Which of these economic possibilities is more likely

[BigDave]

Total Collapse into a 1929-1940 type depression or Extreme Hyperinflation(like early 20's Weimar Germany) due to overprinting of money? I'm thinking Depression first but Hyperinflation could follow that since the Feds love printing more and more money

[MV/Liberace!]

i have no idea what's going to happen.  what i do know, however, is that we are on a path to the inevitable: economic ruin.  it doesn't matter who wins in november.  romney will merely represent a delay of the inevitable.  however, i think that delay could be more harmful than the fully lubed plunge obama represents.  we need the plunge in order to separate the wheat from the chaff and reboot.


bring on the road warrior.  i have enough guns and ammo to survive.

[Morgus]

bring on the road warrior.  i have enough guns and ammo to survive.

yep the 'mad max scenario' seems the most likely outcome...   

[onan]

Oh, that isn't Australia, it is Israel. Now it all makes sense.

I dunno what will happen in regards to our economic future. I don't think we are at the brink of anarchy. But who knows. The smoke and mirrors is far too nebulous to grasp hold of any accurate predictor. And the talking heads just want us to buy from their advertisers or buy their latest book.

[Juan]

I ordered a nice, quiet pellet gun for shooting squirrels in an urban environment today.  I'm slowly adding ammunition for large calibers.   I expect very hard times, and as a geezer, I fear they will last the rest of my life.  Especially since the EPA has already banned my asthma medicine.

[Sardondi]

yep the 'mad max scenario' seems the most likely outcome...   

There's a perverse part of me which thinks the Mad Max societal collapse scenario wouldn't last all that long. Of course maybe I'm confusing my terms since by definition the Mad Max case presumes such a long period of lawlessness that society has literally collapsed in on itself.

What I envision is more like a brush fire that sweeps over the terrain, killing all the weeds and trash growth. I envision the possibility of a few years where government cannot provide the services it has heretofore, and that people more or less break out in craziness. My view is that the urban areas are graveyards-in-waiting, and the suburbs to a lesser degree. Rural areas, with a lot of land per person, is where life will be supportable. I'm thinking people will die off fairly quickly in cities, while many will take to the road looking for space and security.

Those cold-blooded enough to take by the application of extreme force whatever fuel supplies they encounter might survive with enough mobility to travel several hundred miles if they're lucky and nothing breaks down. But injuries, sickness, repairs to equipment and dwindling fuel supplies will be the big limitation on people  being able to escape more than 100 miles or so from major population centers. But 100 miles won't be enough for most of the Northeast and Coastal West. Those folks in the deserted West, Plains and Southern States will probably have a better chance of survival, but they'll have to be cold and hard too, and probably will have to choose to kill on sight a good many emigres from the cities if they want to keep populations down.

Jeez, this sounds bleak. Like The Road. But I'm thinking it won't be that bad, although there would almost certainly have to be a slaughter of formerly tough urban gangsters by suburbanites and rural types with long guns and families to protect. I just do not see a scenario in which the cities don't turn into killing fields. 

[Pragmier]

Here's some good economic news. While not having a big impact at the pump yet, the US oil industry is growing. These stories are bullish about our energy future with some caveats (mostly political).

US may soon become world's top oil producer - Bloomberg/AP

Making Sense of the U.S. Oil Boom - WSJ

and for those with too much time on their hands, Citi's report
"Energy 2020: North America, the New Middle East?" comes in at 80+ pages.

I found this on page 52:

[Obama] has subsequently been more open in encouraging oil development and has come a long way from his anti oil-industry
rhetoric following the Macondo well blowout disaster of April 2010. But the fact remains that active oil rig counts and domestic
oil production have increased nearly every month President Obama has been in office; and behind the scenes policy actions
(which generally look supportive for hydrocarbon extraction and development) might tell us more about the direction of US energy
growth than campaign rhetoric.


... so cheer up folks, there's hope yet.

[PB the Deplorable]

It's not easy engineering simultaneous inflation (food, energy, anything imported, etc) and deflation (salaries and assets like farms and houses now, stocks and bonds later, etc), but that's what we've got.  Both will get very much worse.

I say we renege on all debt and govt promises (entitlements and pensions) now, eliminate most of the govt agencies and cut most of the rest - lay off those affected bureaucrats - pay out SS, Med and Govt pensions using means testing so people wont starve, and move on. 

