Pity the poor American Consumer. She has to buy a new car to restore automobile production. She has to buy cheap plastic crap to jump start world trade. She has to buy a new house to revive the housing market. And all this on a shrinking income, and with significantly less credit available.
Any way you look at it, near-term recovery seems improbable. Lurking in the background are any number of serious problems which make any kind of lasting economic growth seem remote: resource constraints; massive financial and contractual liabilities; stocks of capital which are being run-down instead of maintained; government diktat which allocates scarce resources to non-productive use - to name a few.
Against this backdrop, we ask: Is collapse - economic and social - inevitable? Sadly, we have to answer, yes. Inevitable, not because of technical incapacity to adjust to new economic realities, but because of lack of will to do so.
The fact of the matter is that people want things to go 'back to the way they were'. Political leadership reflects this. If people wanted to move on to the future as it needs to be, the leadership would reflect that.
Over 35 years ago a book called Limits to Growth was widely read and discussed. It modelled the overshoot and collapse of Industrial Civilisation which would occur in the 21st Century unless remedial action were taken. The World was warned, but few listened. Instead, population continued to explode; economic growth and expanding materialism were taken for the end-all of human existence.
Now the very crisis that Limits to Growth foretold is upon the world, and yet actions which could be taken even now to ameliorate the effects of the impending decline find voice only on the margins of society. The mass of people and its leaders are, in the words of Mr. James Kunstler, attempting to sustain the unsustainable.
Exactly what is unsustainable? Simply put: A growing population with an economy that requires growing flows of money and physical goods. An affluent, comfortable lifestyle for all is sustainable only when it can be maintained on ever-decreasing flows of resources - i.e., continuously more efficient.
Speaking of new cars, Mr. Obama wants 14 to 15 million new cars sold per year to replace those "old clunkers." Time to go shopping!
Showing posts with label automobiles. Show all posts
Showing posts with label automobiles. Show all posts
Wednesday, May 27, 2009
Monday, May 25, 2009
The Future of Air Transport
In an energy-constricted world, the efficiency of every enterprise will dictate its longevity. We have already stated that automobiles, buses and trucks will be fading as a primary source of transportation in places where they are thus. Trains, where they are in place, have a promising future as they are remarkably efficient for both freight and passenger transport. Waterborne transport is a human constant, but what of air transport?
Air transport is slightly more fuel efficient than passenger cars, but much less efficient than trucks for freight. Thus, the near-term future of air transport hinges largely on freight. Is speedy air freight merely a luxury that will be cut in a more austere future? And how important is freight to the air transport industry in general?
According to the International Air Transportation Association, World air freight is down 21.4% from March 2008 to March 2009. Freight tonnage peaked in 2007, and it will be revealing if air freight loses market share over the years ahead.
However, it turns out that freight is not that important to the air industry, only accounting for 11% or so of its revenues. And so for the time being, it could be said that the air transport could expect a relatively graceful descent - if they can manage their gradual contraction proactively.
Airplane manufacture, on the other hand, will probably suffer a catastrophic collapse. Growth in air transport is over. A glut of fully functional planes is developing and will annihilate the order books of manufacturers. Layoffs have already begun. Expect lengthy wastes of capital on expensive government bailouts to 'save jobs'.
Air transport is slightly more fuel efficient than passenger cars, but much less efficient than trucks for freight. Thus, the near-term future of air transport hinges largely on freight. Is speedy air freight merely a luxury that will be cut in a more austere future? And how important is freight to the air transport industry in general?
According to the International Air Transportation Association, World air freight is down 21.4% from March 2008 to March 2009. Freight tonnage peaked in 2007, and it will be revealing if air freight loses market share over the years ahead.
However, it turns out that freight is not that important to the air industry, only accounting for 11% or so of its revenues. And so for the time being, it could be said that the air transport could expect a relatively graceful descent - if they can manage their gradual contraction proactively.
Airplane manufacture, on the other hand, will probably suffer a catastrophic collapse. Growth in air transport is over. A glut of fully functional planes is developing and will annihilate the order books of manufacturers. Layoffs have already begun. Expect lengthy wastes of capital on expensive government bailouts to 'save jobs'.
