Is the economy screwed?

[postroad]

This probably belongs in one of the forums I am not able to post in (feel free to move it).

I was just thinking that comodity prices (oil, copper ets) have plunged because of demand destruction due to economic problems.

Does this mean that the prices of these comodities will skyrocket again when/if the economy recovers?

I guess I am wondering that if the demand (potentually infinite) has outstripped the resources (finate), will this lead to rapidly cycleing price spikes followed by demand destruction (this includes deaths from starvation war, disease) and what does this mean for capitalism?

I can see that capitalism works great at exploiting virgen resources, but how will it work at distributing ever more scarce resources?

[just_sawing]

No only people that have bought in to the buy on credit are in love with the pooch.
If you have cash just like people in the depression you will be able to actually get ahead. The one thing that is not taught enough is the difference between a ++ and +- economy.
A ++ job as the economy goes up they go up. A good example of this is lawn care. Everybody working people hire lawn care. Things get tight Lawn care, Gym Memberships, Hair care etc go down. Some professions go up. This is one of the reasons that I picked a sawmill. even in the depression sawmills ran. The difference is when the economy is up people spend the money at the local lumber store instead of cutting a log and having me saw it. If you are in debt get out now one way or the other get out and get to cash.

[postroad]

I also was thinking about the depression and todays situation. It seems to me that during the depression there where still lots of under exploited resources in comparrison to the situation in the world today.

[Darren]

From everything I'm reading it's time to hunker down. I was watching for "the worse since" comparisons. We're now back to WWII. Folks are also talking about the "D" word. Unemployment is expected by some to hit 10%. Any recovery isn't expected until 2010. Those are the so-called experts talking. Given that this is virtually a world wide situation, there's nothing to point to as a start for a recovery.

The point is no one has any idea how to fix what's broken. Companies are continuing to layoff employees (the customers of other companies). We're in an employment down spiral. Cash will be king soon. Deflation has already started. As more people with cash figure prices are still going down, they'll hold for even lower prices. Which will be self fulfilling.

Many commodity prices are pretty much done for. With the exception of gold, demand is gone. It took two years for gasoline demand to recover from the two year drop after the oil embargo in 1973. There was a spike in the eighties after that. After the next drop, demand didn't hit the same level pre-embargo for at least 10 years in the mid 90's.

We're at the beginning of something we've never seen before.

[Nevada]

Originally Posted by postroad

I was just thinking that comodity prices (oil, copper ets) have plunged because of demand destruction due to economic problems.

Does this mean that the prices of these comodities will skyrocket again when/if the economy recovers?

I don't believe that the premise of your post is accurate. We don't see wild swings like we saw in oil prices through supply & demand. Swings like that are characteristic of speculators reacting to something. In this case it was uncertainty in the middle east. In particular, the saber-rattling against Iran. That always makes oil speculators, since Iran controls the Strait of Hormuz where a fair percentage of the world's oil passes.

As for the question of oil prices rallying like before, I doubt it. First, the Obama administration isn't as likely to engage in war rhetoric as the Bush administrations was. Second, many oil speculators are now ruined by the oil price collapse, so the speculative funds may no longer be available.

[postroad]

I was not only refering to oil, but comodities in general. Speculaters sure did have a hand in it although it appears that there is still a lot of uncertainty in the mideast now without a corresponding oil spike.

Perhaps your correct that folks got burned in oil speculation and/or we (North America) are truelly out of cash.

[postroad]

Now you got me thinking. Into which black hole have all those speculative billions dissapeared and are all those bailout billions also going to be sucked down that hole?

Is it really possible to destroy wealth without leaving even some positive residue?

Will future generations have to pay real money whithout having any tangible assets resulting from present debt spending?

[Welshmom]

I sometimes wonder what would happen to oil prices if a nuclear weapon was detonated somewhere in the Middle East tomorrow. As one expert has said, Iran has the capability, and "...the centrifuges are spinning as we speak".

Obviously it would do a lot more harm than just our price of oil at home...we may see fallout, proces of everything would probably go haywire, not to mention the political reactions of other countries and militaries around the world...oy.

I'm more than a little concerned that this could happen within the next ten years or so. Commodities of all kinds would go through the roof, imo. Besides that threat, what do we expect from some of these nations when oil is at or near it's end?

