What is happening to our economy...there is no name for it.

[CoffeeCat]

I'm not sure how to define what is happening to our economy, because such events have never happened
before. I don't have a Ph.D. in economics, but I do know what I see...

It is clear that the entire demand curve for our collective economy was in a big, bloated UNSUSTAINABLE state
for a few decades. Our economy swelled--fed a fatty diet of rampant credit-card spending, home-equity cash, and
rampant consumerism that was encouraged by our own government.

Now--the financial tributaries that feed into our economy have all but dried. Most people are not wildly spending.
They're saving and paying off credit cards. Home-equity loans are practically nonexistent; and rampant McMansion
buying is a thing of the past--due to banks putting the kabash on all creative financing.

Our entire economy is 70 percent consumer spending. That works well--when people are spending everything they make
and even MORE THAN THEY HAVE--as they use credit cards and home-equity to purchase things with dollars that
surpass their annual salary.

We propped up our aggregate economy on wild behavior. Neighborhoods, communities, suburbs and cities were born
and thrived due to rampant spending. Now we're seeing--that this spending level is unsustainable in the long term.
When that spending dies--so does the economic foundations those neighborhoods, communities, suburbs and cities.

In addition to decreased spending, our economic hardship is compounded by growing unemployment and other challenges.
Those who haven't lost their jobs are terrified--and are hoarding their pennies like squirrels gathering nuts for a
harsh winter. Most big banks are insolvent and smaller banks fail every week.

This is a complete re-set of our economy. We're just now into the first wave of the collapse. These waves will keep
coming--and crashing on our shores.

This is going to be worse than a Depression--because our standard of living is so bloated. We didn't have
suburbs during the Depression--where people traveled 40 miles to work. We didn't have so many living in big
houses. We didn't have massive credit-card and student-loan debt. We didn't have cable bills, health-club memberships,
three car payments on $30,000 cars, cell-phone bills, restaurant-grade grills on the back porch, a broken healthcare
system and gas-guzzling cars.

In 1930, people knew how to sew, use a hammer, can food and grow food. Neighbors knew each other and helped each other. Now, we run
to the Yellow Pages if we get a hang nail.

What is happening to our economy, is a yet-to-be-named paradigm shift. It's a shift away from our current reality--because
we will never return to a time when one city block had three Starbuck's, four nail salons, 2 big-box retailers, several clothing
stores, two huge home-improvement stores, three strip malls and two video-rental stores.

Our economy won't be able to sustain this rampant consumerism. More importantly---we won't WANT to support
this nonsense again. People will make fun of us, decades from now---and joke about the giant malls and shops that littered
our neighborhoods.

Our grandchildren will look at us and ask, "What were you thinking?".

Right now...it's all collapsing. The paradigm shift will arrive--but only after we're standing in the rubble and realizing that we have
no choice but to rebuild--because all that we knew is gone and dead.

But, the collapse has just begun.

So, fasten those seat belts and get ready for the ride...because we are in uncharted waters.

This isn't a Depression, as we understand that term. Certainly, this is not a recession!

What is happening now--has yet to be named because it is unlike anything our country has experienced.

[Uben]

1. Technically it's called a.......

.....flustercuck!

[xiamiam]

2. well done...nt

[The_Casual_Observer]

3. We moved from an economy based on manufacturing to one based on finance

There is no viable model for that, it was just a matter of time.

[Hello_Kitty]

4. Excellent post and I think you are right about the paradigm shift.

It's happening all around us. People asking themselves "do I really need all this STUFF?" The answer most are arriving at is an emphatic NO.

[Mr. Hyde]

5. It's a deflationary spiral or, as Ross Perot called it, that "Giant Sucking Sound"

But we told him, didn't we?

[GliderGuider]

6. Of course there's a name for it.

It's called a collapse.

The main reason we're not calling it that (yet) is that the true nature of what is waiting for us in the very near future is still only visible to a very few. Most of us view our situation as though we were peeking into a tiny keyhole, through which only a small section of the vast room beyond comes into view. Only a small number of people have the necessary understanding that goes beyond simple economics to include ecology, energy analysis, history, anthropology, biology, politics and maybe a bit of evolutionary psychology. Fortunately, just a smattering of knowledge in those other fields will suffice, so long as one has the inclination to weave the disparate threads into a full picture.