Thursday, April 2, 2009
A Modest Proposal to Save the United States
We've been following the affairs of the United States' automobile manufacturers rather closely. It's an interesting situation, one that we think deserves more analysis that it seems to be getting. The moves to nationalise the companies, as we wrote about in an earlier article, seem to suggest that one of the most probable outcomes will be the foundation of 'AmeriCar'.
The notion of a nationalised automobile manufacturer is not outside of the realm of possibility, in this bailout-happy era of U.S. policy-making. It carries with it a guarantee of employing thousands of people, backstops what James Kunstler calls the "Happy Motoring fiesta," and more-or-less (mostly less) preserves the appearance of the status quo. All these appear to be the avowed goals of the Obama Administration, so the situation really is ripe for this particular flavour of Lemon Socialism. If the AmeriCar future is true, we have some thoughts as to how the Government can help make the continuation of the Happy Motoring fiesta more durable.
All that we suggest is the phasing in of a national speed limit of 35 miles per hour. Municipalities could, of course, have lower speed limits, but the highest legal speed in the United States would be 35 mph. Ignoring the indignant screams of rage from the Citizenry, this vastly lower limit would bring many positive changes:
The loss of life in automobile accidents would fall dramatically to near zero, reducing the cost of cleaning up the wreck, the medical bills, and fixing any damage done to public roadways. The repair cost of automobile collisions would be greatly reduced, since at 35 mph the force involved in any one collision is relatively low. The wear on public roadways and bridges would fall dramatically, allowing for more maintenance money to be diverted from maintenance to building more infrastructure.
Additionally, the reduced speed limit would force citizens to live closer to their places of work. By vastly cutting commutes, this would give citizens more time to spend with their families (or work more, according to preference). Also, the amount of energy burned daily by citizens going to work would be vastly reduced, thereby cutting the United States' dependence on 'foreign oil.' At the same time, this would automatically increase the density of American cities, which would both give a larger tax base to those cities, as well as make public services cheaper (i.e. more people are paying less).
We could go on, but we hope the point is made. A simple and elegant piece of legislation, like a vastly reduced national speed limit, could perform a world of change. Many of the apparent goals of the Obama Administration could be serviced by a lower speed limit. To be honest, we fully believe that this sort of legislation will never see the light of day. Such well-reasoned, functional mandates seem to be beyond the abilities of the Government.
The notion of a nationalised automobile manufacturer is not outside of the realm of possibility, in this bailout-happy era of U.S. policy-making. It carries with it a guarantee of employing thousands of people, backstops what James Kunstler calls the "Happy Motoring fiesta," and more-or-less (mostly less) preserves the appearance of the status quo. All these appear to be the avowed goals of the Obama Administration, so the situation really is ripe for this particular flavour of Lemon Socialism. If the AmeriCar future is true, we have some thoughts as to how the Government can help make the continuation of the Happy Motoring fiesta more durable.
All that we suggest is the phasing in of a national speed limit of 35 miles per hour. Municipalities could, of course, have lower speed limits, but the highest legal speed in the United States would be 35 mph. Ignoring the indignant screams of rage from the Citizenry, this vastly lower limit would bring many positive changes:
The loss of life in automobile accidents would fall dramatically to near zero, reducing the cost of cleaning up the wreck, the medical bills, and fixing any damage done to public roadways. The repair cost of automobile collisions would be greatly reduced, since at 35 mph the force involved in any one collision is relatively low. The wear on public roadways and bridges would fall dramatically, allowing for more maintenance money to be diverted from maintenance to building more infrastructure.
Additionally, the reduced speed limit would force citizens to live closer to their places of work. By vastly cutting commutes, this would give citizens more time to spend with their families (or work more, according to preference). Also, the amount of energy burned daily by citizens going to work would be vastly reduced, thereby cutting the United States' dependence on 'foreign oil.' At the same time, this would automatically increase the density of American cities, which would both give a larger tax base to those cities, as well as make public services cheaper (i.e. more people are paying less).
We could go on, but we hope the point is made. A simple and elegant piece of legislation, like a vastly reduced national speed limit, could perform a world of change. Many of the apparent goals of the Obama Administration could be serviced by a lower speed limit. To be honest, we fully believe that this sort of legislation will never see the light of day. Such well-reasoned, functional mandates seem to be beyond the abilities of the Government.
