World War 3?

[powayseller]

Those who think the US is still a superpower, I disagree. At one time, we were the manufacturing capital, but now we are the world’s biggest debtor nation.

Our civilization will end someday, just as the others, and the dollar will no longer be the world reserve currency. Look at other reserve currencies, and how long they lasted. The last one to go away is the British pound.

Michael Sherman, in Scientific American, researched 60 civilizations, both ancient and modern. He found the average life span of each was 421 years. Modern civilizations have a life span of 305 years. These societies collapse because they ran out of resources, and their leaders did not plan for this.

One of the best-known examples of a collapsed society is Easter Island. They built great big statutes in honor of their chiefs, until they had cut down every tree and eliminated their food supply. Stupid, right?

But we also are short-sighted, because we are creating asset bubbles, consuming more than we produce, and are dependent for our survival on a resource that we must get from other countries: oil. Why do we not replace our short-sighted closed-minded leaders, since they are not making tough decisions today for our greater good tomorrow? They are not protecting us from the upcoming energy crisis, asset bubbles, underfunded social security and medicare, and all the other problems we discuss.

[North County Jim]

Those who think the US is still a superpower, I disagree.

How would you define a superpower and by what measure would you exclude the US from that category?

I also think you need to get away from your focus on total debt and look at per capita debt. Per capita is a much better way to look at the ability to service the debt.

[partypup]

Powayseller, your response hits the nail on the head. I have been having this conversation with colleagues for months now. The U.S., like all empires that have risen since the dawn of mankind, will one day collapse. Our dollar, like tghe pound before it, will one day be replaced by a stronger, healthier currency. And the U.S., like the U.S., will relinquish its leading role in world affairs. This is not to say that the American Empire was not once a phenomenal beast. It was! But let’s face it, we’ve been here 200 years and change — which is a drop in the bucket when compared to the Roman, Greek or even Mayan civilizations. Their is an astounding book called the Collapse of Complex Societies (by Joseph A. Tainter). He recounts literally endless examples of societies — all which bear striking resemblance to the U.S. in its current form — that literally collapsed under their own weight. Taken from a historical perspective, it seems almost inevitable: as societies become more sophisticated, complex, and prosperous, its constituents increasingly consume more than they produce. The formula seems to work at first, but then there is a tipping point at which the society begins to fray under the demands of the machine. Competing interests (business vs. social welfare, the environment vs. business, upper class bs middle and lower class) literally tear the complex society apart. And your Easter Island example is spot-on. Except, instead depleting timber, we are depleting the fossil fuels upon which this society (and all complex societies in this age) currently depend. When the Babtboomers start to retire in the next few years (read The Coming Generational Storm if you really want to get the crap scared out of you), our society literally will not be able to meet the overwhelming level of entitlements that will come due to this aging portion of our population. Our coluntry is becoming older, not younger (as is also the case in Europe). The burden of the young to support the old will be yet another stress of this complex society that will quite literally be too much for it to bear economically.

To think the U.S. will continue to exist forever in its current form is to literally deny and ignore 10,000 years of world history. I know we all like to think that we are special and that we are smart enough to “build a better mousetrap.” But seriously, if the Romans couldn’t keep it together after 1000 years, how do we think we are going to make iteven half that long if we are showing serious signs of stress on the joints after less than 250 years? Like the Romans before us, we carry exorbitant debt — although by historical standards, current U.S. debt far exceeds that of any known society known to man. You might be interested in knowing that to cope with its mounting debt, the Romans steadily devalued their currency and launched manyh fruitless military campaigns to maintain the consumption levels of its empire. In the end, Rome collapsed under hideous inflation and social disorder ensued. The Roman Empire is the single greates example of societal achievement to date. Given our current course, who can plausibly argue that we will not meet a similar fate?

Collapse is inevitable; I would only hope that it occurs at a measured pace. However, given the current political leadership, I am gravely concered that the timeframe for the inevitable U.S. collapse is being fast-tracked.

I am late for an appointment, so please excuse the typos. And please don’t accuse me of being apocalyptic. I am an avid stuent of history, and the unfortunate byproduct of that is to become acutely aware of how utterly insignificant man truly is. That doesn’t mean we should stop enjoying life or having kids or buying CDs. it just means that we would all do well top better understand our place in the world and in history. For that matter, a simple course in astronomy might teach one the same lesson 🙂

[Anonymous]

Those who think the US is still a superpower, I disagree.

