Debt and inheritance

It is very hard for me to see how I can be politically active on anything that matters.

Dealing with my OWN insecurities and delusions is bad enough, but trying to find common ground living in a Meth house?!

It seems like I should just focus my efforts on keeping my own house in order. Do I really believe I can change people who don't want to change? Do I really believe I can save anyone?

The fact is people will continue to get rich exploiting the environmental and inherited wealth for decades, and others, in pursuits of "self-actualization" will gladly trade their futures away for another hit, just one more.

It would be nice to believe that gas-taxes or any government regulation is going to charge the majority for their excesses. Smoker, sure, drinkers, well, people can only consume so much alcohol anyway, compared to unlimited cars.

A friend tells me I'm on the fringes and need a reality check. Yes, we all need a reality check. Her reality is "party time", now, and until closing time in an indefinite future date. Comparatively, I SEE the clock ticking down to midnight (or is that just noon?) and thinking we can do better.

Where should I focus my energy? We have so much, but so far to fall, so I imagine. I once said we can take the tragedies of life because we've been given so much, and certainly this is true.

If I had ONE mission, it would be to convince people to live within their financial means, to avoid debt and live conservatively. However I don't think I can offer that mission honestly while I am at least as corrupted by unlimited time and opportunity for my own distractions.

So I'm left by myself, muddling against my own excesses into an indefinite future.

Lists

Top-10 crisis issues of the next decade

10. Productive investments
9. Access to investment capital
8. Productive employment
7. Transportation
6. Communication
5. Energy and electricity
4. Physical safety
3. Shelter
2. Food
1. Water

Maslow's Hierarchy of Human Needs
5. Self-actualization
4. Self-esteem
3. Social Acceptance
2. Security
1. Survial

List of ways to save oil in transportation

Let me count the ways

Top-down (Government regulations)

1. Lower speed limits (Conservation)
2. Raise fuel taxes (Disincentive)
3. Lower vehicle weight/power standards (Conservation)
4. Raise CAFE standards (General efficiency)

Bottom-up (Consumer choice, vehicle/fuel)

1. Bicycle (pedal power)
2. Mo-ped/motorcycle (Gasoline)
3. Hybrids/plug-in vehicles (Gasoline/electric)
4. Flex-fuel vehicles (E85) (Gasoline/Ethanol)
5. Diesel/Bio-diesel vehicles (Diesel/biodiesel)
6. Natural-gas vehicles (NG)

What does "flex-fuel" mean - just E85 or gasoline?
http://www.agriculture.state.ia.us/e85vehicles.html E85 Flex-Fuel Vehicles (FFV):

http://www.fueleconomy.gov/feg/flextech.shtml - any mixture of gasoline and ethanol

Here's a website for a coalition supporting immediate solutions to reduce oil demand:
http://www.setamericafree.org

http://www.setamericafree.org/blueprint.pdf

• Hybrid electric vehicles: There are already thousands of vehicles on America’s roads that combine hybrid engines powered in an integrated fashion by liquid fuel-powered motors and battery-powered ones. Such vehicles increase gas-consumption efficiency by 30-40%.
• Ultralight materials: At least two-thirds of fuel use by a typical consumer vehicle is caused by its weight. Thanks to advances in both metals and plastics, ultralight vehicles can be affordably manufactured with today's technologies and can roughly halve fuel consumption without compromising safety, performance or cost effectiveness.
• “Plug-in” hybrid electric vehicles: Plug-in hybrid electric vehicles are also powered by a combination of electricity and liquid fuel. Unlike standard hybrids, however, plug-ins draw charge not only from the engine and captured braking energy, but also directly from the electrical grid by being plugged into standard electric outlets when not in use. Plug-in hybrids have liquid fuel tanks and internal combustion engines, so they do not face the range limitation posed by electric-only cars. Since fifty-percent of cars on the road in the United States are driven 20 miles a day or less, a plug-in with a 20-mile range battery would reduce fuel consumption by, on average, 85%. Plug-in hybrid electric vehicles can reach fuel economy levels of 100 miles per gallon of gasoline consumed.
• Flexible fuel vehicles (FFVs): FFVs are designed to burn on alcohol, gasoline, or any mixture of the two. About four million FFV's have been manufactured since 1996. The only difference between a conventional car and a flexible fuel vehicle is that the latter is equipped with a different control chip and some different fittings in the fuel line to accommodate the characteristics of alcohol. The marginal additional cost associated with such FFV-associated changes is currently under $100 per vehicle. That cost would be reduced further as volume of FFVs increases, particularly if flexible fuel designs were to become the industry standard.
• Flexible fuel/plug-in hybrid electric vehicles: If the two technologies are combined, such vehicles can be powered by blends of alcohol fuels, gasoline, and electricity. If a plug-in vehicle is also a FFV fueled with 80% alcohol and 20% gasoline, fuel economy could reach 500 miles per gallon of gasoline.

If by 2025, all cars on the road are hybrids and half are plug-in hybrid vehicles, U.S. oil
imports would drop by 8 million barrels per day (mbd). Today, the United States imports
10 mbd and it is projected to import almost 20 mbd by 2025. If all of these cars were also
flexible fuel vehicles, U.S. oil imports would drop by as much as 12 mbd.

---

I'm glad there are some choices that can exist now although evaluating benefits in cost/oil-consumption/pollution are not trivial and I can't guess. I still lean towards higher oil consumption taxes to encourage weening earlier. I like the idea of the government being able to set goals on oil consumption and have a mechanism to reach the goals.

