Reply #17: Yup. I see a "Constellation Effect": [View All]

[EuroObserver]

Ordinary people's over-indebtedness, low savings level and declining ability, and maybe desire, to consume; housing bubble bursting; oil and gas prices causing heating, air-conditioning, transport and most all the other costs of an essentially profligate society to rise; geopolitical factors; corruption and malfeasance in the highest places; declining educational and healthcare standards and r&d (except military) and what looks increasingly like a burgeoning war economy... It seems to be all coming together pretty much at the same time.

For example, the conjunction of many of these factors as described by James Howard Kunstler in his article 2006: The Year of Oil Collapse?:

...

You can only introduce so much perversity into an economic system before distortions cripple it. From 2001 through 2005, consumer spending and residential construction had together accounted for 90 percent of the total growth in GDP, while over two-fifths of all private sector jobs created since 2001 were in housing-related sectors, such as construction, real estate and mortgage brokering. Much of the money spent did not really exist except as credit -- incomes as yet unearned, hallucinated liquidity, wished-for wealth, all based on the expectation that house values would continue to rise at 10 percent to 20 percent a year, forever. It became a reckless racket, all predicated on sustaining an economy that had lost its other means for generating wealth -- foremost its infrastructure for making things besides suburban houses.

...

The suburban housing bubble and its related activities were predicated on the idea that we could continue building out a living arrangement dependent on cheap oil and methane gas, and that all the subdivisions and strip malls would retain value for decades to come. Of course, this was the central delusion of the suburban sprawl economy, because it was obvious to anyone who gave the situation more than a cursory glance that cheap oil and gas were the things we were least likely to have in the decades to come.

This reality had begun to penetrate the American collective consciousness and will be represented in 2006 by millions of individual choices to not buy a new suburban house, either because the individuals fear the expense of long commutes, or they fear the cost of heating a 4,000-square-foot house occupied by only a few people (or both). As the inventory of unsold new houses mounts up, the prices of all houses, new and old, will start to go down. There will be enormous psychological resistance to this reality, expressed in a lag of correct pricing, as the owners of these value-shedding "investments" wait for the bubble behavior (anticipated 10 percent to 20 percent asset appreciation) to return. Eventually they will get the picture.

The velocity of change in the housing bubble (and the psychology involved) will be greatly affected by oil and gas prices. It seemed to many of us watching the energy markets that the world may indeed have passed through its all-time oil production peak in 2005. Production in 2005 was nearly flat over 2004. The world was producing and also using roughly 82 million barrels of oil a day. Oil coming into new production was not making up for signs of depletion showing among virtually all the world's major producers. Iran, Russia, Mexico, Venezuela, the North Sea and, of course, the United States, were all past peak.

...

The United States entered into the military phase of this turbulence before any other nation. We used our superpower status to set up a centrally located Middle East garrison in Iraq, under the idealistic cover story that we were removing a dangerous head-of-state and helping to set up a model democracy that would invite us to stick around the vicinity indefinitely and thus retain some control over the deportment of other oil-rich states in the region.

/more...

Very worrying for (the ordinary people of) the States and very worrying for the entire world.

ed. I really recommend reading the whole of this (gloomy) article.