Focusing on just one field will not reveal our full situation (though ecology will come closer than most). I know people in the alternative energy business, for instance, who simply cannot believe that the financial crisis has dashed their dreams of a solar-powered civilization. Most of us prefer to believe that a few simple reforms affecting our chosen field of interest is all that is required. Most of us are tragically wrong.

We are standing on the threshold of the collapse of this version of human civilization. Recognizing that fact radically changes your assessment of the oughts and shoulds that might be useful in addressing any aspect of the crisis. And it completely changes your ideas about what approach might be useful in addressing the whole thundering avalanche.

[DemReadingDU]

18. alternative energy source

I'm surmising that after the collapse that electricity may not be reliable, and when it is reliable, it will be very expensive. Same with natural gas that we use to heat out house.

What do you recommend to generate electricity to light our house and use computers, and what to heat our homes? We have a small gasoline powered generator and a kerosene heater, but what good will that be if there is no gasoline nor kerosene?

I can't convince spouse that solar panels are worth the expense, because he believes there wouldn't be any major outages forthcoming unless there is a bad weather storm.

[GliderGuider]

21. Wood and candles.

I'm seriously expecting technology and energy sources to crash hard within 10 years and stay down. The kind of preparations you're thinking about are all good as far as they go, but they're short-term in comparison, things that will smooth out a couple of years of dislocations.

My recommendations for preparations all revolve around changes in attitude. We need to understand that what humans have experienced for the last 500 years is not a birthright but a singularity. We need to remember that people are fully capable of feeling joy even in the absence of computers, flat panel TVs and modern medicine. We need to come to terms with the idea that death, like all change, is inevitable. And we need to accept that we share the planet with other life that is as important as we are.

This approach sounds pretty esoteric in comparison to wind turbines and solar panels. However, in the end those are just more shiny, ephemeral baubles of the intellect when what we need is the solid rock of the human spirit -- the spirit that has been with us since we became human hundreds of millenia ago.

[DemReadingDU]

25. ah yes, I do see this coming

It will be difficult for many, who have become accustomed to so much. But is all that important? In the end, you can't take it with you. Better to form strong human bonds now, nurture and care for each other, because this is what are going to need in the years to come.

Thanks for your thoughts.

[clixtox]

32. What! No flat screen TVs...

You have got to be kidding!

No flat screens for the obscenely rich?

This is really going to be a complete disaster then, for sure...

It is going to be telling stories around the fire and acoustic hootenannies, sort of like the Boy Scouts, but every night!

"Grapes of Wrath" coast to coast!

[truedelphi]

26. Wish I could recommend your post -

And make it required reading for everyone from Obama on down.

[tama]

30. Collapse

- also: systemic crisis, end of capitalism (or beginning of the end), turning point in human civilization and population... or, perhaps, awakening from an aion of nightmere... chance and responsibility to build paradise on Earth...

[Blue Meany]

44. It is sometimes called "regression"

This kind of collapse usually occurs because of environmental overshoot (and we have certainly done that), so that there is not enough material surplus to support more complex economies and political structures covering large regions. The economy and the polity become localized until the environment and economy can recover.

[IrateCitizen]

43. Calculators or slide rules?

John Michael Greer has broached this subject many times in The Archdruid Report (often via Energy Bulletin).

One of the biggest hurdles we face is ratcheting back toward easily sustainable technologies. Greer highlights the differences between a calculator and a slide rule. Also, since I'm currently teaching HS mathematics, the differences between these two levels of technology has become increasingly and painfully apparent.

Basically, Greer's argument goes along these lines.... Take a calculator and slide rule and bury them in the ground for about 1000 years. Then, assume that someone from a completely different time than ours uncovers them both. Which would they be able to figure out, and -- more importantly -- replicate?

