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Dollar Crisis - What are the odds?

Tuesday, September 23, 2008, 9:16 AM

The US dollar is poised to face its most serious challenges since the slamming of the gold window by Nixon in 1971.  If the dollar fails and loses 20%, 40%, or even 90% of its international value, everything that we import, notably energy, will skyrocket in price.

And with that, so will all other basic living expenses, such as goods that are tied to energy.  This means pretty much everything.

In short, a dollar decline will lead to rapidly rising inflation, and, ultimately, a shortage of goods.  This means that assessing the risks to the dollar and tracking its value is of paramount importance.

Over across the Atlantic, talk of a major dollar decline is in the news:

Quote:

The US taxpayer bail-out of America’s banking sector is an event whose significance will reverberate for many years. What it means for free markets, for the way Western economies are run, for the prosperity of the world economy, must remain to be seen.

But as investors scrambled to make sense of last week’s events, already one conclusion was all but irrefutable – the US dollar will have to take another major fall.

Link to article

While there is much that needs to be discussed about this massive turn towards corporate socialism that has suddenly been thrust upon as "the only solution,"  I remain more concerned about what will happen when - not if - the US dollar is shunned by a breakaway state, fund, or central bank seeking to finally protect itself by dumping dollars.

And why would they do that?  Very simply, because there are about to be a few trillion more of them floating around even as the world economy stagnates or shrinks.  

Quote:

Sept. 23 (Bloomberg) -- Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds.

The plan, which asks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year, economists estimated.

"This is sobering, absolutely sobering, even to someone who doesn't drink,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington.

Link to article

A $1 trillion dollar budget deficit is just the cash deficit that DC will probably rack up next year.  Worse, I think the number could easily be as high as $1.5 trillion, given the other "troubled" assets they want to include and the fact that their tax projections assume positive GDP growth next year, an assumption that I am not willing to make.

This uncertainty over the funding level creates a level of uncertainty that will continue to push the dollar down.  If it falls far enough, it raises the specter of someone "cutting and running" at some point.  That's when the dollar decline will begin in earnest.

Quote:

But analysts say foreign investors will be increasingly reluctant to finance the growing U.S. deficit at the current dollar exchange rate and that funding the gap would require higher interest rates and a weaker currency.

"Nobody knows what form the bailout package will take. We only know vaguely how much it will cost," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. The U.S. fiscal position "does not look pretty for this year and next ... Overall, the uncertainty is driving the current flight out of the dollar," he added.

Link to article

As I've mentioned before, the final horseman of this entire mess will arrive on the day that the dollar begins to fall in earnest at the same time that interest rates begin to rise.  When this happens, it will mean that someone "cut and ran," and I would expect the rest to follow quickly, leading to a very sharp decline in the dollar.

If and when that day comes, your options to reposition your portfolio will be severely limited.  The doorway will be jammed.

I place the odds of a major dollar decline over the next six months at 50%.  If I told you there was a 50% chance of your house burning down over the next six months, would you consider buying insurance?  I hope so. 

That's what everyone needs right now - some insurance against a dollar decline.

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35 Comments

ike's picture
ike
Status: Member (Offline)
Joined: Sep 17 2008
Posts: 19
Dollar decline insurance
I looked around for a long time before finding a financial instrument that hedged directly for the dollar decline. It's still an instrument, and not something you hold in your hand, but it can work in tandem with other equities you choose to hold onto. It's an ETF with symbol UDN. Here's the website
bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 7 2008
Posts: 153
Higher interest rates or bust

Say half of all the US dollars are in foreign central banks. If there is a run on the dollar then all those dollars will come home, flooding the USA. Can you say exponential hyper-inflation?

The only alternative is for the fed to jack up interest rates significantly to restore some (false) sense of faith in the world's reserve currency. High interest rates at a time of a weak dollar and stagnant (more like imploding) economy that relies heavily on imports... We will wish we were Japan in the 90's.

Don't forget, this is different than Japan's recession. On average, our citizens don't have savings to fall back on as Japan did. They also didn't have to deal with a reserve currency to flood their banks.