Given that oil shortage is the primary threat, it makese sense to diversify. Technology IS the answer in the sense of giving choices. But I'm still upset that conservation can't easily fit into the debate as framed.

More later

Powering down and human suffering

It is curious question to imagine a future with less energy than more. Lots of people try, but we're all just guessing in the dark.

There's never been 6.5 billion people on earth with less energy available as last year. Hasn't happened, and given the one-time use of fossil fuels, it might never happen again.

A part of me want to "try" conserving "early", to "teach" others to care about resources being needlessly squandered. BUT is the fight really worth anything.

Do I really want to fight for a senseless energy tax which at best will simply delay the inevitable - the powerdown of humanity.

Perhaps in 100 years, with population a bit lower, perhaps people will still be typing away at keyboards like mine, perhaps on solar powered wireless internets? Who can imagine?

I do wonder the value of books. How many will survive? How many should be saved? How many will be burned as fuel, or recycled for some need we can't imagine now? Funny funny questions.

I do like offering "solutions" - higher prices for unsustainable fuels, but I'm just too pessimistic to believe it'll make much difference. President Bush may be right afterall - technology is the answer, even if not exactly as he projects. Technology in the sense of human genius to "make do" when circumstances change.

I pity all who can't see the powerdown coming, but at least perhaps their reward is few more years of blissful ignorance.

Myself, perhaps I'd better bit my tongue and keep the secret conspiracy of gloom and doom a little longer. Perhaps I can still be like the lucky people who invest in death and destruction. There's money to be made in suffering!

Sustainable money?

Just some silly little thoughts on rates of growth

The governor suggests that we're best off borrowing large amounts of money now to construct new roads and upgrades and that we're better off than taxing now and investing in projects more gradually as we can pay for them. The logic is that the costs of construction are increasing 10+% per year, so waiting will cost us more than borrowing.

It's a persuasive argument if it was true. HOWEVER I must wonder what these extrapolations mean. Do we expect costs to continue increasing 10% per year for a long time? What's the cause of these increases?

And of course the final question is assuming you believe costs will continue to increase like this, how will we be able to afford the "next generation" of construction?

I could take property values as a parallel. My house was assessed at $79,700 in 1999, and $160,600 in 2006. That's an average increase of 10.5%/year. A pretty good investment when you on the right side of the appreciation! (And on relatively low (claimed) inflation at average 2.7% inflation by CPI.)

On the housing front, it is a strange thing what CPI means. If housing costs are increasing 10% per year, is that included in the CPI? And same thing on road construction. If it's really increasing 10%/year, then the cost of government would appear to be increasing. And health care costs as well!

Back to the road construction, perhaps things will "level out", like housing values are assumed to be doing, we'll hope that an expensive period is ahead and we're saving money by borrowing now at low interest and gaining benefits later by cost savings.

However unless we know the cause of price increases, how can we reall guess if things will "level out" or whatever. It is true in times of high inflation (and price increases ARE inflation whether they are being measured or not), then borrowing at a fixed rate may be better for borrowers, but of course WORSE for lenders. Why would I want to lend my money out if I know that inflation will possibly reverse my returns to negative!

It is hard to see overall what's the real dynamics. I still think the whole system is just being artificially manipulated by the Federal Reserve to HIDE economic weakness and risk, creating artificial incentices for lenders to keep expanding the economy, like flying a kite, letting out more and more string as the wind allows, without making the kite lose altitude. Perhaps a kite is a good analogy of the economy of growth. As long as there's energy (wind - fossil fuels) to fuel new growth, the money system can keep expanding.

I'm sure I'm in the dark over how the economy "really works", so I'm just trying to imagine something, even if too simplistic and perhaps fully wrong.

If my house is worth $80k in 1999, and $160k in 2006, THEN I have equity to borrow a net new $80k from no actual new asset. If I want to borrow this money SOMEONE has to HAVE the money to loan me. If the currency was fixed, people like me couldn't borrow new money on our pretend new wealth. So the government MUST print new money. How does that money get circulated? The government "lends" the money out at some rate of interest. If the rate is low enough, banks will take on that interest and borrow money from the government. Then it'll loan that money to people like me at a bit higher interest rate. THEN I'll pay interest to the bank and the bank pays interest to the government, and eventually the government money is repaid and the bank is a little richer, and I'm a little poorer BUT with a debt-free house worth a lot of money. That's happy land perhaps.

So the Federal Reserve apparently does this by setting rates on borrowing. The rate fell down near 0.5% for a while, and now is up around 4.5%. So previously with such a low rate (below inflation!), banks had a high incentive to borrow money and convince consumers to borrow as well. Many people refinanced their homes, consolidated credit card debt, all that, to create new short term money for spending, thus increasing the demand for products and services and driving the economy. I'm not sure at all what the terms for the Fed Reserve loans would be, but I expect they are fixed term loans, and perhaps on the longer term, like 5 years, who knows?

Anyway, now the federal reserve has raised the rate so banks have a lower incentive to borrow money. The Fed Reserve might think the kite string has been let out enough and now the expanded money supply must grow the economy (raise the kite). If there's high-yield investments, banks can still borrow more.

If this is true, then at any point in time, the federal reserve holds a "gross debt" - amount of borrowed money that must be paid back over time by banks. If the loan rate is below the inflation rate, then even modest investments (like home mortgages) can be good for banks.

So when I wonder "Who's loaning me money at 4.75% for my mortgage when they could be making 10% on the stock market?" the answer is ultimately the federal reserve. Banks take "cheap money" from the government and subsidize cheap loans, while private investors want a better return.