A calculator is the ultimate black box. You punch numbers in and it spits numbers out. A basic sense of numeracy is not needed to operate one (based on the way that many of my students use them), but a highly sophisticated level of technology is required to actually construct one. If someone uncovered a calculator in the year 3009, is it even likely that they would be able to distinguish the calculator from a TV remote or Blackberry? Probably not. And they sure as hell wouldn't be able to easily replicate it, especially in a world of lower-level technology.

Operating a slide rule, OTOH, would be possible for anyone with a reasonable grasp of basic mathematics. Furthermore, all of the parts of a slide rule are there for you to see -- so once someone in 3009 figured out how to use it, they would probably be able to replicate it without a significant degree of trouble.

In our "modern" world, we've discarded much more durable technologies like the slide rule in favor of much more fragile ones like the computer. Adjusting to post-collapse reality, whatever it looks like, will likely necessitate a re-familiarization with these "durable technolgies". Without hydraulic forklifts we'll have to reacquaint ourselves with pullies, gears, levers and other simple machines. Without mechanized grain harvesters we'll learn how to use scythes again. Water-driven mills will replace engine-driven ones. And so forth. As much as I'd like to think that computers will remain plentiful, I'm not optimistic in that regard either (given the intensive energy and specialization to actually construct them).

[ayeshahaqqiqa]

7. I knew when we shipped our manufacturing overseas

and went to a consumer-driven economy we were in trouble. Sad thing is thrifty folks like me, who STILL sew, raise and can their own food, and live within their means are effected as much as those who maxed out credit cards and who have three loans on their house.

[we can do it]

29. I Hear Ya Sister!

But we are better off, still. We can take care of ourselves.....

[tama]

31. For a warrior,

sufi or other, there is no true joy without deep sorrow in the Heart. In this sadnes and fear (which can be overcome by facing it like a warrior of Spirit) it gives great joy that there are people like you who have skills, experience and wisdom to share with their fellow beings. :)

[notesdev]

33. Not affected as much

You (and I) don't have a radical lifestyle change coming as a result. The consumer-borrower types are the ones in for a real shock. I predict we will see many, many suicides as large numbers of people find they cannot swallow their pride enough to live humbly.

The sad thing is not that it affects us, but that every proposal on the table has us paying the debts of the spendthrifts and the greedy. Why should I, who own no home, be taxed so that others may keep homes they didn't deserve and couldn't afford in the first place?

[northernlights]

39. same here

I remember back in the 80s when my boss was mouthing off about "outsourcing." When I asked her "but who will be able to buy the products?" she started screaming at me.

She went on to be an exec VP at an well-known analyst, pushing hard for all the shit that has caused this crash.

I went on to this old farmhouse to learn to grow food and medicine. I've also learned more about what I need -- for one thing to live in a place that isn't so cold in winter. I already pretty much knew from my hard times in the 70s what I don't need, and am more than ready to move back to that level of frugality.

My next step is to take advantage of this current "green shoots" mentality and sell this old farmhouse, downsize to a shack or cabin with more land in a locale with a more moderate climate, and start over.

I can grow my own fruits, veggies, eggs. I can put up rudimentary fencing. I still want to learn to do honey, but know where to go to learn those things now. I also plan next to learn to cook with the sun.

If everything totally tumbles down, I'll still even have some transportation with my arabian filly who stays fat on 2 acres of grass.

[Joanne98]

8. There is a name for it. It's called THREE DECADES OF GREED!

Started by Ronald Reagan, may he rot in Hell!

[CountAllVotes]

23. you nailed it

the trickle down finally trickled all the way down. Now everyone can feel it!

:dem: :kick:

[ladjf]

9. It's like a fire going out. nt

[burythehatchet]

10. You may not have a PhD, but you nailed it. The bubble needs new money

pumped into it to remain inflated. Pump done broke. Now the Great Deleveraging of the Early 21st Century (as it will be known in the history books). All the air (debt) needs to flow out of the bubble and if we can make it to the other side, we have to start again.

The current economic managers simply are unable to either understand or believe these facts.

[Raster]

11. The current economic managers are UNWILLING to disseminate these facts.

How do you tell a civilization that it's obsolete?