Sunday, March 29, 2009
It's Not Just the Bankers Who Destoyed Western Civilisation
Ah, the Bankers, how they have garnered the wrath of the world. Between the growing public anger vented on their villas, and the recommendation that bank employees wear their "civvies," it's not a happy time to be associated with a bank. Especially a bank whose name is recognisable by a large number of people. The violence is growing, and we don't doubt that things will be getting worse for the world's new collective whipping boy.
It's not without some truth: the world's major banks designed, packaged, and sold various schemes which - intentionally or not - was the poison pill for the world's economy. The question is whether or not the pill contained sufficient poison to kill the economy, or merely give it some serious health problems. It seems that the latter is true, as the world economy is in a flaming tailspin, as the numbers seem to suggest.
However, we feel the bankers have gotten more than their fair share of the blame for destroying Western civilisation as it is presently understood. On the Times Online's list of 'ten people who should be most hated,' we see ten faces very deserving of anger. There is, we feel, another clique of individuals who have an equal - or perhaps greater - share in the collapse. They should get their fair share of the anger. These persons are the realtors and developers of the United States.
No, really. The reason we level our finger at these recently unemployed persons is simple. They are the architects of the great suburban build-out in the United States, the mortgages for which is a goodly part of the toxic crap now causing the world's economy to keel over in convulsions. The build-out was strongly popularised at the end of World War II, through such legislation as the G.I. Bill. A house in suburbia became the Holy Grail of the average American, as evidenced by the last sixty years or so of rapid suburban construction.
It was a seemingly endless source of money, and it became enshrined as part and parcel of the so-called American Dream. Great amounts of money have been made selling dreams, and so the developers built suburbia, the realtors sold it, and the bankers financed every step of the process.
From this unwholesome ménage à trois the poison pill was crafted. To and from suburbia flowed the sub-prime mortgages, the credit cards, the automobile loans, and the like. All those forms of debt were sliced and diced into many new and interesting forms; other, even more exotic expressions of High Finance were invented to slice and dice further. Put simply, the bankers are indeed to blame, but they had very willing assistance in their quest for more money.
It's not without some truth: the world's major banks designed, packaged, and sold various schemes which - intentionally or not - was the poison pill for the world's economy. The question is whether or not the pill contained sufficient poison to kill the economy, or merely give it some serious health problems. It seems that the latter is true, as the world economy is in a flaming tailspin, as the numbers seem to suggest.
However, we feel the bankers have gotten more than their fair share of the blame for destroying Western civilisation as it is presently understood. On the Times Online's list of 'ten people who should be most hated,' we see ten faces very deserving of anger. There is, we feel, another clique of individuals who have an equal - or perhaps greater - share in the collapse. They should get their fair share of the anger. These persons are the realtors and developers of the United States.
No, really. The reason we level our finger at these recently unemployed persons is simple. They are the architects of the great suburban build-out in the United States, the mortgages for which is a goodly part of the toxic crap now causing the world's economy to keel over in convulsions. The build-out was strongly popularised at the end of World War II, through such legislation as the G.I. Bill. A house in suburbia became the Holy Grail of the average American, as evidenced by the last sixty years or so of rapid suburban construction.
It was a seemingly endless source of money, and it became enshrined as part and parcel of the so-called American Dream. Great amounts of money have been made selling dreams, and so the developers built suburbia, the realtors sold it, and the bankers financed every step of the process.
From this unwholesome ménage à trois the poison pill was crafted. To and from suburbia flowed the sub-prime mortgages, the credit cards, the automobile loans, and the like. All those forms of debt were sliced and diced into many new and interesting forms; other, even more exotic expressions of High Finance were invented to slice and dice further. Put simply, the bankers are indeed to blame, but they had very willing assistance in their quest for more money.
Monday, March 16, 2009
Peak Automobiles
CNN reports "Autos on U.S. roads set to fall." This is an unprecedented event. The automobile has been a defining aspect of American life. For most Americans, their first car is a right-of-passage. Likewise, most Americans consider their car indespensible.
The article suggests that the decline is mostly the abandonment of excess cars - moving from three cars in the drive to two. But it also hints at a decline of demand due to increasing unemployment.
Nowhere does the article suggest, as we do, that a permanent decline in incomes will produce a permanent decline in the need for autos. We don't think that view will ever make the mainstream. In the future, decline in auto use will mostly be reported as an increasing preference for urban life - or not at all.