I'm SURE there's something profound here I'm missing or not fully connecting. Just because it seems like too much magic.

I would think, by my Fed.Reserve model, that the amount of money loaned out just keeps increasing year by year, at least in times of economic growth. The system MIGHT make sense in the idea of "real value". If I spend $100k to build a house I can sell for $200k, then I've increased the wealth of the nation by $100k, so it makes sense perhaps for more money to be circulated.

However if I buy a house at $100k, and sell it at $200k, that's just inflation. I mean it is a "local inflation" which proportionally increases the global inflation. (If EVERYTHING doubles in value, then money is worth half what it was before.)

If I hold an asset (like a stash of cash) for 50 years, there'll be no increase in value (from investing), but the buying power of the bills will be worth much less. So holding cash is obviously a BAD investment, except perhaps for a secure balance on operating and emergency funds.

Myself I'm allergic to holding debt, even low interest mortgage debt. I'd rather be frugal now as I can, maximize my repayment, and then have more money available later because I'll have skipped all the extra interest payments. The argument is sound, except for the argument that I ought to take a fixed-rate mortgage and then invest extra income to stocks and such, and "on average" I'll be wealthier in the end. For me it's a poor trade off - to depend on decisions of others to make me money while I have a sure thing on cutting my mortgage interest.

If EVERYONE was like me, even if proportionally to their discretionary funds, then people would be saving HUGE amounts into their homes, and banks would be getting back too much money that they would have no use for. They'd slow borrowing new money from the federal reserve, and the money system would naturally shrink, although who knows what inflation or values would do.

In contrast, if EVERYONE was UNLIKE me, they'd keep refinancing mortgages on increased values and invest in new construction/production (additions, cabins, boats, cars, etc) and economic activity would increase and debt would increase.

In reality not everyone is doing the same thing. Ideally in everyone's life, there's a time for taking on debt, and a time for paying it down, and then there's a generation of older people who have their wealth invested in places that younger people can borrow. The young people pay off their debt as they are able, and then accumulate new wealth they can invest in the next generation.

Well, I'm lost as ever, still not really closer to imagining how things work. I basically accept the belief that the economy can keep growing as long as energy consumption grows, and when we hit physical limits on available energy, that our system as it runs now will have to change. I just can't tell how it might change. I suspect collective debt loads now are overwhelming under any sort of economic downturn.

BUT what can the government do? I mean better than from the great depression? Economists like to say that Roosevelt did it all wrong and slowed down the economic recovery. I don't know. I certainly accept there's a "new theory" of some sort that keeps the economy growing at an optimal rate, like my kite analogy. I just don't know what "controls" this theory has. When the kite goes into freefall (perhaps the wind suddenly reverses direction), the economy MUST collapse in a hurry to prevent inflation, OR perhaps inflation IS the tool for contraction, and the government can only optimize it to a minimum under any conditions.

If inflation is the real danger, then those with fixed-rate loans (and continued income) are best off and those LOANING money at a fixed rate will lose out. Those with revolving debt will be worst off. I would imagine economic down turn means a sudden reduction in funds for purchases. It would seem actually that economic downturn will at least initially cause prices to fall as inventories exceed demand - i.e. deflation. Deflation is BAD because it encourages people to hold on to their money and causes further deflation at least until the economy can adjust, and adjust means cutting jobs, and shrinking the economy further, which is doubly bad for people in debt!

SO at least I see "inflation" is the force that encourages people with money to spend or invest it. The higher the inflation, the greater the incentive.

I would think as a country we need at least a slightly positive savings balance, but if economic downturn was no threat, savings COSTS money. Well given a 0.55% savings return (for 5k-10k) from the 4th quarter of 2005 with a 3.4% CPI increase in 2005, means my "free savings" is a solid net loss, except for flexibility for emergency funds.

The system is nudging me to "take a chance" and invest my money to a higher return. WELL, looking at the credit union website, 5.0% is the top return for a 4-year CD, or an IRA.

If I withdraw early, last I remember, it costs 60 days interest. So for $10k, that's $500 return per year, and a $83 early withdrawal fee. In contrast $10k in my 0.55% saving account returns $55/year with no withdrawal fee. So as long as I kept my CD/Roth investment for at least 4 months, I'll be ahead in the penalty cost.

HOWEVER if I knew I'd never need the money, I'm just as well to pay down my mortgage with this imagined $10k, and I'll save $475 in interest costs, even if lose a bit of tax deduction, but I also pay income taxes on interest as well! Admittingly this is the least desirable choice since I lose access to the money completely, except if I get a new loan or sell my house.

Ah, I know my little money games are peanuts in the extreme. Ultimately I don't care about $500 interest except if I was sure I didn't want to spend/invest the money. As-is, I rather like having savings if I lost my job, I can still make minimum payments and live comfortably 6 months while I scope out my choices. That's worth a $500 insurance, even if I've proved I'm still better off with the penalty model IF I expected under conditions I won't need it.

I SHOULD just be grateful for a mortgage loan, which is a darn good deal to expand my freedom of choice. I don't believe capitalism itself would support low interest long term mortgages, so I imagine under a time of economic contraction, housing costs will simply be unattainable for many people, if not almost already. What do I want to do with this freedom? Definitely NOT increase for wealth, just can't do it.