[burythehatchet]

12. especially when you engineered its' demise

[dgibby]

13. Excellent post!

I have a question: What happens to one's VA, social security pension when the economy does collapse?

[CoffeeCat]

14. People may think...

...that I'm a paranoid, nervous-Nellie--but I question the stability of most institutions right now.

We simply don't know what is going to collapse or implode--but gee, if it's tied to our government, isn't
there a decent chance that those long-relied-upon institutions might not work as planned?

I wonder about the FDIC. When Washington Mutual collapsed, buried in EVERY article about the situation,
was a few sentences that just happened to mention that the "FDIC's resources were stretched" due to
this collapse. Ummmm...WaMu is one bank. And the FDIC's resources were...uh, "stretched"?

It's at least something to think about.

Banks are failing left and right. They fail quietly, so we don't feel the full seriousness of so many failing.
Also, the large banks are supposedly insolvent. Another bit of info that doesn't look good.

I believe that anyone who feels that ANYTHING is a sure thing, these days, is living in a fool's paradise.

If unemployment rises, will states have enough in their all-ready stressed coffers to pay unemployment to
everyone who qualifies? Will we get tax-fund checks?

These are all questions we should be asking--as we contemplate how to protect ourselves.

[dgibby]

15. I agree.

You might want to check out Catherine Austin Fitts blog on Solari. Sorry I don't have a link, but you can Google her name and it will come up.

I have my money in a credit union that is rock solid, but if the economy collapses and the dollar is worthless, then what? My only income is from my VA and SS pensions, so I am very worried that I won't have an income if the worst happens (which I believe it will).

My sister and her husband are on railroad ret and SS, and their RR stocks have taken a beating. I begged him to move into a safer investment, but he wouldn't do it. So far, the stocks have lost half their value. Grim!

[DemReadingDU]

17. I hear you. I'm a paranoid, nervous-Nellie too

Spouse says I am obsessed.

But I have some extra cash, food and household items preparing for the collapse, whenever it comes. Probably sooner rather than later.

Ohio already has run out of unemployment and has gone to the federal government for a loan. So have these states Michigan, New York, Indiana, South Carolina.

My opinion is that the FDIC will be able to bailout a few more banks. But I'm not so sure what will happen after the collapse. Spouse says the government will just have to print money to guarantee the savings we have in the banks.

Some of my family and friends are still clueless. Buying cars, taking vacations/cruises to faraway countries, remodeling their houses, buying the latest big screen tvs, cell phones, and toys for the kids. They still have good jobs, and a warm place to live. I suppose when something affects them personally, they will get it. By then, it will probably be too late.

[CountAllVotes]

24. no tax refund

I was sent a letter from saying that there was no money in the budget for my property tax refund this year!

:mad:

:kick:

[yy4me]

42. If you are owed a refund and there is no money, I would advise

you to petition for a credit against next years tax. One way or another, you are due monies and should not let them use their excuse. A credit is better than nothing. It would be easy for them to put a notation on your bill to adjust the next one.

[DeschutesRiver]

34. You are not a nervous Nellie

Things are precarious right now in a way that I have never seen in my 50+ years. Being aware of what is going on and concerned about were we are headed is reasonable - a head in the sand approach will make surviving the next 5 years or even the next decade problematic to say the least.

Being prudent right now means getting ready to make the best of the worst that is coming and is essential. Things are going to crack up a bit; what you could rely on yesterday may not even exist tomorrow, so why not spin out the various possibilities and take whatever steps you can to make day to day survival easier to the extent possible? The people who do so can survive, and some will thrive; others that keep demanding help in a way no longer possible will suffer. It appears to be unthinkable to some that our "way of life" is evolving into another way of daily life, but putting their fingers in their ears while screaming lalalalala doesn't change anything.

We are by no means the first group of humans to find ourselves in dire straights - a quick read of history shows that this kind of thing, ie the wheels coming off of a a system that we refuse to believe could change, is a common place event. How we handle it is what counts. Trying to prevent the inevitable by continuing to live the same way we always did is not going to cut it.

