INDEX - FUTUREwww.islandbreath.org ID# 0803-15
SUBJECT: A TASTE OF DEPRESSION
SOURCE: DAVID WARD firstname.lastname@example.org
POSTED: 14 OCTOBER 2008 - 1:00pm HST
Thinking ahead: Predicting the Depression
image above: Detail of poster from the 1936 movie "Things To Come" based on H. G. Wells story
by Sharon Astyk on 14 October 2008 in http://sharonastyk.com
One of the hardest things about facing tough times is figuring out what to do. The right choice depends on an uncertain future - it depends on guessing right about what will happen. Do you transfer your stock market funds to Treasuries? Get out of the market? Give up on retirement? Go back to school? Should you be preparing for a job loss? Should you let your house go? And of course, we’re gambling with your future, and losing has high stakes.
A lot of people have emailed me lately asking me what I expect to have happen, so that they can make plans. This is not something I’m totally wild about - I’d personally rather you base this on your own analysis. I have been doing fairly well at the prediction game so far - I predicted a deflationary depression with rising food prices just about a year ago and my annual New Year’s predictions are now officially 8 for 10, but I also would have predicted oil prices to remain fairly high for a while into the recession, and I’ve long said that I though the fundamentals of the economy were so bizarre and unstable that I didn’t understand why it hadn’t crashed already.That is, I do not think that every word that comes out of my mouth was put there by a divine being, and neither should you. I’m wrong sometimes, and you should remember that. But because so many people are asking me to give them a sense of what we’re facing, I’m going to do that, if you promise not to make any life decisions solely based upon my thinking.
So here are my bets for what we’re facing the coming decade in re: food, energy, etc…
- That in retrospect, the current economic shifts will last at least 7 years, and probably a decade or more before stabilizing, almost certainly at a new, lower economic and energy level. During that period, there will be a number of seeming signs of recovery, periods where things are worse, declarations the crisis is over (I like CNBC’s website for a daily promise that the crisis is over today and that the last set of interventions have worked. They start out every morning with that promise, and amend their claims according to the end of the day.)
I think we are entering a Depression - and both the Great Depression and the 1970s recession took us a full decade to get out of. In both cases, they were essentially escaped by the application of lots of cheap energy - the former withe WWII build out, the latter with the cheap oil of the early 80s price collapse. It isn’t clear to me what would get us out of our current economic crisis - but we will probably reach various points of stability in between drops to lower economic levels, as John Michael Greer argues. Meanwhile, I also believe that we are likely to see what we’ve seen in other economic crises - denial, rallies (such as we’ve seen in the markets yesterday and so far today), minor improvements, declarations that all will be better soon.
One of the tricks is going to be sorting out real improvements from wishful thinking and outright lies. My own opinion is that it is wise to think about this crisis as a long term, rather than a short term one. That does not mean that things won’t get very nasty in a short time - it means that whatever levels we fall to, I would say we’re a ways from getting out.
- Markets will still exist after this. This seems obvious, but I’ve had people ask if there will still be a stock market after this. The answer is yes, certainly. If nothing else, the US, which is the world’s largest grain exporter will be trading food to energy producing nations and food for large nations that can’t produce what they need for a long time. There may be points at which trading is suspended, and my own bet would be in a steep decline over the next year - a few days ago we were down 40% over last year - I think there’s at least another 40-50% to go from here.
It won’t be a steady downturn, though - there will be rallies and improvements. I think it is perfectly possible, however, that a lot of foreign investment may leave the US and the amount of money available for markets to play with will continue to decline for a long, long time. I suspect most ordinary people will probably get out of the markets, just as they did after the 30s.
Where should you put your money? This is not my area of expertise, so I’ll just tell you where I’ve put mine - into my home, into the food in my pantry and the tools I use, into my community (I’m trying to keep up my charitable donations as much as possible), and my local credit union. Is this a perfect solution? No, and it probably isn’t helpful to those close to retirement, retired or with lots of money to preserve. In that case, I’d take the advice of Ilargi and Stoneleigh over at www.theautomaticearth.blogspot.com. They are far better at this than I am. I still think that durable goods, land, natural resources and basic things like food make a lot of sense.
- This one is more an intuition than a fully formed and reasoned thought, but I’m coming to suspect that we may find ourselves unable to import some, or many goods at some point in the not-too-distant future. Watching Iceland’s current situation is going to be unique - and the costs of shipping are also a major issue. There are two consequences of this - the first is the re-onshoring of some manufacturing, which would be good. A friend of mine who works in the medical equipment business already jokes that his job in New Bangalore (Boston) is the cheap place to make stuff for the Swiss company owners.
The second consequences may be that you just can’t get stuff you are used to. So I’d suggest getting unused to it, if you can. This will not be easy or pleasant. And this includes food and other things we need. While the US can feed itself, we are also one of the largest food importers in the world.
- I’d expect to lose your job. I’d bet on high unemployment levels over the next decade - 15-30%. There’s a lot of fat in our economy, and a lot of us make our money on that fat - that’s not a value judgement, btw - books are a luxury too, as is a college education. The problem is that we don’t much distinguish in economic crisis terms between valuable luxuries like education and valueless ones, like Mercedes.