The only questionable investments I have aree for things that can decrease my cost of living in the future - like improved insulation, windows, or even renewable energy like solar or wind. Those seem like worthy investments, PROBABLY NOT, if you imagine smooth sailing, but a good bet if you project ever increasing energy costs. And if I had a debt-free house, properly attired in the best cost saving measures, then local community businesses, and perhaps community supported agriculture farms.

Well, more than enough nonsense, so I'll stop. I'll have to do some real reading on the Federal Reserve to see how my guesses are!

A in-descent proposal: The Freedom Tax

Let's see if I can propose a solution that will reduce U.S. consumption of oil, following President Bush's new recognition that "America is addicted to oil."

We know smoking is addictive and so we apply a hefty tax upon it, a "sin tax" if you like. We're all free to have our vices, if we're willing to pay for them.

Certainly the U.S. dependence upon oil imports is at least as much dangerous to our "way of life" as the addicted smokers in our company.

So here's a draft plan:

1. Apply a new federal "Freedom tax" to gasoline/deisel, of $1.00/gal in 2006, $1.50/gal in 2007, $2.00/gal in 2008, and so on, up to $5.00/gal in 2014 or whatever that works out.
2. Calculate a "fair use quota" of yearly consumption, perhaps assuming a 8,000 miles/year quota and 40mpg fuel economy. That's about 200 gallons, so for 2006, every income tax filing adult could get a $200 tax credit. By 2014, assuming the standards stay the same call could get a $1000 tax credit. This fair-use credit is supposed to offset the harm to the poor that a straight tax causes, but only helps to a capped limit. Sure it still hurts the poor - those poor driving 10mpg vehicles 30 miles to work every day, but so what? The'll have to work that out sooner or later.
3. The remainder of the freedom taxes collected can be allocated by the government to programs that are deemed to help in the long term "freedom" of America - whether this is the war on terrorism, or investments in mass transit systems that allow people to live without cars.

Well, it's just a proposal. Certainly it could be expanded to natural gas as well. And it should obviously apply to jet fuel. Farmers use a lot of fuel, but I don't know how to offset their costs - we still want to graduate them to other fuels, so seems best to just allow businesses to pass costs to consumers. And it gets a little tricker on products that use oil in product since taxing products may just encourage production to move to outside the country.

But even if we just pick on transportation alone, it would seem a good cause - since we have NO well-scalable alternative to run our transportation in the event of a shortage. Transportation must diversify if it is going to survive.

One disaster at a time. That's not the worst approach to policy when you can get away with it.

Our oil consumption WILL descend. The only question is whether it will be forced from the outside, or our choice.

The Freedom Tax: think about it!

The last days of the Empire

Valentine's Day is no occassion to lament the Evil Empire known as modern civilization, but maybe I can pretend that the last days perhaps love will yet triumph over fear and greed.

Good news on the stock market today, apparently due to falling oil prices below $60/bbl. I'm sure tha $30/bbl is just around the corner, although no good reason. Markets do crazy things, or should I say people in Markets do crazy things.

On the other size of crazy, a geologist and author, Kenneth Deffeyes finally got to offer his prediction that world peak oil arrived in December:
http://www.msnbc.msn.com/id/5636037/site/newsweek/ 8/13/04 - One expert has picked an Armageddon date for the peak of oil production: Thanksgiving 2005. The slow decline in world supplies will start then
http://pup.princeton.edu/chapters/s7121.html [2001 book] Hubbert's Peak: The Impending World Oil Shortage
http://www.csmonitor.com/2005/0517/p15s01-bogn.html [2005 book] BEYOND OIL: The View From Hubbert's Peak
And finally his recent blog that his prediction was successful:
http://www.princeton.edu/hubbert/current-events.html In the January 2004 Current Events on this web site, I predicted that world oil production would peak on Thanksgiving Day, November 24, 2005. In hindsight, that prediction was in error by three weeks. An update using the 2005 data shows that we passed the peak on December 16, 2005.

It's interesting that I was curious what his "measure" was and see his graphic above, I'm rather disappointed. Apparently he just computes (1) World Ultimate Reserve before we started drilling, (2) World cumulative production. Then he extrapolates a straight line to determine when HALF the oil has been consumed. He calls this crossover poin "peal oil" assuming a symmetrical bell-curve of production.

Okay, rah rah, give him credit for a simplified graph that anyone can read (even if numbers disputable), but whatever. What most bothers me is that it is so disputable. I don't even really understand his ultimate reserves number he's dividing by two. Even Colin Campbell throws out bigger numbers of 2.4 Tbbl, including nonconventional oil, and we still have people believing the 2000 USGS survey which suggests (95%) 2.2T to (50%) 3.0 to (5%) 3.9Tbbl, so maybe we're only 1/3 or 1/4?!

I mean basing a theory on a number no body knows is problematic. We might have the same ultimate reserves and production troubles a decade ago, or same reserves which will keep pumping higher for another decade, if the curve is not symmetric, and with political events, I expect it not to be symmetric. Although I myself prefer an earlier "peak" and slower decline curve, while technology might just delay the peak, but lead to a steeper decline.

Anyway, mostly Deffeyes's prediction is annoying. I prefer the definition of "peak oil" as the actual YEAR where the maximum oil was extracted, although that might differ slightly from the year of maximum consumption give storage. By Deffeyes's logic, if ulimate reserves are lower, then "peak oil" was perhaps ACTUALLY 2002! What does that mean? Absolutely nothing.