The fact that our military and economic might is still (currently) unmatched by any other individual country, constitutes us not only as a global superpower but the dominate global superpower. I doubt that you will find one coherent political scientist or international expert that would disagree. Our debtor status is noted, and it will most likely lead the U.S. to lose its position as the dominant global superpower but the U.S. has not yet lost that status. There is no other country in the world that could have done what we did in Iraq without the U.S. supporting them, or face severe economic and political repercussions. There is no stock market in the world that doesn’t catch a cold when the U.S. stock market sneezes. But the facts that we can invade Iraq like we did and that our economy drives the global economy is why so many countries want to see a decline in the amount of global power that the U.S. holds and there are many countries working tirelessly to that end. I respect what you have to say PS and you show a lot of acumen with financial and housing markets, I disagree with you however on this point.

-re analyst

[powayseller]

We have the strongest military and the world reserve currency, because oil is still purchased in dollars, although some countries now sell it in euros. But that does not define a superpower.

We lost our superpower status, because we are unable to produce or finance our own consumption. We have transformed to the world’s greatest debtor nation, and if the Asian countries were not so export dependent, our economy would have fallen apart 10 years ago. It is only because the Asian countries are export dependent, that we can consumer more than we make.

We are at the mercy of foreigners to fund our lifestyle. As soon as Asian countries stimulate consumption among themselves, they will not need us anymore. They will sell of their Treasury notes, and our dollar will vaporize. With Venezuela, Iran, and perhaps Saudi Arabia selling oil in euros, who needs dollars anymore? They will be too worried about our ability to repay them, and won’t want dollars.

So having a big military doesn’t make us a superpower, nor does the fact that we are the planet’s largest consumers of goods, oil, and all natural resources. Our military is funded by China, Japan, and all other nations that buy our debt, to keep our government going. Without them, we couldn’t afford to have the military.

A superpower leads the world, produces enough for its own people and exports the excess, and is admired for its financial and technical and political savvy. We have lost that status.

Don’t let your love of your country blind you. Investors have to keep an open mind. When we become in denial, we may be satisfied that “I am right”, but we lose the investor’s advantage which comes from seeeing the truth and not following the masses.

Let the masses think we are a superpower, put their money in the stock market, buy houses, think all is well. We profit at their expense.

This board is about opening our eyes, and part of that is understanding that the US economy is on its way down, and unless the political leaders have a sudden willingness to sacrifice today for a better tomorrow, the economic collapse will come. There is no preparation at all for $100 oil. Why couldn’t they see it coming?

How can we be a superpower if we are dependent on other countries to fund out main resource, oil? Why didn’t we plan for this permanent increase in oil prices by building windmills, promote solar energy panels, hybrid or hydrogen cars? We are dependent on countries which hate us, except Saudi Arabia our ally (?), to sell us the resource which runs our economy. If they pull out the rug from under us, or raise oil prices to $200/barrel because supply is running out, we will have an utter economic collapse.

What superpower? Surely you jest.

[Anonymous]

Powayseller,

With all respect your definition of a superpower is one that is personal to you and not held by people that study this as their life pursuit. So forgive me if I can’t take your side on this.

A superpower leads the world, produces enough for its own people and exports the excess

If this is the sole case of what makes a superpower, we lost our status as a world power in 1972 when we became a net importer of capital. It’s strange how the world has let America be the main decision maker of global policy when we have really been nothing this whole time.

is admired for its financial and technical and political savvy.

You just put a qualitative measure to superpower which your entitled to do but it can not be universally applied because I define savvy different from you and the next person. I still think the U.S. leads the world in financial, technical, and political “savvy”. I agree that we’ve consumed and spent ourselves into a hole and I think it will be vary bad but overall I think it will be good for the U.S. to experience and may bring us back to reality. I welcome more balance in the global theatre, I don’t like any power going unchecked.

Don’t let your love of your country blind you.