Sounds like we need a period of deflation.

bearing01's picture
bearing01
Status: Silver Member (Offline)
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Posts: 153
There's also the MERKX

There's also the MERKX mutual fund

http://www.merkfund.com/

gauntlett's picture
gauntlett
Status: Martenson Brigade Member (Offline)
Joined: Aug 25 2008
Posts: 49
Other options
Also the ProShares FXP, FXC, FXF, FXY, FXA work well. In addition you can check out everbank.com
janb's picture
janb
Status: Bronze Member (Offline)
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Posts: 61
another plan
Since every solution (including doing nothing)seems to result in dire consequences, here is a proposal that would hurt the least. Confiscate all individual personal assets over and above $25 million, liquidate them, and turn the cash over to the "fund" for wall street. Anything left over goes to the other bailouts that have already taken place. Once the slate is wiped clean (if that can be accomplished), we start over with a new system.
LAClimber's picture
LAClimber
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Posts: 24
WTF?!?!! Buying at original value!
"What has become clear is that Treasury plans to purchase bad assets from banks at prices very near their original value. The risk to taxpayers under this program would be tremendous. If housing prices continue to fall, so will the value of the paper the government has purchased. Under this set of circumstances the public could be at risk for underwriting the great majority of the Treasury's purchases and never having a chance to recoup their investment. Buying troubled bank assets at above where they would be valued in a free market now and at a price which is near to the potential price when they mature is a great handout to the banks but undermines almost any chance that the Treasury will ever get any meaningful yield from the bailout."
joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
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Posts: 807
technical problem
i have been trying to run these numbers but my calculator only goes 9 decimal points. and the one on my dashboard is the same. where can i get one with at least 8 more decimal points? i am trying to explain what all this will mean to my grandchildren. if anyone has any ideas please reply. oh wait a minute i see an opportunity i could make them and sell them .......right?
EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
Not a WORD to believe in testimony
Boy - these big boys will SAY ANYTHING! IF they really wanted to Fix the housing breakdown - it only takes re-writing the contract with the home owner! Truth is - they made some money in the late '90s and when the housing market was saturated - they wanted more $ by offering cheap startup loans with Big back end payments. Or, in other words- THEY GOT GREEDY. And now they want US to Bail Them Out? Best option is for single ownership of the foreclosed places, rent or re-sell them under contracts. Then the government doesn't need to be involved. Also, as markets continue a down sliding as these guys talk. I'm moving my funds into local places offering stocks and getting ready for impact. Do you think we will get to see these guys cry on national tv?
LAClimber's picture
LAClimber
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Posts: 24
Record Senate Hearings
Can someone record the senate hearing? (Paulson, Bernanke, Cox) .... Hear, See, Say no evil
jrf29's picture
jrf29
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Posts: 453
You've got a calculator on
You've got a calculator on your dashboard?? I've heard that they're making cars with on-board hard drives now, but this is just going too far! I recommend a good graphing calculator, such as the TI-83 by Texas Instruments. I was forced to buy one in high school for calculus, and I've never given it up. It will show up to 10 significant figures, with an unlimited number of decimal places since it automatically converts to scientific notation. Also, you can set it to draw out all of the exponential graphs that you no doubt want to look at, and ask it to graph out hypothetical exponential functions, etc. It will cost you about $100. If you really don't want the graphing function, you can get a non-graphing model (such as a TI-81) for a lot less which will still easily handle the kinds of numbers you're looking at.
joe2baba's picture
joe2baba
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Posts: 807
dashboard
sorry i have a mac the dashboard has all kinds of nifty widgets. thanks for the info.
Reuben Bailey's picture
Reuben Bailey
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Posts: 138
Calculator
What about a spread sheet? That can be used for graphing as well, and your computer screen is a bit bigger than the TI-83's. ;) If you don't have one, then I would suggest Open Office (www.openoffice.org). In my opinion it is far better than MS Office as far as it's features go, and the price is much better.
ike's picture
ike
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Posts: 19
Wall St. big five paid $39 Billion in bonuses in 2007
In 2007, Wall Street’s five biggest firms — Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley — paid a record $39 billion in bonuses to themselves. That’s $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns. Those 2007 bonuses were paid even though the shareholders in those firms last year collectively lost about $74 billion in stock declines — their worst year since 2002. Who's reporting this? ABC news, hard as it is to believe. (Full article at http://blogs.abcnews.com/politicalpunch/2008/09/last-years-big.html) When the media aren't following along with what would seem the insider perogative, it seems suspicious. It'll be interesting to see what the real orchestration is of all this after the smoke clears. A la the bank failures that were created in the early 1900's in order to later bring us the federal reserve. The real intent behind all this may not have come to light yet...
andrewj's picture
andrewj
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Posts: 16
insurance
what are you recommending as insurance. property dosnt look so good or dollars, wages will fall in real value? is there just gold silver left?
ike's picture
ike
Status: Member (Offline)
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Posts: 19
Meredith Whitney says bailout holds 'little hope'
full story at reuters: http://www.reuters.com/article/newsOne/idESBNG6521320080923?pageNumber=1 "Credit market disruption has had underappreciated consequences on the economy... what started last summer has accelerated and intensified so much so that we believe any government bailout plan has little hope of improving core fundamentals over the near and medium term," Whitney said.
kcim67's picture
kcim67
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Get up and Stand Up
Get up and Stand Up America! http://www.youtube.com/watch?v=MO6P_yjKFR4
kcim67's picture
kcim67
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Posts: 13
Is it possible?
Have you considered the possibility that this is being carefully orchestrated? I know that you already believe in the possibility of black box market manipulation and if so why not the entire shooting match. Pretty much the entire developed western world sold the old Weapons of Mass Destruction lie to there people and happily marched on Bagdhad for oil and as your Crash Course already points out this was just as important to the rest of the west as it was America. If this was the precursor, who is to say that America, Israel, Japan, Britain, France, Germany the rest of the Eurozone along with Australia and Canada are working in unison with one strategy and if so do they have the financial and political clout to pull it off? Just a thought?
jeffgerritsen's picture
jeffgerritsen
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Posts: 10
Scientifc Notation to the rescue....
joe2baba,

