"I was watching that movie Mad Max, you know that movie where gas is so precious that people are killing each other for a few gallons. It was set in the future -- I believe it was August." --Jay Leno
Mad Max movies paint a grim picture of the future for civilizations dependent on oil: When the "black fuel" became scarce, explains the narrator in The Road Warrior, the world became a "whirlwind of looting and a firestorm of fear, in which 'men began to feed on men.'" Could the current oil crisis turn our world into such a wasteland?
Sadly, the narrator fails to tell us exactly how high gas prices got before "the gangs took over the highways, ready to wage war for a tank of juice." While law and order remains today, as prices hit $4 per gallon, it's clear trouble lies ahead. All across the country, gas theft is up: In Mcdonough, Georgia, thieves are going driveway to driveway, in the middle of the night, siphoning gasoline from cars and trucks; Todd Moser, of Washington State believes the gas thieves who stole 800 gallons of gas from a storage tank at his business also stabbed his dog the night before; and in parts of Illinois, people are 68% more likely to fill up at a gas station and "forget to pay" than they were this time last year.
You can buy a locking gas cap for $10 to $15 (next to the siphon pumps and tubes for $1.99 each) but that won't stop vandals willing to puncture the tank and fill up their container as the gas pours out. Imagine what desperate people will do as prices continue to rise and if, as analyst Robert Hirsch predicts, it gets up to $15 per gallon. Hirsch told CNBC's Squawk Box, "The prices that we're paying at the pump today are, I think, going to be 'the good old days,' because others who watch this very closely forecast that we're going to be hitting $12 and $15 a gallon, and then, after that, when world oil production goes into decline, we're going to talk about rationing." What's worse is his prediction that new types of energy and new technology aren't going to save the day. "There's no single thing that's going to solve this problem, because it's as massive as one can possibly imagine," he said.
Having to pay more for food or pay to check a bag at the airport may be the least of our problems when law gives way to reckless violence. Motorcycle gangs aren't fighting to control oil refineries yet but sales of scooters are up. Will well-intentioned purchasers, who started out looking for a fuel-efficient mode of transportation, don hockey masks, join together and kill for oil? Time will tell.
Thursday, May 29, 2008
The Worst May Be Yet To Come!
Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit like the proverbial story of the man who jumped out of a window 60 floors up, and then said “so far, so good,” as he passed the 30th floor.
The United States accumulated a massive, $8 trillion housing bubble during the decade from 1996-2006. Only about 40 percent of that bubble has now deflated. House prices are still falling at a 20 percent annual rate (over the last quarter). This means that the worst is yet to come, including another wave of mortgage defaults and write-downs. Even homeowners who are not in trouble will borrow increasingly less against their homes, reducing their spending.
President Bush says we are not in a recession. One commonly-used definition of a recession is two consecutive quarters of declining output (GDP). The first quarter of 2008 came in at 0.6 percent, although it would have been negative if not for inventory accumulation. So by this definition we cannot say with certainty that the recession has started, although it could well have started this quarter. Of course, for most Americans it has felt like a recession hit some time ago, with real wages flat since the end of 2002, and household income not growing for most of the six-and-a-half year economic expansion.
The National Bureau of Economic Research will eventually decide on the official onset of the recession, but even its definition is arbitrary. All the indicators of a serious recession are swirling around us. The economy has lost jobs for four months in a row, which has never happened without a recession. Consumer confidence has dropped to a 28 year low - a level not seen since Jimmy Carter was president. Home foreclosure filings are up 65 percent over last year. And now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.
With oil prices hitting record highs, and the Fed beginning to worry more about inflation, more restrictive lending practices and other fallout from the credit crunch, the near-term economic future looks even dimmer.
Some look to exports to lead the recovery, but these are only 11 percent of GDP, and consumption is about 70 percent. Still, the fall in the dollar over the last six years is helping - making our exports more competitive and reducing the subsidy that we have been giving to imports for many years. In a sign of how economic illiteracy prevails in the United States, most people (thanks largely to what they hear and read in the media) see the dollar’s decline as bad economic news.
We are facing the prospect of millions losing their homes, their jobs, their retirement savings, their health insurance, and their livelihoods.
This serious economic situation greatly raises the stakes of the 2008 election. What will the government do to help the victims of economic mismanagement, to provide health insurance, and to restart the economy? Is it really more important to spend billions each week on the occupation of Iraq?
So far the government hasn’t done much. The stimulus package now taking effect, at about one percent of GDP and much of it likely to be saved, is quite small. The major legislation that Congress is considering for the housing crisis would mainly bail out lenders and investors while doing little for most underwater homeowners.
The voice of the people has yet to be heard on these questions in the halls of power. It had better get a lot louder, soon.
The United States accumulated a massive, $8 trillion housing bubble during the decade from 1996-2006. Only about 40 percent of that bubble has now deflated. House prices are still falling at a 20 percent annual rate (over the last quarter). This means that the worst is yet to come, including another wave of mortgage defaults and write-downs. Even homeowners who are not in trouble will borrow increasingly less against their homes, reducing their spending.
President Bush says we are not in a recession. One commonly-used definition of a recession is two consecutive quarters of declining output (GDP). The first quarter of 2008 came in at 0.6 percent, although it would have been negative if not for inventory accumulation. So by this definition we cannot say with certainty that the recession has started, although it could well have started this quarter. Of course, for most Americans it has felt like a recession hit some time ago, with real wages flat since the end of 2002, and household income not growing for most of the six-and-a-half year economic expansion.
The National Bureau of Economic Research will eventually decide on the official onset of the recession, but even its definition is arbitrary. All the indicators of a serious recession are swirling around us. The economy has lost jobs for four months in a row, which has never happened without a recession. Consumer confidence has dropped to a 28 year low - a level not seen since Jimmy Carter was president. Home foreclosure filings are up 65 percent over last year. And now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.
With oil prices hitting record highs, and the Fed beginning to worry more about inflation, more restrictive lending practices and other fallout from the credit crunch, the near-term economic future looks even dimmer.
Some look to exports to lead the recovery, but these are only 11 percent of GDP, and consumption is about 70 percent. Still, the fall in the dollar over the last six years is helping - making our exports more competitive and reducing the subsidy that we have been giving to imports for many years. In a sign of how economic illiteracy prevails in the United States, most people (thanks largely to what they hear and read in the media) see the dollar’s decline as bad economic news.
We are facing the prospect of millions losing their homes, their jobs, their retirement savings, their health insurance, and their livelihoods.
This serious economic situation greatly raises the stakes of the 2008 election. What will the government do to help the victims of economic mismanagement, to provide health insurance, and to restart the economy? Is it really more important to spend billions each week on the occupation of Iraq?
So far the government hasn’t done much. The stimulus package now taking effect, at about one percent of GDP and much of it likely to be saved, is quite small. The major legislation that Congress is considering for the housing crisis would mainly bail out lenders and investors while doing little for most underwater homeowners.
The voice of the people has yet to be heard on these questions in the halls of power. It had better get a lot louder, soon.
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