I love my country and we can recover from this, it will be painful but so is surgery, but it still helps us in the long run. Don’t get so carried away in panic and future predictions that you are blinded as well. I don’t think we are headed for total economic collapse, you may disagree but that’s okay. I’ve put my homework in and I’m not simply following the herd. I think we are headed for a severe period of stagflation but I realize even my predictions could fail to come about because of the multitude od unpredictable variables.

How can we be a superpower if we are dependent on other countries to fund out main resource, oil? Why didn’t we plan for this permanent increase in oil prices by building windmills, promote solar energy panels, hybrid or hydrogen cars? We are dependent on countries which hate us, except Saudi Arabia our ally (?), to sell us the resource which runs our economy. If they pull out the rug from under us, or raise oil prices to $200/barrel because supply is running out, we will have an utter economic collapse.

We are not dependent on other countries for oil, we are dependent upon other countries for “cheap” oil, we have plenty of oil, it’s just very expensive to pull out of the ground and refine. I welcome high oil prices because that means better development of alternative uses of energy, clean uses. That I think will benefit everyone. Yeah it’s really going to hurt in the short run but in the long run it will be healthier for us. You act like the middle east is the only place with the stuff. If worse comes to worse, the country will tell the environmentalists off and tap Alaska. As it is, the middle east only makes up a minor portion of our oil imports (Saudi Arabia, Kuwait and Iraq). The bulf of our oil about 40% comes dometically and then the next biggest suppliers are Canada then Mexico. We also have a strategic oil reserve that is supposed to cushion any large spike in oil prices so that we can adjust accordingly. We haven’t invested in alternative energy very heavily because oil has always been relatively cheaper. Those days may end soon, which I’m glad to see. The world is not running out of oil that is a cry that has been sounded for decades. We’re running out of cheap oil.

-re analyst

[rankandfile]

Let me tell you, when the sh** hits the fan, and nukes start flying, I am taking my family and high-tailing it out of San Diego, and California for that matter, post haste. Yes, flying nukes is a worst case (and highly unlikely) scenario, but San Diego County is a military target with all of the bases and installations here. And there’s also the nuclear powerplant by Camp Pendleton that will likely be a target. I think we’ll settle somewhere in Montana and see how things pan out.

[partypup]

Re Analyst, I’m sorry to tell you, but we are all in much worse shape than you seem to want to believe. I am curious how and why you think this country will recovery from the perfect economic storm that is brewing, as one would from a surgery. To continue your medical analogy, I don’t think we are going in for outpatient surgery; I think this patient is in trauma and is on life support.

Questions for you:

***A recent CNN survey revealed that the average American household has NINETEEN credit cards. Moreover, most of these people are using credit to purchase necessities such as food and gas. You have to ask yourself why this is happening. I’d be interested in your take on this. My take on this is that people are drowning in debt, are one paycheck away from bankruptcy and cannot remotely tolerate any major disruptions in their lives — be they layoffs, general inflation or skyrocketing fuel costs from oil disruptions.

Consumerism is the engine that drives this economy. But if you are carefully watching the leading economci indicators of late, you will notice that consumption is conspicuously DOWN…and dropping fast. People are literally tapped out. Equity lines are tapped out. Credit cards are tapped out. The U.S. — which needs to borrow 57B per day just to keep this ship afloat — is tapped out. So my question for you is, on what do you base your belief that we will merely suffer a period of stagflation from which we will recover as usual? What we are witnessing is an absolutely UNPRECEDENTED level of debt, by U.S. standards and by the standards of any country that has ever been in existence.

What is the light at the end of the table? Where will Americans suddenly find income that will allow them to (a) resume their spending on the basis of cash flow, NOT credit and (b) reclaim the middle class jobs that are moving overseas or simply being phased out altogether?

I am in one of the most recession-proof businesses — entertainment — and studio executives are fighting for their lives now. Hollywood is living in fear. They are battoning down the hatches. Disney has just laid off 850 employees, and article in the business section of yesterday’s LA Times sounded the alarm for an industry fighting to stay alive. Why? Because it depends on leisure dollars and advertising. People have to spend to make that happen. Historically, no matter what, people have always coughed a dime or two for entertainment. But all that is changing. Whether you want to believe it or not, the masses in this country are fighting to keep their heads above the waves — but no one wants to admit that this is happening.