The human brain cannot accurately process a number beyond seven digits. That's why mathematicians came up with scientific notation. So just loop off all the zeros and add a 10 to the 8 (or 9th, 10th, or 11th) at the end of the number.... It's like the energizer bunny - it keeps going and going....

But wait, when I add back the zeros my brain can't comprehend that large of a number - OH MY!

This is truly mind boggling!
jeffgerritsen's picture
jeffgerritsen
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Posts: 10
Insurance?
I believe we have reached a point where a national discussion needs to begin, on how we will continue this project called civilization.

One of the biggest deceptions or delusions we have in this country is "... money or the accumulation of wealth in the form of arbitrarily re-assignable value of dollars, is all we need to be concerned about." We need to take a fearless and accurate assessment of our current situation (wasn't that one of the 12 steps in the Alcoholics Anonymous?) Let's see, we don't manufacture anything or value (manufacturing accounts for about 15 percent of GDP), we are hopelessly in debt domestically, and our current account deficit is running over 600 billion a year!

If we wish to continue this project called civilization, a number of things need to occur. They are:

1. Realization we need to eat, therefore we need to grow the food we need with less and less fossil fuel inputs. As in Cuba, the social status of farmers and farm workers should rise to that of doctors.

2. Realization commerce will always occur and continue. in the past corporations were an instrument of control to subjugate a military conquered population. We don't need corporations to continue this project called civilization. As a matter of fact I argue that we would be better off without them! But that's another discussion for a future time.

3. Cancel our roles in insane "free" trade agreements that allow corporations and foreign nations to plunder our country financially. This includes Nafta, WTO, GATT, and so forth.

4. Increase the federal minminum wage to something in the neighbourhood of $14 and index it for inflation. This will put money in the hands of workers who will buy things - sounds like demand economics, not the insanity of supply side economics given to us by such notables as; Fredric von Hight, Aurther Laffer, Milton Freidman, Alan Greenspan, and a host of other thieves

5. Extend unemployement benefits to 18 months.

6. Impose import duties and taxes to bring our manufacturing base back home.

7. Implement tax policies that favor small, local businesses over large corporations.

8. I would even argue that corporate charters only be granted for a fixed period of time. Once the time period has expired, the now defunct corporation needs to start the incorporation process all over again. This should give society the right to evaluate whether or not this corporation existence was a benefit or not. I realize I'm rambling here, but we have just witnessed how large corporate behemoths do harm not only to a nation but the world. I seriously question whether the existence of such corporate behemoths should be allowed. Too big to fail really means too big to exist!

Therefore real insurance means societies (and by extension, the individuals) ability to grow enough food to sustain itself and the ability to conduct local commerce to meet the basic needs of life. Yes I know we could have a whole discussion around the last sentence but I think you get the gist of what I trying to say.