In light of this development, bailing out U.S. automakers seems especially deranged. The industry already had excess capacity during the bubble years. Now it is even more questionable just how much manufacturing capability is needed. Certainly the U.S. Government is in no position to make this decision. Supposedly, that is what markets are for.
Oh wait, there is no market economy any more. If a big corporation with armies of lobbyists is losing money, the market can be swept aside, and Uncle Sam will pull out his teat.
Destroying economic value by perpetuating chronically loss-making operations was probably the main thing that did in the Soviet Union. Evidently nobody in Washington was paying attention at the time. Those who do not learn from history are condemned to repeat it.
The article suggests that the decline is mostly the abandonment of excess cars - moving from three cars in the drive to two. But it also hints at a decline of demand due to increasing unemployment.
Nowhere does the article suggest, as we do, that a permanent decline in incomes will produce a permanent decline in the need for autos. We don't think that view will ever make the mainstream. In the future, decline in auto use will mostly be reported as an increasing preference for urban life - or not at all.
In light of this development, bailing out U.S. automakers seems especially deranged. The industry already had excess capacity during the bubble years. Now it is even more questionable just how much manufacturing capability is needed. Certainly the U.S. Government is in no position to make this decision. Supposedly, that is what markets are for.
Oh wait, there is no market economy any more. If a big corporation with armies of lobbyists is losing money, the market can be swept aside, and Uncle Sam will pull out his teat.
Destroying economic value by perpetuating chronically loss-making operations was probably the main thing that did in the Soviet Union. Evidently nobody in Washington was paying attention at the time. Those who do not learn from history are condemned to repeat it.
Wednesday, February 25, 2009
Another Sign for the Bottom
We like to keep ahead of popular trends in society. For instance, a few years ago the typical American citizen was a debt-addicted consumer: they borrowed, borrowed, borrowed, so he or she could spend, spend, spend. We saw that, and tried to go the other direction: keep debt within easily-manageable amounts.
Fast forwards to today, and people are fretting about their McMansion, their big-screen plasma TV, and their automobiles; all were bought with credit, and all are pretty expensive when one doesn't have a job. The average 'consumers' are only just beginning to realise just how unsustainable their lifestyle once was.
However, it's going to take a quite awhile to obliterate unsustainable 'common knowledge.' 'Common knowledge' holds that everyone can own their own home, their own car, and live in the suburban paradise. 'Everyone' knows that one should pay for as much as possible with credit; it's so much more convenient that way.
We are on the fringe when we write this, but we feel it is true: consumerism is dead; the 'every family in their own home' fantasy is dead; there will be no chicken in every pot and car in every garage. Buying a house with no-or-little money down is a bygone memory, no matter what any bank may say or advertise.
Frankly, we know we're a Cassandra, screaming the bleak truth toward disbelieving ears. However, if one day, you should read on the front page of USA Today that, not only is buying a home with credit is a terrible idea, owning a home is a terrible idea, the worst is over. Simply put, when what we write today becomes the mainstream knowledge of the future, the bottom of the 2007 Depression has been found. When that happens... buy stocks! Buy apartment buildings! Buy everything that can generate a profit! Buy, buy, buy!
Fast forwards to today, and people are fretting about their McMansion, their big-screen plasma TV, and their automobiles; all were bought with credit, and all are pretty expensive when one doesn't have a job. The average 'consumers' are only just beginning to realise just how unsustainable their lifestyle once was.
However, it's going to take a quite awhile to obliterate unsustainable 'common knowledge.' 'Common knowledge' holds that everyone can own their own home, their own car, and live in the suburban paradise. 'Everyone' knows that one should pay for as much as possible with credit; it's so much more convenient that way.
We are on the fringe when we write this, but we feel it is true: consumerism is dead; the 'every family in their own home' fantasy is dead; there will be no chicken in every pot and car in every garage. Buying a house with no-or-little money down is a bygone memory, no matter what any bank may say or advertise.
Frankly, we know we're a Cassandra, screaming the bleak truth toward disbelieving ears. However, if one day, you should read on the front page of USA Today that, not only is buying a home with credit is a terrible idea, owning a home is a terrible idea, the worst is over. Simply put, when what we write today becomes the mainstream knowledge of the future, the bottom of the 2007 Depression has been found. When that happens... buy stocks! Buy apartment buildings! Buy everything that can generate a profit! Buy, buy, buy!
