When I began this blog in January, 2007, I saw 3 Cats (three catastrophes) facing the human race: Climate Change, Resource Depletion, and Over-Population. By 2008 another catastrophe had crept in and something terrible afflicted the economy. The housing bubble burst and a debt crisis spread throughout the the financial structure. Markets plummeted. The cost of oil spiked to unprecedented heights, and the price of housing and commercial real estate fell. Politicians brewed their magic potions to make everything right, and economists poured forth explanations and suggestions of what to do, but the economy just got worse. A new Cat had been born.
So now there are 4 Cats on the scene, but I am not sure what to call this newbie or even what it really is. For now I'll name it Kitty-Cat. Like the kitty in a poker game, it has to do with what you expect to win in life.
The root cause for Kitty-Cat is that too many in our society (I will call those people the ME-MEs) have come to believe they deserve to win it ALL, even at the expense of those less fortunate than they, even at the expense of their neighbors, even at the expense of their country, even at the expense of their progeny and the following generations.
But our capitalist society demands that the ME-MEs find a way to "pay" for all that stuff; the stuff is not free. The ME-MEs chose to use DEBT, a means of payment that has been around for ages.
The real break-through came along when ECONOMISTS appeared on the scene and developed theories of economics that said growing DEBT would be no problem because the economy would always grow. Politicians encouraged the ME-MEs to buy more and more to keep the consumer-based economy rolling. Bankers already knew their profits depended upon how much DEBT they could create, and they found innovative ways (like gambling) to grow DEBT. Governments large and small joined in and became ME-MEs for their electorate.
The unimagined happened. The economy failed to grow at the pace it needed to. The housing bubble burst, markets tumbled, fuel costs rose, real estate values fell, and the ME-MEs could not keep up with their DEBT. The debt crisis spread, and politicians brewed and brewed their magic, economists poured forth more explanations and suggestions, but the economy keeps getting worse. What has happened?
Prevailing economic theories are showing they do not work well when the economy is not growing, but rather it is deflating. Band-aids appear all over trying to get the economy back on track, even using DEBT to solve the DEBT crisis.
Seems to me we need some new economic theory, something that provides direction for how to run the economy in a time when growth does not happen, like when we suffer from Resource Depletion, specifically energy. One of the best recent discussions on this subject can be found on TheOilDrum in the post Hollow Men of Economics that posits "post-war economists don’t do energy, except as an ever-expanding resource that the credit system and technology makes available. For the post-war economist, the supply curve of energy–save for brief lags–is always coming back into rough equilibrium with the economy."
I recommend you continue your reading there and remember the Kitty-Cat, an economy with growing deflation and dwindling resources.
Sam Penny, the Prudent RVer