At least documents like the Hirsch report mean something:
http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT Robert L. Hirsch, SAIC, Project Leader Roger Bezdek, MISI Robert Wendling, MISI February 2005

Also: http://www.worldoil.com/Magazine/MAGAZINE_DETAIL.asp?ART_ID=2696&MONTH_YEAR=Oct-2005

They skip meaningless predictions and just say "what if" and predict possible consequences, and suggest without a 20 year lead on transitioning, we will be in trouble.

That's good enough for me! Let's ASSUME peak in 2015, tax the fuck out of the oil and natural gas industry (an 8 year plan or whatever to get to say a $5/gallon gas tax), and let the market see what happens. If we're too slow, prices rise faster, then good thing we did what we did, and if we're too fast, big deal, then we're leading the world.

Alas, large exploitive systems aren't made for rational conservation. We were first in, and we're not going to be first out of such a sweet deal as fossil fuels.

I'm glad for voices like U.S. Rep. Roscoe Bartlett
http://msnbc.msn.com/id/11320137/ Maryland's most conservative congressman leading charge against fuel dependency

"Unless we have a program that has kind of the breadth of putting a man on the moon and the intensity of the Manhattan Project (the effort to develop the first nuclear bombs), I think we're going to have a very bumpy ride," Bartlett said on a recent morning in his Frederick office. "It's going to be difficult, but there are a lot things that are difficult that are very satisfying."

For me I can't be happy to think about our future unless this issue is actively managed. I have no clear evidence that a modern economy can run with out oil or natural gas.

The craziest thing is environmentalists are still fighting tooth and nail for every little improvement in air or water quality, and it'll be all tossed out the window on a bad day when the next crisis hits and the president decides to take a little more executive power.

Environmental concerns lead to limits applied to pollution and development, but at a cost. While energy is cheap, we can pay the cost, but as energy rises, how can there be anything but reducing standards.

Anyway, I don't wish away environmental standards. I only admit bandaids are not enough. A drunk with a pocket of cash can be the life of the party, but whose going to keep the party going when the money is gone? And I worry more for the poor than nature. Nature will recover after she's knockd us down to size. New species will come, alhough I admit I probably do care more for the lost nature than the poor who are merely individuals.

As always I must consider my own reactions to risk. Beyond reducing debt, and living frugally, my life is just a waiting game. How do you plan for disaster?

The down and dirty of the concentration of wealth

Going along happily upon my recent themes of a declining world, it is a curious question to wonder WHO will be hurt first when the economy collapses in upon itself like the black hole of unsustainability that it is.

Of course the answer is the poor will be hurt first, and probably a good number of "middle class" as well, those who are over their heads in revolving debt that has stopped spinning.

Still, how would it look? The poor, those poor enough to have avoided debt, well, they'll perhap make their way as always, on a wing and a prayer, family support systems and all that.

But I just don't get how the massively indebted class will get through - those who find themselves with a mortgage they can no longer afford after, with car payments, credit card payments, all stacked to the roof with no place left to borrow from.

I'm pretty well convinced that the housing "boom" was illusionary wealth, created via subsidized mortgage loan programs, and low interest rates, and created for the purpose of trying to "jump start" a stalled economy, and it worked, for a time, but that time is passing.

There's probably yet more money that China and Saudi Arabia can invest in the united states, but you got to think they'll get a clue sooner or later that the dollar MUST fall and with it all their investments. Sure, they're dumb, but not forever!

So back to wealth, in order for the average american to have a "zero savings rate" for 2005, that means the money must be going SOMEWHERE. Well, it might be a funny statement in a static world - like saying in a shocked voice that 50% of our children are below average. You would think without a trade imbalance, and a fixed economy that the young would be saving in equal amounts to the elderly spending down their savings. Anyway, whatever it means, we're apparently doing WORSE on average than ever before.

So, anyway, if I'm a rich investor, I want to find a way to get my money to work for me with as little risk as possible. Well, that calculus is tricky, but really I mean whenever possible investors are best off to play the right end of a sucker's game, like being the house in a gambling industry, or exploiting public-owned natural resources given away by greedy governments looking for some quick short term cash. Yes, in general a good invester looks for things that win out in the long term, finding what is under valued, under exploited now and being the first one to get into the market, and also the first one out when something newer comes along.

I would think these wealthy investors do NEED the little people. I would think they value their neighbors working, and having money to spend and all that. The economy makes money because there's people with money to spend.

Whenever someone offers me a business deal that is "too good to be true", I usually refuse out of assumption that it is just another pyramid scheme designed to take on suckers who will pay the top. Still, when I participate in the wider economy, it's harder to see.

That digital camera looks like a pretty good deal at $249, doesn't it? Takes great pictures and I save a ton of money on the old film cameras. Who am I to turn down a good deal on a luxury item I can afford.

I have negative feelings about cars and Repair garages, seeming to take quite a large chunk of money regularly enough, without any great benefit, at least by measure of alternatives - bicycle and bus are much cheaper, no insurance, no $2000 repair bills, no $20,000 purchase costs.

I'd have to think, even without high fuel prices that an economic depression will hit transportatio the greatest, if not instantly, undeniably through attrition. After the bad years progress more people may get a clue that throwing away $5,000/year on a car between purchase, debt-interest, maintenance, insurance, and fuel isn't the best investment they could make on that money. In the very least I'd expect many more families to downgrade from two (or three or four!) cars down to one.

This might yet make a dent into the amazing U.S. 25% share on the world oil consumption, although I admit sharing a car can waste more miles than it saves when people end up making 4 trips instead of two.

