest rates, but that's just part of the transition we're going through. It's just annoying that at a time when I'm exploiting the system to provide me with an income, that part of the system is falling apart. It doesn't mean that I agree with the system, I'm just exploiting it to achieve my aims.

[MaxWahlter]

I'm so glad my post created the debate above. I hope it has been useful. A few follow-on comments:

Credit crunch and energy
For a deeper analysis of the connections between the credit crunch and energy, and some insights into gas, see the Reality Report with Jason Bradford.http://globalpublicmedia.com/reality_re ... ssil_fuels

Business Plans and Direct and indirect Energy costs
Last year in a domestic home in Sweden, energy costs were 9% of the total, the year before that, 7%. The increase is huge, but as the proportion of energy costs, direct, is small it might go unnoticed.
In businesses, fuel costs vary from 25% (airlines and haulage) to just a few percent. What can be missed is that as the basic workings of a business are to buy in services and products and labour and sell them on at a profit, fuel costs are embedded in the whole supply chain.
If you run at a margin of 25% and a profit of 10% you will see that even a small increase in overall cost will eat into profits voraciously.
That's why the system is broken. With oil at 40 something a barrel it means stuff is not being made and put into the system. Further down the supply chain it will just not be available. Wells are not being drilled, cars are not being made and further into 2009 oil will not be available and less of everything will be sold. This is fine if you are a friend of the Earth, but the economic system we live in means people at the bottom of the pile ( and I am close there myself already) will be physically a lot worse off. You could say the system lacks resilience...

Interest free banking

Those of you with money could consider trying what is being tried up in the North of Sweden. Asset based finance. Basically you put money into a business, and as long as the money is there you get benefits in terms of what the assets of the business (rather than money) can give. It is solidarity based as you share the risks with the owners. You can e.g. put 3000 pounds into a sheep farm and get mutton delivered as long as the money is in the firm. I think it also gives you the possibility to purchase at production cost as well.
The aim of this way of investing would be to put as much into local firms as possible, reduce your living costs, reduce the need to work for money and give you the reliance the transition town people are after.

[DominicJ]

But what if you suddenly need your money back?

Thats the problem, if you give it to a mutton farmer, he buys a better tractor and that cuts his costs and eventualy he can pay you back.
Unless he goes under.

Its investment, its quite [s]good[/s] interesting investment, but it isnt a current account.

[skeptik]

With oil at 40 something a barrel it means stuff is not being made and put into the system. Further down the supply chain it will just not be available. Wells are not being drilled, cars are not being made and further into 2009 oil will not be available <snip>

Why?

Oil touched $10 a barrel in 1999 and didn't become unavailable. What is seriously being effected is the marginal stuff - unconventional supplies that out on the bleeding edge required (according to a Goldman Sachs study) a price of up to $90 to break even. At the moment demand is falling, and OPEC is shutting in production in response. It doesn't take long to open up shut in production when required.

The Saudis claim (as per recent interview with their oil minister) a production cost of $5 a barrel. $40 a barrel is not going to make oil unavailable. What it could do - in combination with the credit crunch - is produce a supply crunch a few years down the line, as the projects at the financing stage currently being cancelled fail to come online. Don't forget that there's a time lag of 5 to 8 years between raising finance for a major oil project and the first barrels reaching the consumer. Big engineering is a slow process.

[JohnB]

Interest free banking

.....
The aim of this way of investing would be to put as much into local firms as possible, reduce your living costs, reduce the need to work for money and give you the reliance the transition town people are after.

That's pretty much what I'd like to achieve. It makes a lot of sense, as you have more control over what your money is used for, and you get a useful return on your investment, rather than bits of paper. You also benefit by acquiring goods at cost rather than having to pay the retail price that you would with money received from interest.

Not sure the tax man would like it though.

[emordnilap]

Idle muse: I wonder if RGR has simply changed his forum ID ...

No. We're not that lucky.

[skeptik]

Idle muse: I wonder if RGR has simply changed his forum ID ...

Linguistic analysis would suggest not.

(Unless he's moved to the UK and his mom has put him back on the Ritalin which he'd been forgetting to take since joining Powerswitch)

[DominicJ]

I joined 40 days before RGR was banned, I called his bullshit on several occasions, I agreed with him on several others.

Refusing to accept your disproven theories as gospel is not trolling

[PaulS]

I joined 40 days before RGR was banned, I called his bullshit on several occasions, I agreed with him on several others.

Refusing to accept your disproven theories as gospel is not trolling

I didn't realise he was banned!
Banning RGR is too severe. His views may be opposite of most of us, but some of his arguments were interesting. Having opposition tends to improve debate.

[oilslick]

Idle muse: I wonder if RGR has simply changed his forum ID ...

I've been posting on PS for about 3 and a bit years now with this and my previous ID (which I stupidly had my name in...forum n00b that I was ).

Anyway, I've noticed something of late. It's almost like peak oil hasn't delivered so everything has to be because of it, even if it hasn't really happened. Someone will explain Gaza is due to PO, the credit crunch is DEFINITELY PO, it's cold because of PO and so on.

More worryingly it seems anyone who doesn't follow the party line is treated as if they have something wrong with them.

I've been following the credit crunch all the way along and I'd like to think I called it before most people...some of you might remember my sad recession watch graph monitoring how often the word recession appeared in the press back at the end of 2006, early 2007. I said at the time 2007 would be peak living standards for the UK and it seems that will be the case. It seems obvious now but it didn't back then.

So I'd like to think I've got a pretty good handle on the causes of all this and I have to say I agree far more with Dominic than I do with most people here who assume it's all down to oil and not much else.

But I think PSers need to be careful not to become a closed shop all agreeing with each other how bad this peak oil lark is when I haven't seen any evidence it's really happened or about to happen.

[Vortex]

I didn't realise he was banned!

Huh?

I thought he legged it when his identity was rumbled?

So ... was he banned? Anyone know?

[Vortex]

Someone will explain Gaza is due to PO,

Already seen that comment on one of the other sites! Twerps!

[DominicJ]

I just assumed...

[JohnB]

Anyway, I've noticed something of late. It's almost like peak oil hasn't delivered so everything has to be because of it, even if it hasn't really happened. Someone will explain Gaza is due to PO, the credit crunch is DEFINITELY PO, it's cold because of PO and so on.

I don't think PO is the cause of the problem. It's one of many symptoms of an unsustainable system. We're heading for Peak Everything, or at Least Peak Lots of Things that we depend on for BAU. Even if PO occurring directly led to some of the current problems, it's still not THE problem, but just part of it. Oil has allowed us to grow further and faster and made the problem worse, and will make the collapse more dramatic, and that's why it's so important.

The solutions to PO are, or can be, the same as the answers to other problems, so it's a logical subject to concentrate on, and a good reason to hang around with other PowerSwitchers.

[biffvernon]

Of course PO is not THE cause of the problem. Neither is Mr Brown. Both are just parts of the system. We need to have systems thinking for systems.