Friday, May 20, 2022

On The Economic Disturbance

 In general, I have been eschewing current events as a basis for a post for some time now..  There is a  sense in which I do this that it tends to help self-monitor the commentary, allowing for actual discussion.  It also is purposeful in the sense that many "current events" postings do not age well over time (unless one is a fine writer with an eye towards history, as some are).  At best they become a historical record, at worst they become awkward records out of place.

But occasionally, something - like what appears to be an ongoing economic disturbance (I do not know that words like "collapse" or "meltdown" are warranted, at least yet; nothing more embarrassing than being on the disaster train that does not get off the tracks when we believe it has) - merits a few words as it constitutes the sort of historical event that is worthwhile to ponder.  After all, we still speak of the Great Depression, The Stagflation (and bell bottoms) of the 1970's, The Dot.Com Crash, and The Housing Crisis of 2008.

Of the mechanics of the crash, I cannot speak on them as I am neither an economist nor did I stay in  Holiday Inn express last night.  I can say that this appears to be the confluence of a number of factors:  A disturbance in the economy - and by disturbance I mean "virtual shutdown" - due to The Plague (which myself and many other writers suggested might not be a grand idea at the time), government largesse during The Plague in which money could not be given away fast enough (resulting in too many dollars chasing too few goods:  if only I had seen this definition somewhere else...), the then-resulting Supply Chain disruptions resulting from that Shutdown as well as continued Plague related shutdowns.  Add to this the more recent developments of an uptick in energy prices and the corresponding decline in their availability and a shock which no-one outside of agriculture probably saw coming (prior to February of this year, I think it likely that 90% of the population knew what chemical fertilizer was, who the major suppliers were, and that countries can just decide to not export food), and we have at least the beginnings of a major economic historical event.

As I have said, better minds than mine are writing on the economic side. My thoughts are really more around the personal side, for me and for others.

Am I worried? Some, but not excessively.  Worry promotes nothing but worry. The correct question to ask is "Am I doing what I can to prepare?"  And that has three answers:  yes, no, or possibly.  And from those, I can take actions.  I cannot control the cost of energy or the markets as they continue to plummet down like the Titanic.  I can stock up on food and fuel.  I can learn to do a skill.  I can manage my outflows.

Is God in control?  Of course He is.  Even within the confines of this blog, I am reminded time and time again that He is.  In that sense, the economy is in far better hands than anyone can imagine, even if it does not seem like it from here.

Who I do worry about are the people that have never lived through such a historic event.  I have memories of every one of the above referenced occurrences and, through the memories of my grandparent's generation, some memory of The Great Depression (although likely the last generation with such direct memories).  Later generations - say the 1990's on, those that are now in their 30's and below - have at best minimal memories of such events, or none at all (how many were actually conscious of the Dot.com bust?  Parents often do their best to carry on without directly notifying their children that the economy had a plunge).  To these individuals, life has always been on the up and up.  Things are always available.  Progress is always forward.  Food is always available and I can order almost anything I want from Amazon.

It is too easy in such moments to scoff at such beliefs and say "We tried to tell you".  And I am sure most of us did.  At the same time, this is a generation that is being thrust into a world of realities that modern technology and social systems have largely kept at bay.  It is likely that - beyond nicely sanitized end of the world dramas on the streaming channels - they have never experienced what seems to be coming.

When I read of crypto investors who saw their entire life savings wiped out in the Terra Coin collapse openly stating they lost everything and are considering suicide, that is a concern.  My fear is that this is - literally - the tip of the iceberg.

I am not suggesting some sort of misguided charity - the kind the government often likes to give - to solve the problem.  What I am suggesting - mostly to myself - is that through this, a great teaching opportunity is presenting itself, be it in skills or actual economics or questions about lifestyle and energy and food or even metaphysical questions about what is out there beyond this world and Who is perhaps in control.  

The reality is that the forces that brought the world to this point have little to offer beyond what they have already done to get us to this point.

We, on the other hand, do.

17 comments:

  1. Anonymous3:34 AM

    I too am concerned about the near future. Not so much if it will be permanent, but am expecting our economic output being drastically cut. Food and fuel are already at historic highs now. And our government seems intent on inflicting more costs on us.