I recognize the government and federal reserve are surely in complicity with the wealthy few in the country who encourage laws to their own benefit. AND surely federal reserve policies that promote economic growth is a good thing, right? Surely everyone benefits from a good job, and you gotta keep printing enough money to pay all of them something right?

I'm sure its true in the short term - that MONEY can be controlled in ways that seem to help everyone. Who can complain when every year we all have a greater access to processed natural wealth from around the world? Who is hurt by these progressive policies?

Those who live in the future, those who will have to deal with the convenient lies we've been telling ourselves about how the pyramid raises all boats. It's NOT real. Nothing is real, except the day of reckoning that is due us all one day.

You might understand how those at the bottom are taken along, like an amusement ride, amazed at how many cheap thrills they can buy for a buck. But I wonder what the "plan" is for those on top. Do they see the next step or two? Do they expect they can continue their magic tricks of doubling energy again in 50 years by some new technical wonder, cold fusion or whatever? Are they also in denial?

I think the movers and shakers are generally smart and aware people, although perhaps a little too "in the moment" day-to-day to be calculating "risk probabilities" that the whole system is in danger of collapse.

Let's take an easier example: How about those famed 36,000 princes of Saudia Arabia? Sure most are young and foolish, but some will be thinking of marriage and children and all that and wonder what "share" their children will have in this ever shrinking, ever dividing pie. They know that even if Saudi Arabia's oil may continue flowing equally for 50 years, their children's share may be worth little, and of course they know the political instability. The largest holder of oil has to first invest lots of money to feed an ever growing discontented population below, and that's going to cut more into their bottom line than a few more princes.

Well, if I were such a prince, I wouldn't turn down a "free lunch", but I'd be "keeping my options open", putting away as much wealth as I can, preferrably in a safe swiss bank account, and look to where I can "retire" when I'm say 45, when my children are grown. You know those Swiss Alps are very pretty!

As a prince, do I have ANY empathy or compassion for the wasteland of human misery that my country will become in 50 years? Why should I? What can I do? I'm not making them have so many babies? I've only got two kids - my fair share, so it's not MY fault there's just not as much to go around anymore.

And perhaps similarly, as a wealthy investor in the U.S., what compassion am I supposed to have for those who get over their heads in debt? I've got my safe government protected investments along with my risker multinational investments taking in 20% returns a year. I'm working hard to manage my wealth. What am I supposed to do to help those stupid poor people having 6 children and expecting they can live it up? The government can worry about that, although I'd better keep a watch on those "entitlements" I don't need myself. And I've got my gated community up on the ridge over yonder. We've got security forces. It'll be all right for my family, and as long as I feel safe, I'll do what I can if things turn down. I'll donate to the food shelves, and all that.

I do have a hard time blaming the wealthy for our problems. Okay, I DO, but I understand power corrupts, and humans haven't much experience at the levels of power reached in this last century. Besides churches and kings, very few have had as many temptations to evil. We all need our youth to "fool around", right? And we'll grow up when we HAVE to.

Well, I still don't see it. I don't easily see the wealth as PURPOSELY sending out future into the toilet. I don't see them as doing anything more than bacteria in a jar of food - stuffing themselves in delight, and even if a little guilty at first, later merely wondering why the honey isn't quite as sweet or as free as it was just a little while earlier.

I imagine the economy MUST fall into depression, but it's hard to see how it might happen. Assuming a government that is "managing" the money to maximize growth, you would think that it would muffle out all contrary signs as long as it can. Well, especially if you happen to believe in the free market that finds optimal solutions to every problem by its own greed. The purpose of government is to get out of the way, and at best to anticipate the needs of the wealthy so they can keep working their magic.

Perhaps it is just a collective "hope" that the next best thing will propel us again into the future.

I just LOVE the ironic pro-lifer joke when someone get a chance to ask God why he hasn't cured cancer yet, and God replies that "I tried, but you aborted her." My god, bless the optimists for they give us LOTS of problems to solve!

Surely with a world of 7 billion people SOMEONE ought to be able to find infinite free energy that can propel us to new prosperity and another century of economic growth and a 20 billion population. WE CAN DO IT! China has the same area as the U.S. and 4 times our population. Why can't the whole world do that!? Maybe we don't want to live like peasants, but with enough energy, we can support it. And Canada is still nearly empty, ready for colonization when global warming makes it the new agricultural center of north america? Are you invested up there yet!?

Maybe the growth model is simply too intoxicating a vision to abandon? It is probably just thinking too much to hope that we could do better than bacteria in a jar of light sweet crude honey.

It's hard for me as I like to think big, like to envision solutions and systems that can expand wealth and abundance and well being to my neighbors. Who am I to piss on my neighbor's fence for envy of his new 108" TV or his Hummer? He can afford it - look at his bank account, or at least his credit card limits!

I'm being unfairly sarcastic and judging, but mainly I'm just doing what ever other not-bad-off guy with a brain and a conscience is doing - protecting my ass for when the shit hits the fan, and my guilt when my Ark can not hold any more animals in the rising global warming tides. I did my "fair share" will be on MY tombstone, or it SHOULD have been!

You expect ME to get down and dirty with the scum of the earth, the trailer trash who think having 6 kids on a high school education is a good idea, or those TV addicts who think there's nothing to life beyond getting a paycheck, and drinking beer in front of the TV all weekend, or whose aspirations rise no higher than a down payment on a corner of a shit hole swamp lake up north where I can drink beer in my cabin in front of my satellite TV?

Being an elitist takes a lot of concentrated effort to maintain a superiority complex.