Tuesday, December 2, 2008
Rethinking Luxury
First off, we're pleased to announce the launch of another, sister blog: the Silver Money Report. This blog will deal exclusively with topics pertaining to silver, notably in its investment and monetary functions. We have other blogs in the works, which will be rolled out for public consumption in the future.
For today's post, we would like to look at the idea of 'luxury.' We're sure that, to most, 'luxury' is probably brings to mind the lifestyle of a movie star or pop singer, rather than the middle-class living standard of yesteryear. Luxuries typically embody a large amount of wealth, whether financial or otherwise. In the past, one could demonstrate one's wealth by, say, gold-trimmed plates and solid silver silverware. The American rich of the late 19th and early 20th Centuries bought automobiles to show off their wealth.
Westerners in general (and Americans in particular) have forgotten just how much of their lifestyle is actually a luxury. Eating meat is a luxury; indoor plumbing is a luxury; a private room is a luxury; more than twenty square feet of living space per person is a luxury. We're sure these things sound more like necessities to you, Reader, but rest assured they definitely are not. Rather, these are the 'victory' of the 20th and 21st Centuries: making the luxuries of the 19th Century the necessities to the masses.
We're not saying that these things will necessarily once again become luxuries, but we're willing to bet the 2007 Depression will push the average closer to historical norms than Americans (and Westerners) are willing to accept all at once. Average living space in the West may not become ten square feet per person again, but it will probably be closer to 200 than the 1,000 Americans enjoy presently. Indoor plumbing probably won't go away, but the average person almost certainly won't have their own, private bathroom.
Perhaps the biggest luxury that Americans especially are unaware of is being able to live anywhere. Many areas of the United States are not viable economically, either from lack of productive capacity, remoteness, or outright uninhabitability. As energy becomes scarcer, and the 2007 Depression squeezes the economy even more, the 'live where I want to' mentality of Americans will likely end.
We could go on, but we instead will suffice with saying that knowledge of the living standards of the 19th Century is something one might want to be more familiar with. Not to forget, there are 4 billion people in the world who do not have even the quality of living as the average in the 19th Century. They are perfectly willing to fight tooth and nail, and work as hard as humanly possible, to get their indoor plumbing. They will work harder for this than you ever will, or ever have.
For today's post, we would like to look at the idea of 'luxury.' We're sure that, to most, 'luxury' is probably brings to mind the lifestyle of a movie star or pop singer, rather than the middle-class living standard of yesteryear. Luxuries typically embody a large amount of wealth, whether financial or otherwise. In the past, one could demonstrate one's wealth by, say, gold-trimmed plates and solid silver silverware. The American rich of the late 19th and early 20th Centuries bought automobiles to show off their wealth.
Westerners in general (and Americans in particular) have forgotten just how much of their lifestyle is actually a luxury. Eating meat is a luxury; indoor plumbing is a luxury; a private room is a luxury; more than twenty square feet of living space per person is a luxury. We're sure these things sound more like necessities to you, Reader, but rest assured they definitely are not. Rather, these are the 'victory' of the 20th and 21st Centuries: making the luxuries of the 19th Century the necessities to the masses.
We're not saying that these things will necessarily once again become luxuries, but we're willing to bet the 2007 Depression will push the average closer to historical norms than Americans (and Westerners) are willing to accept all at once. Average living space in the West may not become ten square feet per person again, but it will probably be closer to 200 than the 1,000 Americans enjoy presently. Indoor plumbing probably won't go away, but the average person almost certainly won't have their own, private bathroom.
Perhaps the biggest luxury that Americans especially are unaware of is being able to live anywhere. Many areas of the United States are not viable economically, either from lack of productive capacity, remoteness, or outright uninhabitability. As energy becomes scarcer, and the 2007 Depression squeezes the economy even more, the 'live where I want to' mentality of Americans will likely end.
We could go on, but we instead will suffice with saying that knowledge of the living standards of the 19th Century is something one might want to be more familiar with. Not to forget, there are 4 billion people in the world who do not have even the quality of living as the average in the 19th Century. They are perfectly willing to fight tooth and nail, and work as hard as humanly possible, to get their indoor plumbing. They will work harder for this than you ever will, or ever have.
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