Thing I find the most unsettling is that no matter how many scenerios I run re how this will progress, I can't find one that is more likely than the others. That makes specific planning tough. So for my family's protection, I am hitting the basics - food, heat, shelter, no debt, frugal measures (making stuff from scratch, repairing things outselves, etc) and having a bit of cash tucked away. And then forgetting about it and trying to make each day count with the time I have to spend with loved ones.

[GoesTo11]

16. But what about this?

In this country, we have all sorts of infrastructure that is really nice. Ok, some of the bridges and roads need repair, but there is a lot here. We have the machines to fix that stuff, we have educated people, we have cities, buses, schools, airports, hospitals, pharmaceutical factories all that. We have manufacturing plants, we have tools, we have kitchens and farms, computers and lines of all sorts. We have the technology and resources to make more sustainable energy and everything else. Basically, there is no physical reason we can't just produce more than enough to give everyone a high quality of life. But instead, we have people unable to find work, we have people in need and not getting, we have a general crappiness in our daily lives. And we have no societal way to get from here to there. The free market was supposed to do it, but it didn't. Benevolent dictatorships don't work either. What we need is some good organization and maybe some new organizing principles. Hey, those are free. It doesn't have to be a disaster. (But it probably will be).

[burythehatchet]

19. reduce the power of the corporation (through regulation and oversight)

and all these things will come to pass.

[eridani]

47. Right. We still have plenty of intellectual and physical capital

We need to use it to figure out reasonably comfortable lives with far less throughput of energy and raw materials.

[Danascot]

20. Related rant here:

http://market-ticker.org/archives/809-On-Our-Fraudulent-Economy.html

[upi402]

22. resulted from believing all that pro-NAFTA bullshit

that Clinton/Gore spewed. EXTRA! did a good piece where they timed the anti-NAFTA pundits vs. the pro-NAFTA pundits. It was hugely slanted to NAFTA touts. And when there was an anti-NAFTA pundit, he or she was middle of the road or not exactly eloquent. They'd put a "man on the street" interview as balance to all the "free Traitors" touting NAFTA and GATT.

[snot]

27. I'd call it an incipient DEPRESSION for the many resulting from LOOTING by the few.

[eridani]

28. Looking on the brighter side--

--we still have our physical and human capital, which is pretty substantial. If your house kept you dry and warm when you could sell it for $500K, it does the same even if you can only sell it for $250K. We still have a lot of gardening and craft-type skills as well as quite a bit of advanced technical info.

[scholarsOrAcademics]

35. poetic

Is business wisdom superior to government wisdom?
When one can earn double in the private sector the government employees have to be devoted to government or drones, with little middle ground; it seems to me.
With the IMF restructuring other countries' economies, the dominant wisdom is economic welfare, interpreted as business acumen; it seems to me.
What portion of the GNP could be subtracted that is not strictly a 'consumer product'? Donations to Foundations, donations to charities, donations to religious institutions, payments to lawyers, interest payments, the negative hospital expenses (cancer), cancer research (aside from the justifying cover of side benefits, . . .

[leftofthedial]

36. the technical term is

"dying."

[JohnWxy]

37. NO NAME FOR IT? .. IT'S THE REPUBLICAN DEREGULATION DYSTOPIA and we've seen it before

it was called the Great Depression brought on by an economy which couldn't be supported by too many people sharing too little of the wealth. The companies couldn't sell products to people who didnt' have enough money to buy those products. It was tripped off by excessive speculation in the stockmarket based on the use of way too much leverage (borrowing money to bet on stocks).

This time around, it was tripped off by banks using too much leverage buying mortgages made by predatory lenders who lied on the loan apps so they could sell them to Wall Street banks. (when in 2004, 50 states Attorey's General tried to reign in predatory lenders the Bush administration STOPPED THEM using a 100 year old law. Had these States Attorneys General NOT been stopped perhaps there would not have been all those fraudulent untenable loans made.)