A lot of what I trying to express (albeit rather poorly) is contained in Jim Kunstler's book "The Long Emergency". Kunstler is much more eloquent and sarcastic than I could ever be - although my sarcastic index is rapidly rising lately....
srbarbour's picture
srbarbour
Status: Silver Member (Offline)
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Posts: 148
Stuff
[quote]As in Cuba, the social status of farmers and farm workers should rise to that of doctors.[/quote] A rather silly idea when farming is becoming increasingly automated. Within the next 50 years a 'farmer' will be little more than a man who sits on 'capital' and collects a 'fee'. [quote]We don't need corporations to continue this project called civilization.[/quote] We don't need them, but they are awfully useful. Corporations aren't the problem. The problem is that regulation is wrong headedly designed. The goal should be to: "Control the environment in which corporations and other free market entities exist, so that the earning of maximum profit is synonymous with providing the maximum benefit to the people."

That, and we lean toward overly complex and unenforceable regulations (Differences in simplicity and enforceability is why a carbon tax is vastly superior to a cap and trade system). [quote]Cancel our roles in insane "free" trade agreements that allow corporations and foreign nations to plunder our country financially. This includes Nafta, WTO, GATT, and so forth.[/quote] A rotten idea. Free trade is, in the long-term, beneficial to all parties. That is why 'Kansas' has free trade with 'New York'.

The problem with the current system isn't free trade itself, but rather that the system encourages countries to 'compete' with each other for the 'business' of corporations. An insane idea that can be summed up with the inverse of the well known saying: "When companies compete, the customer wins" -- or in this case "When countries compete the people lose."

(Remember that the next time some senator or talking head claims we need to lower corporate taxes to 'boost' our economy. What he's suggesting is that we compete even harder with other nations to ensure a 'corporate presence'. Therefore, he is advocating a policy that in the end causes you - and the rest of the world - to lose)

Instead, what we need is clauses added to our free trade agreements establishing 'minimum ground' for all goods and services produced for export into the USA and all other member nations. This includes:

* Basic labor rights
* An international minimum wage
* Basic environmental laws
* Bottom level corporate taxes etc...

In other words Europe, the Americas, Australia, etc.. should all gang up against the corporations to shutdown this self destructive international competition, or at least reduce it to sane levels.

(A simple penalty for violation would be a nasty tariff) [quote]Increase the federal minminum wage to something in the neighbourhood of $14 and index it for inflation.[/quote] Probably doesn't need to be that high. Personally, I'd prefer to set it to $9 and index it to per capita economic growth. After all, the wealthier our nation, the more the bottom should get paid. (And, inversely, if our country becomes less wealthy, it is perfectly reasonable that the bottom gets paid less too)

That, and economic growth is something the government likes to nudge up in its doctored statistics, while inflation is something it likes to fudge down. [quote]Implement tax policies that favor small, local businesses over large corporations.[/quote] Agreed. While we are at it, make our income tax more progressive. And get rid of the medicare and social security taxes. These are just 'general income taxes' like the rest, disguised to make our tax structure regressive instead of progressive near the top. [quote]I would even argue that corporate charters only be granted for a fixed period of time.[/quote] Again, probably not a good idea. I'd rather a legal revocation of a corporations 'personage'.

