This blog contains material I wrote and posted on between the years 2005 and 2011 only. It does not contain any new material. For newer writing, please check my main blog (Bill the Butcher).

Wednesday, 28 November 2012

(Apparently fulfilled) Prediction From October 2008

Let me state, once more, that I am no prophet. Let me also remind you that I’ve never attended a class in economics.

Which is a way of telling you that everything I’m saying may be, in fact in all probability is, bullshit.

Yet let me stick out my neck and make a few predictions:

The first prediction I’ll make is that while the stock market won’t blow up to the ridiculous heights of before, it will rise in time. Yes, we’re beginning a phase of recession, but the stock market has assumed a life of its own which has no connection with reality. Like those wikipedia clones that discuss the history and biology of entirely imaginary creatures like orcs or rancors, the stock market lives in a parallel universe. Therefore, it will rise again, though overall it will remain – by previous standards – mostly depressed.

But, at the same time, the companies that own those stocks are ultimately companies that depend on the real economy, that of firms that manufacture things or grow things or sell things; and here’s where things will get a little hairy.

Because, get this, the price of oil isn’t going to remain (relatively – I remember when $50 per barrel was called high) low, despite the collapse caused by the drop in demand. That demand was in any case caused by speculation over perceived demand because of economic growth, which in turn was a phantom created by imaginary growth led by invisible, intangible investments. I don’t know how clearly I’m expressing this. An analogy might be a balloon being filled up with air, but those looking at the balloon imagine that it’s growing, like a plant, and not merely blowing up – and that the growth means it’s full of something, not just air that can be taken out as easily as it was put in. Then when the balloon pops, all you have is what you really had before – a piece of rubber.

But the real economy needs to make things or grow things or sell things, and all these need resources. Resources and labour need transport, as do finished products. And also the whole process needs energy. Besides, economic constraints consequent to the recession will – as I’m sure you’ll appreciate – discourage spending on research or actual measures to curb global warming and ecologic degradation, because these are expensive.  So oil will continue to be exploited. But you can’t exploit oil forever – the supply of oil isn’t infinite, and the supply of economically exploitable oil is even more limited. You can design more and more efficient engines, but you’ll never make one that’s completely clean and that consumes zero fuel. Oil supplies will eventually run out. Before they do, the rich will fight for what oil is left, and the prices will rise sky-high, whatever be the state of the economy.

Meanwhile, due to global warming (which is almost certainly irreversible now, whatever we do to try to stop it, and we’re doing almost nothing, and in a recession will do even less) there will be major climatic changes, desertification, massive population migrations due to the flooding of lowlands and the frequent droughts and dying off of forests and so on. All this will put a tremendous strain on any economy. Agricultural output will drop, resistant diseases will emerge, traditional bread-baskets will turn into dustbowls or seas of mud. No real economy will be able to survive this without unprecedented damage.

At the same time some other things will happen. The melting of Arctic ice and the Siberian taiga will expose a lot of minerals (this is already being called a “positive effect of global warming” by some morons), and this will lead to another gold rush and possibly a few nasty mini-wars. While military spending is all very fine as a stimulator of an economy, it’s useless when it comes to feeding and clothing and housing thousands of millions of people. And since the global warming is going to damage humans extremely badly, there will be so many problems traditional industry may not get going very well, and the resources will mostly go a-begging.  

I’ll make another observation: fights between groups may well be on the basis of competition for resources and not national identity, which will get the go-by. These groups might well feel they have a better chance to win if they hire mercenary outfits. So Blackwater, Aegis and the like will see their share prices stay up…for a time.

Mass migration, desertification, starvation, famine, loss of employment, war and disease – not great ways of stimulating real growth in the real economy. And as I said, the stock market depends on the real economy.

Look, therefore, for a series of brief rallies for stocks, followed at all times by a slow steady decline.

The good days are forever over for Joe the Stockie.     

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