    If you are in debt, am upside down on your home or vehicles, have expenisve medical issues which require addressing and have committed to paying out expenses, that is an especially difficult place to be optimistic. If you own your home and vehicles, are healthy and out of debt - much better situation.

    Each of us have our own specific points and now would be the time to try and balance the sheet before things get out of hand.

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    1. The issue I really see is that what we are looking at will fit the bill of "The New Normal" that we have heard so much about over the last two years. Prices, once increased, seldom seem to come down and it seems likely the costs for goods and services will not decrease either. The real pivot point comes when most people realize this is the case - then, such things as political instability become much more likely.

      Other than a house payment, we have no debt (and are safely not upside down on the house). The health factor is going to be true for more and more people - at least, it is for me. A greater reliance on myself to preserve my health rather than a medical system to fix it will likely become a reality.

      As the saying goes, the best time to plant a tree is before you need it. The second best time is today.

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  2. You nailed the tenor of this post perfectly.

    Things are starting to go bump-in-the-night. Panic is counterproductive. It is good to have a plan if only because it is many times easier to change a plan than to pull one out of the air at the last moment.

    There is only one person we can change, and that is our self. And even that is debatable.

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    1. Thanks ERJ (I often think I somehow get the tenor wrong).

      Small things are becoming too visible in too many places to ignore at this point. And for many, this becomes the moment of self-realization that things are different, and suddenly they need to act differently.

      Having a plan - any plan - is almost always better than not having a plan at all.

      And yes, the ability to change one's self - at least, macro changes - may be overstated.

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  3. Nylon125:48 AM

    "Uptick in energy prices"....an increase of 75% in gas prices here makes for a surge in my book but I'm not trying to criticize words. My capital city just had 3 homicides in 6 hours last night and that's another warning bell to me since I live in a first-ring suburb to it. When you feel uneasy listen to your gut which can be your best guide , let's hear it for the reptile brain. That part of the brain tween the ears can lead you stray during a tumultuous time like this.

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    1. Tongue in cheek of course Nylon12, tongue in cheek. It has been significant - so significant it cannot be ignored.

      In New Home we are the in the first ring suburb as well, and even the fact that mail-box break-ins have crept up to us is of note. The longer things "go", the more I expect incidents like this to increase - they always do in times of economic turmoil when people feel they are out of options.

      Indeed, the reptile brain has saved me more than once.

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  4. As the resident optimist, I'm not overly worried. I think all the fundamentals are still fairly sound. If I were a betting man, I would say we are in for a short crisis much like many that you listed but not in for a long term recession... yet. But if we keep spending like there is no tomorrow and accumulating debt, there will be another recession like that of the 30's or worse.

    I look at crisis like these as sort of a realignment of values. Compared to many countries, the price we pay for things like fuel and other energy is extremely cheap. By catching up in these large steps, things sort of realign themselves. People move closer to their work in smaller more efficient houses, drive smaller vehicles, consume less, etc.

    I guess I'm fortunate in that we don't have or plan to make any major expenditures anytime soon and so hopefully at worst, our savings rate will just decrease a bit. But we have always lived close to work, live in a house a tiny fraction the size of most of our peers and drive fuel efficient vehicles already.

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    1. Ed - My question on the fundamentals, so much as I understand them, is if they are as solid as we believe them to be. If they are not, our assumptions are wrong. And to be frank, I do not see spending and debt accumulation changing in the least, barring some sort of catastrophic event - to suggest such is political suicide for either of the two major parties.

      In terms of alignment of values, I do question (a bit) if this happens. For example, in theory living in an urban area may change how people live, perhaps what they drive, and how the work. At the same time, urban areas tend to be far more expensive than other areas. If anything, I would think a true economic crisis would force people to where the cost of living is less expensive, leaving urban areas with another issue: the cost of legacy systems or programs which now have to be paid for with inflated dollars, and less of those to boot.

      We are also not planning any major expenditures and right now, all seems alright. That said, the one thing about such an economic environment is that such things can turn on a dime.