Wall street banks WANTED high rate loans (sub-prime loans) to sell to institutional investors who bet on these high risk loans (bundled into CDOs - Collateralized Debt Obligations) that were sold like securities. Why did institutional investors invest in high risk securities they were not supposed to? Because the banks sold them Credit Default Swaps (CDSs) that were supposed to protect them from loss of their investment due to foreclosures. In other words the banks were saying they could make risky investments without any risk!!!

The only thing, thanks to PHil Gramm and the Republican philosophy that "the market will police itself" - trade in CDSs was completely UNREGULATED. So when defaults rose and investors (including Wall Street banks) called in their CDSs (many from AIG) they found out that the institutions who sold them the CDSs didn't keep enough in reserve to cover their liabilities (they too were using too much leverage). And so the banking system all falls down (well, it would have, if the Government - John and Jane taxpayer - caught them before they hit ground).

The name for this Great Depression II (we would be in one as bad as the first one if we didn't have the FDIC, unemployment insurance, the Federal REServe in place this time around) is THe Republican Deregulation Dystopia.

And now it's up to Obama and the Democrats to clean up the devastation wrought by this deregulation disaster.

[roamer65]

38. It's the end of the American Empire.

Rome, Britain...all empires rise and fall.

[ixion]

40. exactly... that is rule number one

What do a dominant species (like humans) and empires (like the US,Rome,Britain) have in common? They both rise to a peak and decline and are eventually replaced. So it goes.

[upi402]

41. corporatism, thugism, Republigasm

All Hail the Uniparty

[snappyturtle]

45. I think you have it exactly right. Way too late to K&R so I'll just give a

:kick:

[vicnapier]

46. A Jobless Recovery Turns into a Jobless Economy

I believe that we are on the verge of dramatic changes in the way we think of jobs and make a living. There will be a recovery from the Great Recession, but the economy that emerges will be much different from the one we had in the past. I have started building a web page to help people understand some of the economic forces that are shaping our future. I don't pretend to have all the answers, but maybe I can help focus the discussion in a way that will help people prepare for the economy and job market that is now evolving. Traditional jobs are going away and we all need to think of new ways to make a living.

Please come by my website, www.JoblessEconomy.net, have a look around and tell me what you think.

Vic Napier
www.vicnapier.com

[TomCADem]

48. DOL Reporting The Largest Drop In Prices Since 1955

The conventional wisdom that tends to be repeated is that Obama's stimulus programs will inevitably lead to immediate inflation, and the financial gurus have been pushing inflation indexed bonds as a wise investment. However, I am worried about the relatively unreported evidence of deflation. Today, the Department of Labor is reporting the largest drop in prices since 1955, yet the Wall Street Journal is dismissing this evidence as not a big deal.

I am not an economics experts, but the largest drop in prices since 1955 sounds like a big deal to me. For many of us, this is our first extended bout with deflation. Someone talk me down please.

[clarence swinney]

49. GREAT POST

IS YOUR NAME KRUGMAN?

OK! ARE YOU KEVIN PHILLIPS?

Kevin 2006 book American Theocracy
has excellent chapter on financial doomsday is here.

debt debt debt = major culprit

live far beyond your income=big problem

big bomb was(my analysis)
A. Fed cut 6.5% Interest Rate to 1% for Banks.
B. Fed increased Total Money Supply by 4000B from 2000 to 2006 or twice as much as in prior ten years
C.Banks rushed to Borrow
D.Banks rushed to Loan.
E. Developers rushed to build at $100 + per square foot. Big profits.$50 in 2000.
F.Wall Street rushed banks to send mortgages in bundles to sell as Securities to unsuspecting buyers.
G. Refinancing Boom due to increase in values.

OUCH--REAL ESTATE HAS ALWAYS APPRECIATED IN VALUE. ALWAYS. ALWAYS.

NIGHTMARE THIS CANNOT BE TRUE.

$400,000 HOME WENT TO $700,000 THEN--OUCH--BACK TO $400,000.

DARN.I SPENT THE $300,000.I OWE IT.
BUT MY HOME IS NOW WORTH ONLY $400,000.

IT IS NOT OVER. MILLIONS YET TO FALL.

LET REGULAR BANKS GAMBLE WITH WALL STREET GAMBLERS=DISASTER

[email protected]