*** We are not only dependent on others for oil, but also for our very financial existence. If foreign investors — principally the Chinese — didn’t show up to buy bonds one day, we’d be up a creek without a boat or a paddle. Powayseller is 100% right; this is not the position any super power has historically found itself in. Was Rome beholden to any of the lands upon which it cast the shadow of its empire? Did England rely on the good graces of India to survive? No. This is a fundamental sign of weakness, and it is simply delusional to believe otherwise.

Ah, but you say the Chinese have to keep buying dollars because they are dependent upon our appetite for their cheap goods. To that I say (a) our appetite is still strong, but our stomachs are full. We can only buy so much, and as Americans near their credit limits and interest rates invariably rise, China will face the reality that Americans simply can’t consume as much as they want indefinitely. The laws of economics will eventually prohibit this; and (b) China, like India and Russia, is not a fool. It knows that the dollar’s days are numbered. But rather than shift all of its reserves out of dollars immediately, it is accomplishing this same feat over time. Do your research and you will see that central banks all over the world have been gradually lowering their dollar reserves for the past 24 months. THIS IS A RECENT DEVELOPMENT. They are buying gold, Euros and other foreign currencies. Not coincidentally, the dollar has been steadily falling…

And more food for thought: Iran and Russia are now selling their oil exports in euros and rubles. It matters not if these exports amount to only 20% of world consumption; what matters is that this means that there is a need for 20% fewer dollars in the world. That means that we suddenly have more useless dollars floating out there. Coincidentally, shortly after Iran and Russia began their euro and ruble oil exchanges, the Federal Reserve — for the first time in U.S. history — decided not to publish M3, the measure of the national money supply. Re Analyst, why do you think our government would take such an unprecedented step at that particular time? If you think this is a coincidence, then I have some beachfront property to sell you in Nigeria.

The writing is on the wall. No one wants to be caught holding the funny money when the hammer falls. Faith, alone, keeps the dollar afloat, and all it takes is one major global disruption to challenge that faith. Information is shared instantaneously now, and markets can plummet in one business day. Make no mistake, the day will come when foreigners reach a level of security such that a dollar collapse will not spell doom for them. What they are slowly, quietly doing behind the scenes is preparing for the inevitable day.

***Lastly, with regard to your contention that we are only running out of cheap oil: cheap oil is the only oil that matters to the U.S., my friend. Because when the cheap oil is gone, the expensive stuff will easily cost us $100+/barrel. Do you really think Americans who are barely making ends meet and living on credit cards can stomach gas at $5.50/gallon? How much will it cost to bring food to market? What will become of airlines? Because that is the future. If you disagree, I’d love to hear your thoughts as to why you think Americans — and the economy and general — can withstand this paralyzing shock when we are virtually stagnating at $3.25/gallon.

And by the way, I am old enough to remember the price shocks of the 70s. Prices at the pump tripled when supply dropped by 10% — and that was more than 30 years ago. Imagine what our energy needs are now! So even though the Mideast only supplies 25-30% of U.S. oil, just think about what a 10% disruption will do to this economy today. Gas at $9/gallon? Fugghetaboutit. Americans would thrown in the towel. Social unrest wouldn’t be far behind. And if you doubt the last sentence, I have one word for you: Katrina. If a category 5 hurricane send one city into chaos, imagine what a category 5 financial hurricane all over the country could do. There’s a thin line between order and disorder. Think about it.

[powayseller]

reanalyst, running out of cheap oil is a big problem, and should have been planned for by our leaders. Peak oil has been known about for decades, yet they are short sighted and don’t put money into alternative energy or drilling our own oil. If oil gets to $200/barrel as Dr. Leeb suggests, he says our economy will collapse, and it is one crisis that we cannot monetize out of. You see the problems already created by rising oil prices, and it will only get worse.
If we get our own oil, but have to pay $200/barrel to extract it, then it is basically going to cause an economic collapse. Have you read any books about oil supply and rising demand from China and India?

I stand by my point that as long as we cannot produce the goods and services we need for our own people, and have to take on debt to maintain our lifestyle, we are not a superpower, but a debtor nation.

Becoming a superpower once again means paying off the debts and creating products that the world wants to buy from us, so we are net exporters.