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    2. While it makes sense to move to an area of lower cost, I.e. from urban to rural, it never happens due to other reasons such as lack of jobs, lack of infrastructure, etc. Living in a rural area, all I have ever seen is a steady exodus towards the cities that only increased during past economic downturns.

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    3. I would agree with you Ed. Jobs are the main motivating factor, although (perhaps hopefully) remote working will change some of that (I am certainly a beneficiary). My point was simply that I do think that inherently moving to an urban environment, which may engender a smaller more efficient living area, more efficient transportation, etc. is inherently an answer per se. Urban areas tend to be more expensive - grossly, in some cases.

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  5. Suicide after a downturn? I reckon those are speculators, easy money types unable to change with the times.

    Out here, driving a long distance is a given. Stuff is really spread out. Lots of ranching and farming down here. Just to the west is the winter garden area. Cabbage, broccoli, spinach, etc. The Rio Grande Valley is a garden with veggies and fruits grown year round. I haven't been running like usual down there, so I don't know how the harvest / planting is going. Milo is usually up and headed, and the cotton is really tall and green.

    The industrial and farm use of diesel and chemicals is what worries me. Without that, food production is poor. I know folks that could use the Chavez Diet, but forced diet isn't much fun. EVERYTHING depends on diesel for production and delivery. Precursor chemicals made from petroleum is in our medications. The belief that we can adapt to this extremely rapid rate of change is spooky. Industry needs time to retool, markets take time to develop, supply chains evolve to meet needs. That kind of stuff doesn't just happen. it takes time. Mindsets take time to change. With this pace of change, your decisions today may not apply tomorrow. Normalcy bias, etc....

    Yeah, it's interesting to watch. Here's hoping we were paying attention to grandma or great grandma when she told stories of the 1930s...

    I just found a gas receipt from 2-2-2022: $2.999/gal. It took a year to go up a dollar a gallon, now it's up a $1.20 in four months. "Hello darkness my old friend...."

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    1. STxAR, I think some of them would be speculators. But I think a lot of other people could be - or will soon be - those whom have never seen such economic carnage and thus, have no idea how to live through it.

      From what I read online, crop plantings in the Mid West are down due to a lack of fertilizer availability. I wonder if that is true everywhere.

      I confess I am one of the masses in terms of what all we derive from petroleum products. But it is a lot more than what most people think when they decry "fossil fuels". Plastics, which are not only convenient for us but necessary for items like medical supplies are derived from the same time.

      I expect the world is devolving into two camps, those that will be constantly bewailing the situation and demanding action (largely governmental) and those that will quietly make their way through this under the radar (after all, drawing attention to yourself in such circumstances gains nothing). What I am hoping for is that for many, this is a serious reassessment of not only their lives and values, but how they got here and how whom and what they supported led to this point. After all, I can change no-one but myself.

      I just did some quick math. Fuel has increased in our area of operations by 142% since the low during the plague. Unreal.

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  6. "Who I do worry about are the people that have never lived through such a historic event." Indeed, this is a significant part of the "fire triangle." My "kids," the youngest being 31 last month, have never really known adversity. In short, America has had it too good for too long. ...Stand by for heavy rolls as the ship comes about...

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    1. Pete, my children - and virtually all the children that I know - are in the same boat. We have had it very good for a very long time. Let us see how we deal with adversity.

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  7. Posting for our friend Linda, who has been bitten by the "no comment by Blogger" bug:

    "I wanted to comment on your economic post. Probably you already know what I will say. However The forces that brought us to this point have nothing to offer because they want us at this point.

    The Gates foundation has been working on a plant based formula for a while now. And we all know the people who think they are our betters, want us to stop eating meat altogether.

    The fuel shortage will create delivery and restocking problems across the nation. The normal people like you and me will be rendered unable to travel which makes us easy to control, while the people with money will live as they normally have.

    I do agree that God is in control. He is trying to bring America back to him.

    Enjoyed the post and comments. Be safe and God bless.

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    1. Linda, I would agree that there are people and institutions that benefit from us being in this position. There are always folks that want and desire control of others.

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  8. Anonymous9:41 AM

    My grandparents survived the depression. When I was young I didn’t understand their seemingly extreme frugality, but I’m glad that I’ve retained many of their lessons.

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