[Spook]

We are gonna get more regulation, and we are gonna have slower growth. Even when this thing is over, it probably won't feel too good to those up their eyeballs in debt.

[Welshmom]

postroad -
my thoughts about what you just asked while i was posting:
I do think future generations will have to pay. I think the smooth, asphalt road to progress, the one that our parents and grand parents drove faster and faster on until we got here, is at it's natural end. Or very close to it. There is no such thing as truly unlimited growth. As you said, natural resources are near the end of their supply, in generational terms.

As for the billions, now trillions of bailout $$...I think it is possible for it to disappear. Unless you go looking at a few pinstripers' overseas accounts... the speculative billons were always just that...speculation. Mostly, it never existed in real life.

[postroad]

Again, is capitalism going to be as effective at conserving, distributing scarse essential resources as it has been at developing unexploited opportunities?

Or is it going to be a survival of the fittest scenario?

Does anyone have faith that science will find a solution to the problems?

[LandRover]

We will come out of this. Recessions happen, booms happen. We need to make a few changes to what we've been doing to adjust for ever increasing competition for resources globally.
Long-term we need China and India to start consuming, but it will not be the same as US consumption.

[postroad]

How will the rest of the world consume at anything aproaching a North American rate with a finite amount of resources? Or are we going be forced into adjusting to a much reduced standard of living?

Was Cheney mistaken when he said " The American way of life is non negotiable"?

[Nevada]

Originally Posted by postroad

Now you got me thinking. Into which black hole have all those speculative billions dissapeared and are all those bailout billions also going to be sucked down that hole?

Is it really possible to destroy wealth without leaving even some positive residue?

If the speculators got burned badly enough then the money evaporated through bankruptcy. The commodity contract would have defaulted and that oil shipment would have been sold to someone else.

[Mike in Ohio]

Originally Posted by postroad

Now you got me thinking. Into which black hole have all those speculative billions dissapeared and are all those bailout billions also going to be sucked down that hole?

Those speculative billions (trillions) didn't really exist.... to a large aprt they were paper and nothing more. Use houses for example. Even without the current economic decline, if everyone decided to sell at the same time, they all couldn't get the peak prices. So all that "wealth" didn't really exist.

Originally Posted by postroad

Is it really possible to destroy wealth without leaving even some positive residue?

Absolutely. Look around you. Look at Wilmington Ohio where DHL is closing. Residue is probably about all that will be left.

Originally Posted by postroad

Will future generations have to pay real money whithout having any tangible assets resulting from present debt spending?

You betchya! What is happening now can best be described as kicking the can down the road.

Mike

[Welshmom]

I do think we will come out of this tailspin, to one degree or another, for a while. But I think over the long haul, the coming shortage of critical resources, like water, will limit growth, and perhaps even provide fuel for warfare. India and China will not be able to boom for long once the fresh water supplies are dried up. Never mind oil.

Good question as to whether this would be a playing field unsuitable for capitalism. It seems perhaps not, since capitalism depends on goods and services being created continuously. Hard to do that if there is very little oil, or gas, or water (and hence, scarce food) to be had by most people.

Geeze, I sound like the owner of a tinfoil hat factory! But I guess I should wear the shoe that fits...

[LandRover]

Originally Posted by postroad

How will the rest of the world consume at anything aproaching a North American rate with a finite amount of resources? Or are we going be forced into adjusting to a much reduced standard of living?

Was Cheney mistaken when he said " The American way of life is non negotiable"?

That's the problem isn't it.

Cheney hasn't really been living in the real world for quite some time now.

We've had the pick of the world's resources for comparatively little cost in relative terms. That's really not likely to continue. But we still retain huge advantages.

[LandRover]

Geeze, I sound like the owner of a tinfoil hat factory!

Now there's a market with potential!!!

[postroad]

I sometimes also feel like I am being a little paranoid. But sometimes it is better to be somewhat prepared for a not theoretically improbable situation

[CocalicoSprings]

The economy will rebound soon. It will take a few more months and a re-test of the October 10th stock market lows(around 7770 on the Dow)before we begin to see some positive changes. Tax changes will be better for individuals and married couples making less than $150,000 per year.
The housing market is already showing increases in numbers of purchases despite the lower prices. With 4.75% mortgages for 30 years, anyone who is waiting for lower prices to buy is going to be in for a disappointment.
Essential services such as water, electric, and gas are going up and we better be prepared for using alternatives and conservation measures.