--

Steve
pinecarr's picture
pinecarr
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Posts: 2237
Is this being orchestrated?
I don't know the answer to that. I used to think that was an extreme, fringe view. But the longer and more I read and learn, the more I wonder. If you are interested in reading editorials by some folks who do believe that to be the case, check out the website www.financialsense.com . It has a lot of different editorial writers and contributors with many different views on the economy and macroeconomics (including our own Chris Martenson!). Some writers who explicitly talk about the economy being actively manipulated are: Deepcaster: http://www.financialsense.com/fsu/editorials/deepcaster/archive.html Darryl Schoon: http://www.financialsense.com/fsu/editorials/schoon/2008/0716.html and David Morgan: http://www.financialsense.com/editorials/morgan/2008/0922.html There may be more writers with that view, but these are ones I know about off-hand.
robk's picture
robk
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dumb question, but is now a good time for a mortgage...?
So, I believe that the dollar will be falling. I believe interest rates are going to go up. I know mortgage rates are at a low (very low). I rent now... but if I bought a house today with a reasonable down payment and got a 30 year fixed mortgage at 5.5%, doesn't that put me in a good position during the upcoming chaos? No matter what happens, my payments will be $2,500 per month. If I can ride out what's coming for the next several years and have enough savings to cover my mortgage, isn't that a good position to be in?
Reuben Bailey's picture
Reuben Bailey
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Posts: 138
a few comments
[quote]Quote: As in Cuba, the social status of farmers and farm workers should rise to that of doctors. A rather silly idea when farming is becoming increasingly automated. Within the next 50 years a 'farmer' will be little more than a man who sits on 'capital' and collects a 'fee'. [/quote] That automation will only continue if we continue to have CHEAP ENERGY. Having grown up on a small family farm, I would argue that many of our cultural problems stem from the loss of understanding by the general population of where our food comes from and the natural cycles of life and change. The number of eyes (and therefore Is) to acres has been shrinking for a long time, and our food quality has been falling right along with it. Our food is now bred for how easy it is to grow and how long a shelf life it has, rather than it's flavor and nutrition. [quote] The goal should be to: "Control the environment in which corporations and other free market entities exist, so that the earning of maximum profit is synonymous with providing the maximum benefit to the people."[/quote] While this sounds like a good idea, I am not sure that it is the environment that needs to be controlled, so much as the reasons that we allow the corporations to exist If we can re-define profit as "the most good to the most people" then we may be able to make some headway. If you look at a corporation as a person, and diagnose them using the DSM IV, which is the book used by clinicians and psychologists to diagnose patients, then you would find that corporations are psychopathic. They are anti-social, and their only goal is to make the most profit with no real regard for the human, environmental, or social costs, except as they impact the bottom line. From my own feelings, I would say that the bigger a corporation is, the more psychopathic it tends to be. My only other comment is that limiting the time a corporation can exist is not necessarily a bad idea. My understanding is that this is how it was originally done, and it may be worth re-visiting the idea. All the best, Reuben
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Reuben Bailey
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mortgage

$2500/mo for 30 years? That sounds to me like you need to move to a less expensive part of town. ;)

I would say that your question is one that only you can answer. Look at the situation from every angle you can think of. Some of the questions that I would ask myself are:
1. Is the monthly payment more or less than the rent?
2. If prices for basic living necessities triple, will I still be able to afford it?
3. Is my income stream reasonably secure?
4. Do I need to spend this much on a house?
5. How will I feel if house prices drop another 5%? 10%? 20%? 50%? (some of these may be extreme - I hope - but it is still worth asking the question)
6. If I have enough savings to "cover" the mortgage, should I buy something outright and save on the interest? (this may include looking in other housing markets)

There are many more issues that affect the decision, but I hope this helps.
All the Best,
Reuben

Dragline's picture
Dragline
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Posts: 54
Buying a home/mortgage

I agree with Reuben. If you are not liquidity constrained (i.e., you won't need that money to live on), a fixed mortgage in an inflationary environment is almost always a good deal in the long run.

That's why people used to buy houses -- they did not expect to make a killing in the market and remove the equity to buy more crap -- they just expected that the real cost of their housing payment would decline over time while the value of the home and their income would rise with inflation. That may not be true in the next few years as the housing bubble continues to deflate.

Dragline's picture
Dragline
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Posts: 54
Foreign Investors

This I think is really the key as to when it hits the fan. A great omount of the free capital in the world is held in sovereign wealth funds or by countries like China with huge trade surplusses. At some point when they are looking at the U.S. markets, you have to figure that they will not be interested in investing here anymore or buying any more U.S. treasuries, because they have better opportunities or concerns elsewhere.

You might have noticed earlier this week that China rushed in to support its own markets -- that means it's not using that money to support ours.

Just this evening Singapore's sovereign wealth fund announced that it "has shifted its asset allocations toward emerging markets, hedge funds, natural resources and infrastructure ..."

When these sources tire of U.S. investments and markets watch out because things could get Great Depression-like ugly for our markets -- but with lots of inflation as the Fed injects trillions more into the system.