How many kids does the Dept of Education educate?  How much energy does the Dept of Energy produce?  Why is Dept of Veteram Affairs not part of the Pentagon?  Why is HHS and HUD national instead of local - any reundencies there?  Why do we still need Fed Depts of Labor, Agriculture, Transportation - the few essentials they provide can be wrapped up into smaller agencies?

Or we could do nothing different and have it done later the hard way for us, but it will happen either way.

[Ruteger]

I know exactly what to expect. At some point in the near future some cataclysmic event will occur that enables a one-world political and economic system to rule.
The Bible says a man will have to work an entire day for a loaf of bread and that everyone will need to take a "mark" on their body to buy or sell
"He also forced everyone, small and great, rich and       poor, free and slave, to receive a mark on his right hand or on his       forehead." Revelation 13:16

[Thomas Firepickle]

Shit, that scenario has been happening for like what, 2000years? Oh wait, I mean even before the carpenter turned prophet turned "son of God"..... Man I've got to read those Dead Sea scrolls again and make sure that it really was Jesus who said all of this and not his brother.

[Pragmier]

The piece from Australian TV is a couple years old, but worth watching in case anyone missed it. A real eye-opener touching on one aspect of China's vaunted growth.


China's Ghost Cities and Malls

A more recent article can be found at BBC.

[interposemission]

I don't think the hyperinflation scenario is at all likely. To get to that place, you'd need really irresponsible central banks. I vote for an extended depression, but I'm hoping that we are seeing the beginnings of a real recovery. I kinda doubt things will get much worse, just stay depressed longer.

[Pragmier]

This is going to take a long time to reset.

The ugly truth is due to stagnant wages, American consumers have been driving the economy on credit for years. And now that credit is dried up, so it's belt-tightening times.

[PB the Deplorable]

I don't think the hyperinflation scenario is at all likely. To get to that place, you'd need really irresponsible central banks. I vote for an extended depression, but I'm hoping that we are seeing the beginnings of a real recovery. I kinda doubt things will get much worse, just stay depressed longer.

$1.5 Trilion annual Federal deficit.  The Fed 'monetizing' the debt (creating money to buy US Bonds held by banks and others), and created money to prop up companies like GM and AIG.  All this new money is still in circulation, mostly held by banks and Fortune 500 companies.

I'm not sure how much more irresponsible the Fed and the US Govt could possibly be than to issue all this new debt, then have the Fed create money to buy it back.

The banks create money when it is lended out - it's called 'fractal banking' - the more economic activiy, the more the banks lend out and thus the more money they create.  The reason we don't have massive inflation now due to the Fed's irresponsibility is because the banks aren't lending out all that much in net new loans. 

[interposemission]

Paperboy,

Yes, you are right about why hyperinflation hasn't happened yet. Firms are sitting on the cash! That is not a hyperinflationary scenario. But what we'd need to believe for hyperinflation to be imminent is that the Fed won't rapidly withdraw funds when inflation expectations pick up. The central bank needs to facilitate in that way for hyperinflation to occur. I think it's very unlikely that all of the key actors would believe the Fed would sit on its hands as we picked up speed toward hyperinflation.

[Juan]

I see businesses that were hiring two years ago cutting staff now.

[PB the Deplorable]

Paperboy,

Yes, you are right about why hyperinflation hasn't happened yet. Firms are sitting on the cash! That is not a hyperinflationary scenario. But what we'd need to believe for hyperinflation to be imminent is that the Fed won't rapidly withdraw funds when inflation expectations pick up. The central bank needs to facilitate in that way for hyperinflation to occur. I think it's very unlikely that all of the key actors would believe the Fed would sit on its hands as we picked up speed toward hyperinflation.

I really hope so.  I've wondered how would that happen, what they could do mechanically to soak up all that money they created recently.   The National Debt is over $16 Trillion, less whatever the Feds bought back with new money created.  Some of the rest is owned by SS and Medicare (that's where their 'surplusses' went - I thnk it's around $5 T). 

Would the Fed pull back the excess cash by selling those Bonds back out on the market?  Do they have other tools to soak up cash?

Would we end up with all those Bonds out in the market?   What effect on inflation does the existance of over $10 Trillion in Fed Bonds have, if any ($16-5 held by SS)?   If interest rates on all that go up, is that inflationary?  Should we have confidence in anyone in DC at this point?

[interposemission]

Yup, the Fed would sell them on the open market.

[Pragmier]

Should we have confidence in anyone in DC at this point?

I submit the fiscal cliff negotiations for the jury.