Curiosity Over Pride (FYI: To comment, send an e-mail to scifidink@gmail.com)

Tuesday, February 9, 2010

The blind leading the blind

This one is for Dink and for any fear the Doomers might have been stirring in him. My fractal fettish has been working overdrive of late. ;-)

I don't want to say I am finally beginning to understand this stuff but it is at least starting to make a little more sense to me. In particular, I have been trying to understand some of this "stuff" as it relates to the dollar, etc... as all the talk on the blogs by Doomers and PEAK OILer had me wondering. Anyway, I though I would pass my thoughts along in case you were having similar troubles connecting some of the dots we read- these thoughts were stimulated by a series of posts by Krugman on Spain and the Euromess so hat tip Krugman.

First, I really recommend the following post from the American Enterprise Institute... FWIW, I am finding I really need to read BOTH left and right posts in order to get a three dimensional picture of these issues. Either by themselves seems entirely incomplete.

Anyway, after you do read this stuff, I recommend this and this.

... If you remember anything else, remember that the sum of the parts equals the whole (e.g. the conservation of energy).

Anyway, then look at this (you can click on the box to re-rank the countries by external debt as % GDP).

And of course, we all know by now that looking at debt in isolation is silly as Deb reminds us all the time that looking at anything in isolation is silly. Our debt is not a problem if we have the assets and ability to repay it, etc...

Bottom line, the US dollar will fall over time against some kind of theoretical standard (say gold), but it seems unlikely that it will fall either abruptly or catastrophically. Nor does it seem likely that America will go bankrupt as either a society or a government. This is true even if we continue our drunken sailor Keynsian spending. And if we spend this public money building nuclear power plants and/or drilling for domestic oil, we will push our problem a long way down the road (which has been Hell's point all along). It does seem forever clear that if and when the US government ever does go bankrupt, it will occur only AFTER ITS OWN CITIZENS have completely looted its assets. So even if they do this, and the American government goes bankrupt, the citizens will still have the underlying assets and American society will remain the same.

So I do not agree with Deb that our living standards will fall over time. In fact, I see the opposite. Though one could argue how they define living standards and using certain definitions I might concur.

Remember in any system, a certain amount of energy goes into it and a certain amounts leaves. Peak oilers may have a point re: peak oil but their hype re: PEAK OIL is simply epistomologically wrong so don't get fooled by their randomness.

Bottom Line: The future is not lost, though navigating its ups and downs remains the challenge it has always been.

PS- I do assume a certain degree of TRUST that the data on these links is accurate. I am increasingly learning such assumptions can be unwise. But we have to trust someone. ;-)

9 comments:

Thai said...

For comments

Debra said...

Lots of things to comment on here, Thai.
Couple of posts down I mentioned that the Franco German alliance was not doing so well economically, and France and Germany are at the center of the European Union.
Funny, that.... I SEEM to remember that France and Germany are two of the three countries emerging out of WW2 to heavily benefit from the Marshall Plan, right or wrong ? And that their politics were and still are heavily dependant on ties to American economic ideology.
There is SOME truth in doomer perception, nevertheless.
The FACT is that U.S. empire is over. This is becoming increasingly evident to everyone.
But in the Angela Merkel post I threw out for your consideration the FACT that we have increasingly substituted ECONOMIC competition/war for the application of brute, physical force. (This doesn't always work, but it often does. Shrinks call this phenomenon "displacement", or is it sublimation ? Any guess goes... I go with "displacement", I think, because there is considerable RUTHLESS agression involved in economic competition that can be otherwise seen in the context of... WAR.)
Any substitution/displacement we employ for our agression is always at risk to suddenly bottom out, bringing the application of brute, physical force out into the open once again.
I am rambling a little bit here, but that is what the comments are for, right ?
I do not think that there will be a sudden collapse of the dollar either, if for no other reason that IT IS NOT IN THE INTEREST OF THE CHINESE FOR THE DOLLAR TO COLLAPSE.
But U.S. currency WILL lose reserve status, as soon as the Chinese figure out a diplomatic way to do this that will safeguard their own economy.
After that, who knows what will happen to the American economy, as being forced to buy energy with ANOTHER reserve currency will not do the American economy any good.
As for lowering the standard of living..
if we do this well enough, we will manage to get by with less, and NOT feel deprived.
The ultimate question is... WHY do you feel deprived ? You can be technically poor, and not feel "deprived". Feeling deprived is not a.... fact, it is a state of mind.
It is NOT inevitable.
Careful about ideological bias : a major example : MOST people think that... LESS= a bad thing, in most contexts. And that... LOW is worse than.. HIGH. These are deep seated ideological biases that go way back through to ancient Greek culture, and are transmitted with our language.
One other point : the European Union is NOT comparable with the U.S. to the extent that a federation never was, and still is NOT possible due to the lack of language unification.
No common language, no Union.
Sorry guys...

Thai said...

Back to old Malthus. Agreed, there is some truth in their predictions. From some viewpoints they are correct, from others...

Haven't we learned this is true for everything?

re: "The FACT is that U.S. empire is over."

Yes and No. Again, from which viewpoint of empire are you referring?

Remember, the more things change, the more they remain the same. When things get "brutish", who has most of the guns?

re: America buying its energy with another currency.

Deb, this will not happen. If we need to we will make our own energy before we ever start purchasing it from other countries in another currency.

But if you truly believe this, and I think as a psychologist you have more insight into this than anyone else commenting on the blogs, you (and I and Dink) should start purchasing gold.

Debra said...

Just WHERE is the U.S. going to get its energy from, Thai ?
You mean that it's going to squeeze the oil out of all those itsy bitsy little places that it is as expensive as hell to get it out of ?
Or that it is going to chain link eolians across the continent ?
Or that it is going to open mine excavate the Grand Canyon, for example ?
WHERE do you see the energy coming from IN the U.S. ?

Thai said...

Internal energy generation/conservation will come from a multi-pronged strategy:

1. Nuclear (just like you French). If you didn't hear, Obama made this a keynote of his state of the union
2. Opening up drilling that has been closed till now (there is a lot)
3. Improved efficiency
4. Wind
5. Solar
6. Biofuels
7. Coal

It is #s 2 and 7 which have the anti-global warming crowd up in arms with justification.

If a compromise is reach on global warming then it will be 1,3,4,5 and 6

I am not sure you are aware but America has already made major changes in energy utilization per dollar of GDP growth since the oil shocks of the 1970s. Our economy has already clearly shown that it can grow strongly without nearly as much energy growth and there is no reason to believe this will not continue.

Energy consumption is important but it is not quite like some of the things Doomers make out. It is true that Steak may be a lot more expensive for the average person, but vegetarian sausages are getting cheaper, etc...

Thai said...

And remember, the one that pays off the highers ROI by far and away is #3 if you don't remember the conversation between Cotton and myself.

Thai said...

ROI is return on investment.

In other words, if you give me $100 and I have to pay you back in 1 month, which of the following would you prefer:
1. $80 (you lose $20)
2. $100 (you break even)
3. $130 (you make $30)
4. $200 (you make $100)

4 is obviously the highest ROI and 1 is the worst.

Thai said...

After I posted that I went on an internet search to see what others who have studies this have said and I found the following.

If you look at it, you will see that these guys say much the same thing.

Debra said...

Well, I certainly hope that Americans are NOT WASTING AS MUCH EVERYTHING as I saw them wasting two years ago.
There is MUCH room for improvement IF we get rid of all that waste.
I am against nuclear, Thai. Bad deal, that. No way to get rid of the waste. (YOU don't want it in your backyard, do you, now ?)

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