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
farmers
sorry to disagree with you steve. it is not a silly idea to have an equal regard for farmers. jefferson's idea was for a country of small farmers. 1.6% of our population is engaged in farming currently. this is only possible with huge inputs of oil. oil for fertilizer and tractors. 4 billion people are here only because of the green revolution fueled by oil. which is at peak production right now. we will be having less oil, food will be more expensive to the point where we will have major die offs of human beings. long before 50 years has elapsed. a friend of mine is in food security and they ran a computer model to see what would happen if there was a few cows discovered with mad cow disease in one feedlot in colorado. within 3 months the entire social fabric of this country would have become unraveled. of course it was a computer model and subject to human error. but close enough to think about. my experience is that people who live closer to the earth and are able to live off local natural capital fair pretty well in the economic environment we are entering. take a look in your fridge and pantry and see how much of your food comes from a 50 mile radius. then think about if it doesn't show up. so i actually hold farmers in higher regard currently than i do the medical profession. i think it would be an interesting interview right now to ask an amish about the financial crisis. the answer would probably be huh? i seem to recall that mr martenson actually now lives on the land. these are dark times my friend and i would make friends with someone growing food or better yet grow some yourself and see what it takes.
joe2baba's picture
joe2baba
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Posts: 807
you tube
thanks for this post it was awesome. i love the sharing on this site. thank you chris. you are a true patriot. i am proud to have you in my foxhole.
joe2baba's picture
joe2baba
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Posts: 807
mortgage
i have been in real estate for 37 years. i have never seen anything remotely like what is happening now. be that as it may rueben's advice is very sound. i would also add that you should review the chapter on bubbles. the bubble pops and returns to the level it started at or lower. in my market i think we have about another 20% to go before we see a bottom. so i would look at the numbers in your market dating back to 99-2000 and see where the market was for a comparable property to what you are considering. you can probably go into a real estate office and find an agent just dying to talk to someone willing to buy in this market...more like a hundred they will fall all over themselves to give you whatever info you want. my guess is you will find lots of properties for sale and you can lowball several a day until you find a "motivated " seller. this applies to everything in my previous real estate experience and we are in unchartered waters now. remember the lower the price the lower the payment. and who knows what your financial situation will be in the next few years.and of course you should buy the most energy efficient house you can find and retrofit it for as much alternative energy as you can. a garden spot is also a major plus. this advice is free so take that into consideration as well. i wish you well.
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Te4t0n
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Open Office
[quote=reubenmp3] and the price is much better. [/quote] This made me laugh.

Thank you,

Tommy
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srbarbour
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Posts: 148
Automation in Farming
[quote]That automation will only continue if we continue to have CHEAP ENERGY. [/quote] Nope, automation would continue even if cheap energy was gone. There are several problems in the opposition here:

1: Humans are monstrous energy consumers. Farming with human labor is horribly energy inefficient. So inefficient in fact, that the total yields (when using animals bred for generations as assistance) that for most of history we could barely keep our heads above water, with 80-90% of the population farming. Now, if that doesn't sound bad yet, recall that those farmers had a much poorer diet as well. Consider that if we Americans reduced our meat consumption, we could easily double or quintople our food supply.

2: Increasing automation further is mostly a matter of adding 'intelligence' (and I use that word very loosely here) to existing machines so that they operate independently of the human. There are of course, several mechanical additions that need to be taken care of as well, but even with those we aren't talking any major changes of energy efficiency.

In otherwords, automation would continue to increase, even if the amount of energy farm equipment was allowed to consume stayed static.

3: More than enough Cellulosic ethanol can be produced from corn stalks, agricultural waste, and lands left fallow to power every farming machine on this green Earth. So while, yes, Cellulosic ethanol might not be in sufficient quantity to displace our entire fuel economy, farmers will continue to have cheap enough energy for the foreseable future.

To sum it all up. Automation in farming will continue to increase. [quote]Having grown up on a small family farm, I would argue that many of our cultural problems stem from the loss of understanding by the general population of where our food comes from and the natural cycles of life and change.[/quote] And, having read a history book, I'd say you are completely and utterly wrong. Our current problems are just one more repeat of the exact same ones humanity has faced for the last 10,000 years of civilization (albeit, at a much larger scale). It is, sadly, innate in our species. Did I say species? Sorry thats still too limited, many other species show the same problematic roots in their behavior too.

To put it simply, I doubt there is a single life form on this earth, that if given the chance, wouldn't eat and obliterate its environment straight into oblivion. In fact, we humans are quite remarkable in that we can even grasp the danger of what we are doing and have taken 'some' (insufficient) measures to control ourselves. [quote]I am not sure that it is the environment that needs to be controlled[/quote] The environment -- that is, the system of laws, taxes, penalties, and regulations -- is the only thing that can be controlled. Controlling anything else has proved itself repeatedly to be delusion.

