Crisis 2011 – Part I: The Other Shoe - Eric Janszen

[shiny!]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

I too doubt it will help the economy much, except perhaps for those working in the military, intelligence and aerospace industries.

Financially speaking, an all-out major war now would be the equivalent of "suicide by cop" on a sovereign scale. I seriously think we're already in WWIII but it's a currency war and only the Oligarchs will win.

[ThePythonicCow]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

I don't see how War will benefit our economy this time around, since we don't even manufacture most of our own equipment anymore.

I too doubt it will help the economy much, except perhaps for those working in the military, intelligence and aerospace industries.

I sure hope you're right [about finally solving our energy problem.]

I should caution you and any lurkers that I've been off reading some weird sites lately. So take my predictions above with a dump truck full of salt:

[Chris Coles]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Holy smackers. I take a few days off from iTulip and miss reading this in real time? Who'da thunk? That'll teach me.
Oh ... there's a way out, ol' chap. The same way out as after they sunk the Lusitania (to incite America's entry into World War I) or sunk America's aging battleship fleet at Pearl Harbor (to incite her entry into World War II). WAR !!

Not this year, I don't think. First we get the world economic body slam that EJ is describing to us. Keep your pantry well stocked. If you have a garden, tend it well; if not, consider planting one. The biggest event of 2011-2012 that EJ left out, in my view, will be world wide food shortages. EJ will still eat well; I'm sure he need not worry for himself or his family. But many humans will not. I anticipate the WAR will follow sometime thereafter; not just regional colonizations (aka War on Terror) but something more riveting for the global human population. I will not state here who I think will be the enemy. It would bring too much ridicule to this good forum to go into that here and now.

There is always a way out. It might just be a tad brutal. Hang in there however. If civilization survives in anything resembling its present form, the technology brought forth during the coming war will solve our energy problem.

The trigger will be sea levels rising much faster than anyone has predicted.

[shiny!]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Oh ... there's a way out, ol' chap. The same way out as after they sunk the Lusitania (to incite America's entry into World War I) or sunk America's aging battleship fleet at Pearl Harbor (to incite her entry into World War II). WAR !!

I don't see how War will benefit our economy this time around, since we don't even manufacture most of our own equipment anymore. Things might be assembled here, but AFAIK most of the components are made in other countries. It's not like WWII when we ramped up factory production in a huge way. Now, war might mean more jobs in other countries but not here.

We've been at war for the last decade, and during that time our national debt has exploded while factories have shut down and manufacturing jobs have been lost. What will more War, bigger War accomplish? All War is good for now is draining what precious oil remains at an accelerated rate.

But since it's you I'm arguing with and you're generally the smartest kid in the class, all I can assume is that I'm misinformed or overlooking something.

Hang in there however. If civilization survives in anything resembling its present form, the technology brought forth during the coming war will solve our energy problem.

I sure hope you're right.

[ThePythonicCow]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

No.........i don't agree you, for the 1st time since i posted on Itulip......i disagree with you.

Holy smackers. I take a few days off from iTulip and miss reading this in real time? Who'da thunk? That'll teach me.

Eric they painted themselves into a conner, by mistake or plan there is NO WAY OUT NOW......you can't un-hit the iceberg mate.

Oh ... there's a way out, ol' chap. The same way out as after they sunk the Lusitania (to incite America's entry into World War I) or sunk America's aging battleship fleet at Pearl Harbor (to incite her entry into World War II). WAR !!

Not this year, I don't think. First we get the world economic body slam that EJ is describing to us. Keep your pantry well stocked. If you have a garden, tend it well; if not, consider planting one. The biggest event of 2011-2012 that EJ left out, in my view, will be world wide food shortages. EJ will still eat well; I'm sure he need not worry for himself or his family. But many humans will not. I anticipate the WAR will follow sometime thereafter; not just regional colonizations (aka War on Terror) but something more riveting for the global human population. I will not state here who I think will be the enemy. It would bring too much ridicule to this good forum to go into that here and now.