I admit it is easier to feel sorry for the poor in India with their $1/day income, and 6 skinny kids who'll never make it past 4th grade before working. At least they know about family support systems, even if the'd have aspirations if they were available.

Putting down the poor as dumb and lazy is not a difficult proposition. Even smart people are frustratingly dense, but poor people?! How am I supposed to care about their plight?

The reality of the next 50 years is going to be probably the saddest tragedy of wasted potential in the history of humanity, and that's the bright view, assuming senseless violence of war is minimized through some good old fashion peace-loving dictators take effective charge, who'll beat the crap out of anyone who tries to take a piece of their pie. We'll yet have a lot of weapons in the next 50 years, and weapons benefit the powerful the most. People CAN be beated into submission, and when the alternative is civil war, the majority will surely take a not-half bad dicator over the uncertainty of civil war.

My pessimism surprises even myself, and much easier to project in my mind than to imagine any real people living it.

Seriously folks, can't everyone just listen to ME, NOW!

Can't you all be as scared as me about the future and stop your nonsense long enough to look at the signs?

Do you ALSO sometimes think at night how our free lunch will finally come to an end?!

For myself of course, as long as I have a job and can pay my bills, I'm NOT going to rock the boat. I'm just going to keep building my little nest egg, even with no assurance it'll be worth anything. I only know I'm better of later for owning my home, for knowing how to live without a car. I don't care about money, but I do care about security. As long as the future looks insecure, I'm forced to just keep muddling in my little less-than-average-insane corner and see what happens.

But seriously folks, BE AFRAID.

I mean sometimes, just long enough to wonder what president Bush really means when he says "America is addicted to oil." It's a clue, even if it seems like a joke I don't get.

I'm addicted to oxygen too, so the fuck what? Should STOP breathing?

Economic Growth in a world of declining resources

Oh, you seriously have to give credit to humanity for our vast success over the last 100+ years in expanding our domains of power and influence.

Any reasonable person must stand in pure awe at what we've accomplished in such a short time.

Anyone who thinks Humans are going belly-up at the first signs of the trouble, we'll of course it's naive to think we nearly 7 billion people on the world don't have a lot of fight left in us, whatever early "signs" we see of our impending disaster.

But what is most amazing is it would seem the vast majority of the world minority who use the greatest amount of resources don't see this coming. They can't see that not only can't we GO ON raising our GNP 5% per year, but that soon we'll be fighting just to keep even!

And we don't even need "declining resources" to fall behind. All we need is "more players", as world population continues to rise and new players like China and India want their share in the pie, and apparently will get it, or whatever they can before the fall. Myself, I feel sorry for their late entry, but maybe they'll spur a "sooner" crash, which will be less steep otherwise.

Success is a deceptive teacher, and we have been well-deceived as a people, distracted from the biological systems that support us into a short term "fix" on cheap fossil fuels.

I believe America can renew itself. I believe necessity is the mother of invention, and that when the crises start exceeding our ability to respond, we'll pull back our expectations and promises and ambitions, and focus on the core issues needed for survival. But must we really wait until then?

A civilization that knows of winter will work hard to create the shelters and food stores to survive through it. A civilization too young to remember what live was like before the lazy days of August will blindly wander into the Fall and Winter unprepared, convinced they can find what they need like our prehistoric ancestors in the tropical jungles.

We've got "good momentum" on our side (infrastructure), but more "bad momentum" - expectations and demands that must keep growing.

I have to wonder what the downslope will look like. What incentive do people have to "work hard", knowing next year, next decade, next generation will have less that we've had, less that we want. What do you give to your children? What do you teach them in a declining world? What knowledge and lessons will be needed in the "slower" lives that must follow?

America has long moved away from community action for collective survival towards surrender to capitalism to provide everything we need. I'm sure capitalism must be a poor model in a declining resource world.

I mean even if I'm a fortunate and kind millionaire, what "investment" is going to give me ANY return at all in my "capital"? A wise millionaire will invest in his/her community, knowing long term investments are what will determine the success of the next generation. However in the fall or depression, local investments will look like "bottomless pits" of need, especially if I'm used to looking at the world from a distance, high above in my skyscraper, looking down at a chessboard.

I can't imagine what the fall will be like in countries like Saudi Arabia where the entire economy is powered by oil, and human labor is to be avoided if your rich, and a dime-a-dozen for workers trying to find a meaningful place. It can't get much worse in quality of life, but everything is yet down to realize that every problem from 100 years ago WILL return, but multipled by the factor of 10 or so in population increase since oil first created wealth there.

The U.S. stands in a privledged place in the world, our dollar being used as the standard of global currency. This privledge has been abused, and we will someday have to pay back our borrowed money, maybe still a good deal for us, but since it must end, again, sooner is better than later.

As an individual I am afraid. I wish there was a way to build a better future now. I can live frugally, without a car, pay down my mortgage, and invest in ways that will reduce my long term need for income. I can garden and grow some of my own food. I can learn, maybe consider what skills I have or may need in the future. But does my "retreat" allow me to consider children? It doesn't allow me to easily invest my time into a doomed future.

As an individual I am a fatalist, a pessimist, just taking what I can while it lasts. To go beyond this and believe in the future, I'm sure I must somehow work together with others.

Yes, like the millionaire in his skyscraper, I look at my own limited ability to live minimally, and see a vast see of unmet needs around me. However well-off I am, there's people now, barely getting by, and getting daily suckered into scams and debt by others for fun and profit. The "vast unmet needs" will grow in a world of declining resources. How can I not be hopeless? How can I made a difference?