So, by default, its the environment in which companies exist that must be controlled. [quote]From my own feelings, I would say that the bigger a corporation is, the more psychopathic it tends to be. [/quote] And you'd be right. That theory has strong rational basis. Consider that in a larger corporation, each decision passes through more layers of management. Each layer of management, thinking primarily about profit, is more likely to forget, fail to understand, or neglect the human factors. As such, the 'humanity' inherent from the employees gets washed away with each layer of transversal.

Hence, the bigger, the more likely a company is to be psycopathic. Publicly owned corporations are even worse, as their 'leaders' are nothing but an aggregate of individuals united only by raw greed.

I take it you've seen 'The Corporation'. ;)

--

Steve
srbarbour's picture
srbarbour
Status: Silver Member (Offline)
Joined: Aug 23 2008
Posts: 148
Reply to farmers
[quote]sorry to disagree with you steve.[/quote] You never have to be sorry about disagreeing!

Now, being sorry about being wrong... ;) [quote]jefferson's idea was for a country of small farmers. [/quote] To be frank, Jefferson probably never envisioned the technological revolution of these last 250 or so years. Indeed, it is clear he didn't truly comprehend the power of the industrial revolution taking place during his own life. He was a smart guy, yes. But, the effect of future technology upon society was well outside his area of expertise. [quote]1.6% of our population is engaged in farming currently. this is only possible with huge inputs of oil.[/quote] Try ~0.35% .

Farming is quite possible without large inputs of oil. It is difficult to get our current yields without fertilization though. But, there are a number of practices that have fallen out of favor (because of cheap fertilizer) that can maintain large yields.

I'd also point out the fertilizer itself, is not dependent on oil (though its largely inefficient use is aided by cheap oil significantly). Nor, for that matter, is there any reason that farming equipment need be tied to a single energy source.

So to say that modern farming is dependent on oil is incorrect. It is more accurate to say that modern farming (at least in the short run) will be much more difficult without oil.

If you want the closest existing visage of farming post oil, the best example is probably organic farming. [quote]which is at peak production right now. [/quote] History has made it quite clear, that we won't know the oil peak until after it happens. Yes, the signs of a peak are here right now, but that doesn't mean it is right now.

So, while it is fair to suspect. Be quite careful about making such claims until the evidence exists to support it. [quote]friend of mine is in food security and they ran a computer model to see what would happen if there was a few cows discovered with mad cow disease in one feedlot in colorado. within 3 months the entire social fabric of this country would have become unraveled. of course it was a computer model and subject to human error. but close enough to think about.[/quote] Fear! Fear! Fear!

Most models like that are so flawed they deserve only to be laughed at.

--

Steve
EndGamePlayer's picture
EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
mortgage now?
Hi robk-

That's a good question. The rule of "buy low - sell high" may not apply so much now as does - "buy to ride out what's a head". IF you take a plunge - go for a place that can provide both the buy-low/sell high factor and offer you security in energy conservation, food production and is comfortable - even in the worst of economies.

We bought a farm last year to ride out what we saw as an upcoming big economic shift due to peak oil . . and we haven't even seen the beginning of peak oil - or the even the perception of peak oil (yet). But we also looked seriously at lake places and other waterfront since it tends to hold value and has a certain lifestyle value. Buying a foreclosed home in a depressed neighborhood may not look like the place you want to be if this turns to economic desperation.

Then there's another way to look at it. You will be locking into a debt and that debt may not increase for the term of the loan while your wages and other expenses (like rent) may increase exponentially over that 30 years.

There are still reasons to buy and I'm sure someone can think of a million reasons Not to buy now so I'll let them come up with that side of the coin. . . EndGamePlayer

