Scary Stuff

If this doesn't scare you, perhaps you are already dead and just don't realize.

There are 5 major trends that are reshaping the world economy.

Historically the regulated capitalist system has been flexible enough to keep those of us in the US fairly safe in economic upheavals. As these reshaping trends stare us in the face, consider: will our previously successful system be resilient enough in the future? Or have we already devolved too far?

The following is from Bill Bonner's article in MoneyWeek. Read it, or regret it.

• The rising cost of Energy
  
  Is the world running out of oil? No. There is plenty of the stuff. At today’s oil prices, every producer in the world is busy adding capacity. Non-importers are busy trying to reclaim old wells; squeeze oil of sand, or tar or rock; or find substitutes. In the U.S. ethanol is becoming a major swindle. It takes more energy to produce a gallon than you can get from it. And it costs more to make a gallon than a gallon is actually worth. But it’s the kind of boondoggle that Congress likes, since it gives a way to spread other people’s money around under cover of national emergency.


• The Experimental monetary system
  
  It bears on the price of energy, of course, and on everything else. It is quite possible for the price of gasoline to go up, for example, even with no change in the supply/demand equation for energy itself. This is because the price is measured with a tape that stretches. As demand rises for energy resources, producers begin to see their oil and gas as precious assets. Sellers begin to ask what they are getting in return.
  
  Worldwide, oil is calibrated in dollars. But what is the dollar calibrated in? More and more oil producers are beginning to ask. And the answer is that the dollar floats in the air like a willow leaf. If the winds are favorable, it stays up. If it gets caught in a downdraft, it falls.


• Where are we in the Economic cycle?
  
  Here we are talking about the normal ebb and flow of prices, as well as the big epochs in economic history. Temperature changes from day to night and from winter to summer, for example. There are also extraordinary periods that can last decades…or thousands of years….like Ice Ages and times when the ice melts. Nicholai Kondratief described economic patterns of as waves of growth and decline that lasted about as long as a human life. His work was mostly bogus, but the patterns are real.
  
  We know that from boom to bust in the stock market is usually a period of about 18 years. The bull market began in 1982 or 1975 depending on how you look at it. It ended in 2000, as much as a quarter of a century later.
  
  The bear market that began in 2000 was held off – but not reversed -- by the biggest flood of liquidity in human history. But that bear market is still waiting to fully express itself. And it will probably carry stocks down to about 5,000 on the Dow…or lower…before it is over. And it probably won’t be over until 2015 or so.


• The Exodus of money from West to East
  
  Let’s go on to another of our Big E’s – The grand Exodus of money and power, from West to East. One of the biggest trends in economic history was the rise of the West – centered roughly in Manchester, England, and Manchester, New Hampshire – beginning in the 18th century. Then, in the 19th century, all of Europe and European outposts in the New World spurted ahead of the rest of the world.. By the end of the 20th century, the average worker in Western Europe or America earned about 20 times a much per hour as a similar worker in China or India.
  
  But the averages masked the new trend. Wages in India and China are rising sharply. Those in America and Europe are stagnant. Yesterday’s Financial Times tells us that real hourly incomes in America are lower today than they were 5 years ago. In India, they have almost doubled.
  
  Meanwhile, China is growing faster than at any time in the last 10 years – with a GDP growth rate over 11%. India is not far behind. Both economies are graduating hundreds of thousands of new chemists and civil engineers, whereas American universities turn out young people trained in sports therapy and theatre design. And while both economies are plagued by the usual assortment of bullies and bureaucrats, their parasites are much cheaper than ours…which, along with low wages, gives them a tremendous advantage.


• The decline of the American Empire
  
  And finally, we come to the last of the Big E trends, the one for which this conference was conceived – the Empire. We Americans don’t like to think of our country as an Empire. Instead, we imagine it as a kind of proto-democracy…with people coming together in local schoolhouses in town meetings where important issues are discussed. We are too modest for empire, we say to ourselves. Besides, empires need emperors, and we don’t have an emperor, we have an elected president, and a society that believes in individual liberty, not collective glory. And empires need people in funny hats. And we Americans don’t wear hats…except maybe baseball caps that advertise where we went on our summer vacations. What’s more, America is a democracy…where the people decide what kind of government they want. And no one ever ran for high office on an Empire platform. So, we couldn’t have an empire.
  
  But it is a strange and wonderful world we live in. And sometimes we get what we did not intend and what no one in particular ever wanted. If you look at the next presidential press conference you will find the American eagle on the lectern. The eagle is, of course, a symbol of empire – it comes from the Roman era, when the eagle was on all the Roman standards. And if you listen to the president’s remarks you will find he spends a lot of time talking about war in exactly the same places where the Romans did their fighting – the edge of the empire, Mesopotamia, where Roman soldiers died by the thousands taking and retaking ancient Babylon. And there, too, where the soldiers of the British Empire washed up again, on the same river banks…done to death by the same desert tribes.