There is always a way out. It might just be a tad brutal. Hang in there however. If civilization survives in anything resembling its present form, the technology brought forth during the coming war will solve our energy problem.

[ThePythonicCow]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

See also: http://James Goldsmith discusses glo... 1994 (55min.)

Link kaput -- try Charlie Rose November 15 1994

[Chris Coles]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

May I also add the point about what seems to be occurring; a systematic, revolving series of natural disasters, one following the other around the planet. last year it was Russia and Grain, has anyone noted that the Queensland rains have damaged the grain harvest expectation for next year as there is much land that will not be accessible for some indeterminate period. The world economy may not be sufficiently robust to ride a continuing series of such events.

[ViC78]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

EJ,

You seem to acknowledge the run up in oil prices is at least partially due to the finite oil supply. You don't explicitly attribute it to the rising demand for oil in China and India, but I assume you understand this. You seem to go on to attribute it's price-rise solely to an increase in the money supply. You may be exaggerating for effect, but if not I fail to see the support for this hypothesis. If you have the data correlating as much, I would like to see it.

From my reading, the assertion that the price fluctuation are due to the money supply does not seem well supported, particularly as the rise in commodities seems to be easily explained by supply and demand. See, e.g., Causes and Consequences of the Oil Shock.

Do you attribute the 2007 run-up to an increase in the money supply? The subsequent 60% drop due to a decrease in the money supply? Or are you making the argument that the fluctuations in the money supply affect/reflect supply and demand?

I was going to pose the exact same question. The flow chart describes 3 inputs to the oil price increase, but then, in the explanation, EJ accuses the Fed of exporting inflation to the emerging market economies. I have been reading up on the Indian food inflation spike and lot of it is attributed to the poor and unseasonal weather conditions which depleted grain stocks.

I would be very curious to know if someone has attempted to separate these different causality factors in terms of impact on food/oil inflation.

[Sharky]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

An big issue regarding China is that ownership rights there are not as strong as American corporations have been lead to believe. When large corporations in the US moved their factories to China, they retained either total or at least partial ownership. However, they have forgotten, or chosen to ignore the fact that in spite of the recent success and progress, China is still communist at its core. If (when) their economy goes into the tank, it seems very likely to me that there will be lots of "nationalization" -- the confiscation of foreign-owned industries by the Chinese government. If you don't think it's possible, just look at what happened in Russia, Cuba, Iran and Venezuela. The scale would be larger here, but the underlying politics / philosophy in China isn't really much different than those other countries, and it's the philosophy that makes such things possible.

[herbkarajan]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

important interview, here's the working link
http://www.youtube.com/watch?v=4PQrz8F0dBI

of course, we're almost a generation later after 'globalization' and events Goldsmith describes. The paradox which Goldsmith doesn't explore is that the only way to quickly 'industrialize' China (et al) was to engage 'animal spirits' of businesses which took advantage of the labor arbitrage and brought in capital and know-how. Whether 'they' will finally start to consume what 'we' make is at the heart of the 'rebalancing' debate happening right now

[herbkarajan]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Stagflation worked in the 70's because the UK/US were "Closed loop" econermys.....it worked because:-

A. Wages could chase inflation (very high levels of emplyment)
B. Badly informed public.

Open your eyes and look beyond U.K, the West's been underwriting global expansion (on the backs of the bottom half of its own population) for the better part of two decades. 70's style inflation will work "very well" for the 4 billion people in China, India etc.

Raising prices for necessities in the West may seem cruel, and it is, but several years down the line, when the remaining companies realize their input prices are coming down while the margins stay 'fat' because all the competitors are gone, they may actually hire a few people.

[Sharky]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Having been prominent in this part of the debate; I will be pleased if you would also share with us all your own answer as to how you see, from your own viewpoint, what they should do. (I should explain, I am trying to widen this debate, not in any way demeaning your own response).

The obvious part is to take actions that result in increasing production within the US. Since production = wealth, that's the only long-term solution.

Exactly what those steps should be is less obvious, but still reasonably straightforward; the US needs to become more competitive. Why did companies move to China in the first place? It wasn't just GATT and cheap labor.