Just to be clear, we’re totally implicated in this one. We figure there’s a 50-50 shot Eric will lose his job - he brings in a huge amount of money to the university and is paid less than a comparable tenured professor (part of our betting mechanism), but if across the board commands come to get rid of non-tenured faculty come out, he’s toast. This is bad, since it provides our benefits and also much of our income. It is also bad because Eric loves his job. We particularly took this job, as opposed to say, a tenured position at a small university (Eric is primarily interested in science education, not research, so tenure at a research University was never considered), because we thought that despite the risks, the state universities are more likely to survive a major crisis than small private ones, but this was a bet, and we may pay the price.
If your job depends on travel, state and county budgets, parents having the money for private schools or college, luxury goods (and by luxury I mean “stuff you don’t need), high end consumers choosing to pay more for quality (and this is likely to affect many small organic farmers, crafters, etc… me included), real estate development, or can be described as a “Dilbert Job” you are probably at risk. I’d also suggest that people relying on current non-traditional energy booms, and renewables are in trouble if the credit crisis continues. You are even more at risk if you are a. older, and highly paid and can be laid off and replaced with a much cheaper younger person b. recently hired c. recently graduated or d. have a medical condition that makes you expensive or are likely to have a baby, and thus seem expendable.
What can you do about this? If you can, make sure someone in your household (and remember, “household” is a fungible commodity - it does not have to consist only of a nuclear family) has a reliable job if possible. If you currently are making a lot of money, but could shift into something more stable, it might be wise to do it. Otherwise, pay down your debts and do what you can to start cottage industries and local businesses so that you have a way of bringing in income. Double up with family, share resources, cut your budget and get ready. If you do have stable employment, sit tight and play nice.
- I may be wrong here, but I don’t expect most people to lose their homes, nationally. I think millions will, but the enormous build out of homes has left us with more housing than we can possibly use in any rational system. So while some people will be homeless, my assumption is that gradually, either municipalities will decline to foreclose, as several have already, or legal challenges will allow people to keep their homes, because the institutions that once held their mortgages are now owned by the government, and paid for by the people. I think more people will end up living together, but most people will have homes, simply because we built so many of them.
- I think that most people’s kids aren’t going to college for a while. Eventually, my guess is that some small schools will close or be bought by state colleges, and eventually, the US will probably go to a subsidized college education system - but that’s longer term. I think this is likely simply because sending young adults to college is one of the best ways to keep them from rioting and causing violence - it is a cheaper thing than letting them start revolutions because they have no work and no money. In the coming 5 years or so, I wouldn’t bet on college unless you have the cash to pay for it securely in your mattress - I think state colleges and community colleges will do ok, with trickle down of more affluent parents sending their kids there, but private, expensive colleges without huge endownments will struggle.
It is time to think about alternative education - apprenticeship, cooperative universities created by professors in their communities, and other educations.
I do expect, in the very short term, a lot of people to go back to community college and especially graduate schools. But since such programs only have subsidies for a few, be very cautious about borrowing money for this.
- I don’t expect short term loss of the utility grid as a whole or food access as a whole, but I do expect a lot of people to struggle to pay for them. Utility shut offs are up again, and food is the one thing whose price is not falling much. I expect high food prices in proportion to income to continue over the next years - and people are going to pay more and more of their income for food. The same is true with utilities - while people may cut back some, I don’t expect radical drops in gas or electric prices. So my guess would be that more of us should be set up to do without electricity or heat, or with very minimal use of these. Growing some of your own food, and perhaps food to sell is going to continue to be essential.
- I have said this before, but I expect that generations are going to have to come to terms with one another really soon. That is, older folks who have been expecting to retire, or are retired, but now can’t do so or are struggling, are going to have to come together with younger folks who can work, but don’t have assets like housing or remaining funds, and have large debts from college and other sources.
The only possible answer to this set of problems is for them to work together -
parents with kids, younger friends with older ones. The good news is that this isn’t bad. The bad news is that both generations are going to have adjust their expectations of the future enormously - the all leisure retirement is probably over. So is the idea that living with your parents means you are a loser. Valid relational difficulties are going to have to be overcome - or chosen family will have to take on the characteristics of biological family - ie, they’ll love you and help you even when they don’t like you much.
- I expect that in the coming years there will be a lot of misery and unhappiness. And also a lot of surprising moments of happiness. There will be a lot of pain and suffering. And there will be a lot of moments in which people show extraordinary courage, kindness, and experience joy and delight, despite what’s happening. We will live through extraordinary events, but we will also experience our lives in ordinary ways, and if we plan and think ahead, it is possible even to imagine that happiness will predominate, in the face of very difficult times.
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Island Breath: Kunstler 2006 Observations 11/13/06
Island Breath: Salvage Sociaties 10/28/07
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Island Breath: Part 2 - Kauai 2007 to 2029
Island Breath: Part 3 - Kauai 2020 to 2050