qxcvr's picture
qxcvr
Status: Member (Offline)
Joined: Mar 16 2008
Posts: 10
Mortgage
I have given this a lot of thought. My biggest thought is that if you want to know "what happens to X when economies tank", simply look at history. "What happened to people who were deep in debt with high payments when their economy tanked?" Well most of them lost their high paying jobs and ended up defaulting on their home loans (this is happehing now). Don't misunderstand my meaning behind this though. I am NOT saying that buying a property (especially a place you will live in) is a bad idea though. The reason is because renters are going to be hit hard as well. The position you want to be in would be to OWN your home OUTRIGHT with NO DEBT. This way, even if you loose your job and end up flipping burgers all you have to do is pay your taxes and you are good. Don't have $250,000 just lying around? No worry... buy a house that only costs 80,000. Get a 15 year mortgage so you don't pay so much interest and use the extra money you save to fix the place up. Maybe even install a safe in the basement to store some silver coins. Don't be afraid to buy your house. Get a great deal on a smaller, older place that is close to where you work/shop and pay it off as soon as you can. That is true security.
Reuben Bailey's picture
Reuben Bailey
Status: Silver Member (Offline)
Joined: Mar 17 2008
Posts: 138
Re: Dollar Crisis - What are the odds?

Mind the large bump.

I am not sure if Steve is still on the
boards or not, but this is a response to his last post in a
conversation that we were having. It has been awhile, but I still
want to continue this if he is still around.

srbarbour wrote:

Quote:

That automation will only continue if
we continue to have CHEAP ENERGY.

Nope, automation would continue even if
cheap energy was gone. There are several problems in the opposition
here:

1: Humans are monstrous energy consumers.
Farming with human labor is horribly energy inefficient. So
inefficient in fact, that the total yields (when using animals bred
for generations as assistance) that for most of history we could
barely keep our heads above water, with 80-90% of the
population farming. Now, if that doesn't sound bad yet, recall that
those farmers had a much poorer diet as well. Consider that if we
Americans reduced our meat consumption, we could easily double or
quintuple our food supply.

I would suggest that calling human
labor energy inefficient is a totally wrong headed. I personally
think that using as little human energy in the production of things
as we do is a waste of non-human energy. Put another way: if it is
such a waste to use human energy to grow our food, what about all of
the energy available from people who have no meaningful work, whether
they have a job or not? This to me is a far greater waste of human
energy than farming is. This is not to say that there are not
appropriate uses for mechanical equipment in farming, but that the
current scale of it is far too big.

srbarbour wrote:

2:
Increasing automation further is mostly a matter of adding
'intelligence' (and I use that word very loosely here) to
existing machines so that they operate independently of the human.
There are of course, several mechanical additions that need to be
taken care of as well, but even with those we aren't talking any
major changes of energy efficiency.

In otherwords, automation
would continue to increase, even if the amount of energy farm
equipment was allowed to consume stayed static.

The practicality of this is
questionable, in my mind. While it may be possible, that does not
mean that it makes sense.

srbarbour wrote:

3: More than
enough Cellulosic ethanol can be produced from corn stalks,
agricultural waste, and lands left fallow to power every farming
machine on this green Earth. So while, yes, Cellulosic ethanol might
not be in sufficient quantity to displace our entire fuel economy,
farmers will continue to have cheap enough energy
for the foreseable future.

To sum it all up. Automation in
farming will continue to increase.

Here you are ignoring the amount of
energy that it takes to run the huge equipment used in agribusiness
these days. You are also leaving out the efficiency of producing
fuel out of corn based ethanol – it is at best a break-even
proposition. Also, if you use the agricultural “waste”, as you
call it, you remove the nutrients in those “wastes” from the
land. If they are taken away, they must be replaced, which means
more inputs of fertilizer.

srbarbour wrote:

Quote:

Having grown up on a small family farm,
I would argue that many of our cultural problems stem from the loss
of understanding by the general population of where our food comes
from and the natural cycles of life and change.

And, having read a history book, I'd
say you are completely and utterly wrong. Our current problems are
just one more repeat of the exact same ones humanity has faced for
the last 10,000 years of civilization (albeit, at a much larger
scale). It is, sadly, innate in our species. Did I say species? Sorry
thats still too limited, many other species show the same
problematic roots in their behavior too.

To put it simply, I
doubt there is a single life form on this earth, that if given the
chance, wouldn't eat and obliterate its environment straight into
oblivion. In fact, we humans are quite remarkable in that we can even
grasp the danger of what we are doing and have taken 'some'
(insufficient) measures to control ourselves.

I suppose that I misspoke, then. Let
me amend that comment to read that our problems are exacerbated by
being so removed from the natural rhythm of life.

In short, I guess that my argument is
that the values that are driving agribusiness these days are clouded,
and the definitions used for such terms as profit and efficiency are
out of tune with the human side of things.

All the best,

Reuben

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