What’s Next for the Economy

BLOG What’s Next for the Economy

I‘ve been talking with quite a few people who are knowledgeable about the economy lately, so I thought I would share some of the things they say might well be coming before the current recession ends.

What Might Happen Next
        What You Can Do Now
Collapse of $US by as much as 50%
  • Sell $US investments
  • Pay off debts and invest in items shown below
Deflation (continuous price drops) for manufactured and luxury goods/services, stocks and housing
  • Defer buying such goods
  • Learn to haggle — don’t pay list
  • Don’t be suckered by “sales” and “limited time offers”
  • Don’t be suckered into getting back into the market(s) anytime soon
Inflation (sharp price increases) for staple goods (food, energy) and land; Agricultural crisis in 2009
  • Grow your own, using permaculture
  • Make meals from scratch
  • Invest in solar, wind, geothermal, insulation 
  • Practice energy conservation
  • Prepare to spend more of your income on these items
Spike in personal, corporate and government bankruptcies;
Tight, expensive credit for most
  • Pay off debts and avoid new ones
  • Don’t buy extended warranties
  • If you must buy, make sure it’s durable
Wage deflation (annual pay cuts)
  • All of the above
  • Create your own sustainable Natural Enterprise
  • Invest in know-how (carpentry, home repair, sewing, cooking)
  • Create your own entertainment instead of buying it
  • Learn how to buy used, wisely
Spike in pension plan insolvencies
  • Don’t depend on your pension
  • If it’s a defined contribution plan, reconsider plans to retire
Health care crisis (increased demand + cuts in funding)
  • Get fit
  • Learn to self-diagnose and (within reason) self-treat
  • Eat healthy
  • Practice preventive medicine
Collapse of Chinese economy
  • Create local markets
  • Pledge to buy local
  • Make your own
Infrastructure failures
  • Learn not to rely on the grid, Internet, or phone system
  • Be prepared to bike or walk if public transport fails
  • Develop carpool networks
  • Figure out how you can work from home even if the utilities are offline
  • Don’t live in the suburbs
  • Strengthen your local community networks
Education crisis (cuts in funding)
  • Learn to teach yourself, and unschool your kids
  • Collaborate with community in education programs

Incidentally, the consensus seems to be that we’re in for a long recession, but not a depression. This is consistent with my own research, which suggests that The Long Emergency is coming, but may be a decade or two away yet.

Hardest hit, as always, will be the poor, the sick, the uneducated, those who are dependent (on government, on infrastructure, on medical systems, on cheap energy etc.), and those who are highly leveraged (a lot of debt relative to the value of their assets).

One of the biggest challenges for many people will be what to do when you want to (or have to) move, and there is no market for real estate in your area. Don’t panic, because there are vultures out there. Many people I know are renting out their home (at less than it’s worth) and renting (instead of buying) in their new community (at less than it’s worth). They are effectively straddling two homes, and a whole underground market for such peer-to-peer arrangements is emerging wherever housing sales have dried up. It’s not a viable long-term strategy, and it’s likely that eventually people will just shrug, acknowledge that 80% of their equity is gone probably forever, and sales at the new lower prices will pick up briskly again. If/when that happens, you’ll still take a bath on your old home, but you’ll get your new one for a much lower price, too.

Category: Economics

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7 Responses to What’s Next for the Economy

  1. Jon Husband says:

    Nice synthesis .. when laid out this way, what I believe I can see is the dots beginning to swim into a pattern … as in people everywhere have already begun doing some, much or all of these things, but there is coming quickly the time when these will converge or cohere into a “new way” of living and being in these circumstances.

  2. vera says:

    So where do you figure is the dividing line between a recession and depression? I’ve been told 15% unemployment and a shrinking GDP means a depression. ?

  3. Nice synthesis Dave! I am a little surprised that you think the collapse of “business as usual as we know it” will not come sooner. I just plotted the predicted oil production from ASPO against world population increases. As you may know, up to now, most regions have had a stable oil consumption per capita. That is changing. If we cannot handle business as usual with stable oil consumption, how are we going to handle it as it falls? Here in Sweden we hear news of layoffs every day. And for every layoff in a large industry, ore follow in the suppliers. A small company that supplies leather for car seats went bust yesterday.http://files.meetup.com/189080/OILPERCAPITA1.png

  4. Paul says:

    “Don’t live in the suburbs”: if your job is in another city, or even if you live close to your job? Aside from the problems of commuting, I’m not sure why infrastructure failures would be worse in suburbs than in a central city. In the San Francisco Bay Area, the large cities are having just as bad budget problems as the surrounding suburban cities.

  5. Dave Pollard says:

    Thanks everyone. Vera, the “official” numbers produced for unemployment and inflation are so far from the truth, and GDP (as many have noted) is now so meaningless, that I don’t think these metrics can be used. I think the current recession will be the worst since the Great Depression, but will not be anywhere near as bad the as the next Great Depression, which I still think is 20 years off.Paul: The Long Emergency by Jim Kunstler explains the problem with suburbs. In cities the per capita costs of distribution are less than in suburbs, and because they have a long-standing underclass, social service organizations exist to serve city cores that don’t yet exist for many suburbs, for a start.

  6. vera says:

    Thanks, Dave. I know that the official numbers are not trustable, but I think that with the help of some alternative guesstimates, some basic idea can be obtained.In any case, if you don’t trust the stats, on what are you basing your claim that this is a recession, not a depression? Gotta do better than “hunch”, no?

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