Specific suggestions:

1. Radically reduce regulation
2. Remove legislative support for unions (no forced bargaining, etc)
3. Abolish the minimum wage
4. Drastically reduce government spending
5. Cut and simplify income taxes (personal & corporate), on the road to eliminating them entirely
6. Decrease the true cost of capital by encouraging saving (first step: have interest & dividend income be tax-free)
7. Eliminate taxes on capital: capital gains tax, inheritance tax, gift tax, property tax, etc.
8. Sell as many government assets to private parties as possible (privatization)
9. Eliminate all subsidies and other forms of tax or financial support that have encouraged companies to move offshore
10. Strictly enforce laws against fraud of all kinds
11. Privatize the education system

I realize this sounds like a third-world "austerity" program of some kind -- and perhaps that's partly what it is.

Government alone is not going to solve the problem. The best thing they can do is to get out of the way, to allow innovators, entrepreneurs and risk-takers to do their thing.

BTW, note that I'm suggesting what I think should be done, not what I think will be done; they are two very different things. In fact, what probably will be done is close to the opposite of what I'm suggesting, at least in the near term.

[Mega]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Good Eveing Eric & co
No.........i don't agree you, for the 1st time since i posted on Itulip......i disagree with you. I totally agree with the logic of your thoughts & am sure you have soucres of "intel" from well placed players (unlike Max Keiser who only has Saurces).....but it won't go down like this.

Stagflation worked in the 70's because the UK/US were "Closed loop" econermys.....it worked because:-

A. Wages could chase inflation (very high levels of emplyment)
B. Badly informed public.

Neither are now the case, as they try to inflate & REAL in your face inflation rises the squeezed middleclass will BLOW. Unlike the 70's now we have MEGA personal debts, true keeping rates low stop them from blowing.....but the everyday food & fuel costs will rocket....which will have the same effect as high rates.

Savers are getting raped & they KNOW it, with internet they are very well informed.......they are finding ways to hit back (Gold/silver). The "Fiat" kings are scared shitless of the loss of their kingdoms, they have so devalued "money" that its control might very well be snatched from their hands.

Eric they painted themselves into a conner, by mistake or plan there is NO WAY OUT NOW......you can't un-hit the iceberg mate.

So, what does "Mega" (who sussed into in 2005) think will happen?

Well, their cowards, they seen that poor woman shot & are just a "tad" worried they next in line.....they will have noticed the riots & neo-revoulutions going on around the World. They decied to do....EVERYTHING.......They "QE" & LIFT Rates....after targeting a low bulsh*t fake inflation fig.............they do it all.....to give them time to decied what to do &/or give them time to retire/escape & hand off the job to someone else.

That won't work either, Eric i read your work for years & it helped my understanding, but your like a Russian phyicis standing in the control room at Chernobyl..........its too late mate.

Mike

[LargoWinch]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

Charles Hugh Smith is using iTulip's chart depicted in the above article for his latest post, while acknowledging the source: See here.

As we can see in this chart from iTulip.com, the increases in income have also been concentrated in the top 5% and the 15% just beneath that together make up the top 20%:

[Munger]

Re: Crisis 2011 – Part I: The Other Shoe - Eric Janszen

EJ,

You seem to acknowledge the run up in oil prices is at least partially due to the finite oil supply. You don't explicitly attribute it to the rising demand for oil in China and India, but I assume you understand this. You seem to go on to attribute it's price-rise solely to an increase in the money supply. You may be exaggerating for effect, but if not I fail to see the support for this hypothesis. If you have the data correlating as much, I would like to see it.

From my reading, the assertion that the price fluctuation are due to the money supply does not seem well supported, particularly as the rise in commodities seems to be easily explained by supply and demand. See, e.g., Causes and Consequences of the Oil Shock.

Do you attribute the 2007 run-up to an increase in the money supply? The subsequent 60% drop due to a decrease in the money supply? Or are you making the argument that the fluctuations in the money supply affect/reflect supply and demand?