For now, we are getting weaker by the day. I think the next superpower could be Europe, Chindia, or Russia. They are more productive and export more than they consume.

But time will tell. I am concerned about the dollar falling 20% over the last few years. When I went to Germany in 2000, 1 dollar was 1 euro. Now you need $1.20 to buy one euro. Our dollar is getting weaker. So doesn’t that make us a weaker power?

This is an economics discussion, and in this regard, we are turning into losers. Who has the political will to change it?

Rich was guessing the Fed will inflate itself out of this mess. Why not do the right thing? To become truly strong, let the excesses correct. The politicians are too short sighted. They worry only about the next election. If they were long sighted, they would have kept Carter’s programs for alternative energy, planned for the SS and Medicare crisis, cut back spending to pay off the deficit.

[Anonymous]

Powayseller and your devotee PartyPup,

This is probably going to me my last comment on this because frankly it is becoming tedious and I’m no longer enjoying this thread. You think I’m off base, I think your off base, we can agree to disagree I hope.

To continue your medical analogy, I don’t think we are going in for outpatient surgery; I think this patient is in trauma and is on life support.

My analogy was misconstrued and not meant to make light of the situation. Sure I’ll go with trauma, or whatever, but I don’t agree that they are mortal wounds, the point is medicine tastes bad but its good for us.

A recent CNN survey revealed that the average American household has NINETEEN credit cards.

I hate surveys, especially after I’ve taken several courses in statistics, I realize the huge amount of bias and error that can exist in them. Word to the wise, don’t quote surveys to me like they are hard fact, especially ones from MSM, I just don’t buy it. In any case I realize we are up to our nostrils and drowning in debt, as has been suggested what the government will do is inflate that debt “away”. It’s not going to be an easy hole to crawl out of, but given U.S. history and our past levels of productivity, I don’t find it hard to fathom other countries investing in the U.S. again after a painfully protracted amount of time. I think the times ahead will be especially hard for people who rely on others for employment and have no self-sufficiency. I guess where we are butting heads is not so much on intensity, but on the U.S.’s ability to recover and what makes the U.S. great in light of other nations.

Okay this is turning into another book, and my eyes are getting tired. Maybe I’ll see one or both of you at a gathering and we can call each other names and have it out, and then have a drink together. After all isn’t that what it’s all about?

-re analyst

[sdduuuude]

reanalyst:

I just want to say I love your first post (6:40 p.m.)
I hope to see more of your comments here.

The “patient” analogy is a decent one. The thing about markets is that they tend to be self-medicating. The market finds the problem and fixes itself, (which doesn’t mean it isn’t painful) as long as government doesn’t muck with it too much. I mean, the government would drag a back injury patient to the hospital by their head, thinking they are helping the situation.

I put my faith in the entrepreneurs of the world to give us alternative energy when the time is right. I put my faith in people to be cheap bastards, too and they’ll reduce consumption when the price is high enough.

I do wonder what we’ll do without plastic and nylon, though.

[rankandfile]

I think that finding an alternative to oil for automotive fuel will help to extend our ability to produce plastic and nylon from oil.

I agree that we should just let the markets be and hope that governments don’t muck it up. But that’s what always seems to happen. I think that the entrepreneurs of the world have already given us alternative energy in various forms. The problem that I see is that the barriers for entry into the energy business must be absolutely astounding. Another problem is that you have to have government contacts on your side, and you better hope that their campaigns aren’t being funded by anybody in the oil industry. For example, do some research on ultra narrow vehicles (UNVs) and you’ll see that the state of Washington (I think it was Washington) had to pass special legislation to enable 2 UNVs to travel side-by-side in one lane.

The point I am trying to make here is that often times the solution to the problem is already there, it just needs to be implemented. UNVs would solve our traffic problems for 20 years IMHO. Do you see any incentives for them? No, you get incentives for hybrids and more car pool lanes, which are a complete waste. Too many interest groups would lose out if we stopped building wide autos that ran on gasoline and are driven on roads that need to constantly be improved and widened to keep up with a growing population.

Never count out the environmental-architectural-engineering-construction complex!!! Collectively, they can be a very influential and powerful voting bloc!

[Author]

Posts