For now I'll put my head back in the sand.

What if?

What if we tried funding the U.S. miliary largely through as gasoline tax, how much would it cost per gallon?

Pretend military expenses ~$500B/year
Pretend 150 million cars, driving 12,000 miles/year, and 25 mpg.
That's 72 billion gallons.

So taxing gasoline at $6.94/gallon would approximately cover our military expenses.

Is there something wrong with this picture?

We have a serious problem. America is addicted to oil

President Bush offered an amazing state of the union speech, amazing not necessarily for being complete, but even hinting at reality seems a good start.
http://www.nytimes.com/2006/01/31/politics/text-bush.html?pagewanted=print

Keeping America competitive requires affordable energy. And here we have a serious problem. America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology.

This short paragraph seems a mess to me, but I take the center as a useful admission - America is addicted to oil.

America uses 25% of the world's oil consumption, has 2% of the world's reserves, and produces 8% of the world's oil production.

When oil sold near $10/bbl in 1999, no one cared that we were "addicted to oil", but $60+/bbl in 2005 seems to have convinced the recovering alcoholic president that perhaps there's a problem here.
http://research.stlouisfed.org/fred2/series/OILPRICE/98/10yrs

There still seems to be a contradiction that a president must be an optimist for his people and an optimist can't necessarily tell people the truth they're not ready to hear. SO "Technology" is the best way to break our addiction? It is just nonsense at too many levels to even attempt to respond to.

...new technologies will help us reach another great goal, to replace more than 75 percent of our oil imports from the Middle East by 2025.

This is just another messy, messy statement, given a world oil market where ultimately it matters little where we get our oil from since we're taking it from somewhere, and so singling out the middle east is total total nonsense.

Our current imports from the middle east are perhaps 900Mb/year (of

US Oil Suppliers
Canada 584 Mb/a
Mexico 584
S.Arabia 548
Venezuela 475
Nigeria 402
Iraq 256
Angola 110
UK 110
Algeria 73
Kuwait 73
Other ~2000
Domestic ~2400
http://peakoil.net/Newsletter/NL51/newsletter51.doc

So you might say we import as little as 12% of our oil from the Middle East. So perhaps the president is asking for us to reduce our oil consumption by 9% (75% of 12%?) by 2025? 9% of current 21Mb/day is about 2Mb/day. So will we only be consuming 19Mb/day in 2025? I just don't begin to know how to interpret this goal, especially considering the estimates that Middle East oil are 2/3 of the world's "proved" reserves.

It's just crazy since in 20 years non-OPEC production will be long past peak production and we'll surely be importing much MORE than 12% of oil from the Middle East by then.

The reality is more likely that world oil production "won't exist" to meet our demands, much less the world's demands by 2025, and exporters who can avoid civil war or external takeover will be selling oil at prices we're only beginning to imagine possible.

A president who says we're addicted to oil ought to offer suggestions that can reduce this addiction by direct "cost" to those most addicted. We NEED higher prices for oil. We NEED a model that predicts higher prices in the future so we can PLAN for those higher prices.

A world "free market" for oil is GREAT when markets are expanding and production is expanding, but HORRIBLE when markets continue to expand as production plateaus and leans ever closer to the downward slope.

Whatever hope we have for a smooth "transition" from oil to alternatives ought to be abandoned, at least if we think "markets" will take care of this.

When the government wants people to stop smoking, it imposes high cigarette taxes, and this works, to degrees. And the tobacco market is certainly more stable than oil.

Either we "tax" ourselves to ween us away from dependence on oil, or we're just not serious about this weening. EVEN if oil now sold at $200/bbl, that'd not be a reason to reduce a consumption tax. In fact it would be a greater reason to keep the tax because ever small reduction in demand lowers market prices.

Hey, just like "trickle down economics", maybe the reverse is true as well "trickle down prices". If prices are higher consumption is lower, and prices are lower! The government can REDUCE prices by taking MORE money from the economy! What a win-win situation!

Anyway, I'm glad our president has offered America the word "Addiction", and its a start. I'm still a pessimist about the future, about our collective will to save ourselves from our addiction. There's still economists out there who dare assert that higher prices will take care of themselves, so there's nothing to do but party until the party is over. Meanwhile here's money to be made and so we all should INVEST in the problem so we'll personally have the wealth to handle the coming chaos!

I'm hopeless about government action too at least. So I'm at least glad "the word is out", and individuals can respond as we can.

I say "Get out of debt", "Live, work, and shop close to home", and "Be prepared for a lower standard of living" that will be needed in our "market oriented" transition of "demand destruction."

I feel for those on the bottom who are not able to be prepared for economic chaos. I don't even think anyone can be prepared except for living frugally, investing in ways that reduce future energy usage, and hence future income demands.

Being a pessismist is not a good place for a public message. President Carter tried it, gave the exactly correct message (for the long term picture), but addicts don't want long term predictions. They can't look past 5 years, much less a future that is nothing like the recent past. Only the great depression of the 1930's may be close to our future, and we had plenty of energy then, so our new problem is likely to be very different still.

Thank you Mr. President. You've rang the bell. The race is set, and we've all got time to make peace with our maker before the shit really hits the fan.

Houston, we have a problem. Think Apollo 13. Technology will "save" us, because we're inventive and adaptive to problems, but don't expect it to save all of us. We've not yet turned back around the moon's far side, and we don't yet have a plan to even survive the return journey.

Powerdown, conservation MUST also be a part of the solution, Mr. President.