Thursday, March 27, 2008

Real Estate Crash caused by Denial

To get us out of a recession, the fed lowers interest rates. This is equivalent to printing massive amounts of money, in the form of credit.

That is standard procedure.

They didnt care where the money went, as long as it went somewhere. Last time around, it went into housing. It could just as easily have gone into cars or solar panels. The point is that it tends to create a bubble somewhere.

The main problem is that the bubbles they create often dont do much for productivity. Yeah, we built a bunch of houses, but what did it do for us? The simple answer is it increased our energy consumption. Just like the "SUV boom" of the 1990's increased our national energy consumption. These booms create jobs, but they also create waste. The boom in SUVs created some waste that we all can see quite clearly now. And the weight of that waste is usually what causes the bubble to pop.

I find it rather ironic that two of the biggest booms we've had have been booms that cause energy use to rise. Big houses, and big vehicles.

Then we hit the plateau of peak oil, and now we have big houses, big vehicles, and big energy bills! Yet peak oil, even to this today, is rarely discussed.

Whatever the reason it is not being discussed, THAT is precisely the reason things will get much much worse. If you dont talk about real problems and real issues, they stand 0% chance of being solved. The problem can be solved, but the denial is what will ensure that it will not be solved.

Peak oil is what caused energy prices to rise so far beyond what was predicted by the so called "experts". This price increase started to eat into the money that was supposed to feed the housing bubble. So the housing bubble popped. People had to spend an extra hundred bucks a month on gasoline. And an extra hundred on heat and electricity for their homes. (Natural gas peaked in 2001). And that, combined with other rises in cost of living, combined with increasing ARM rates is what brought about this totally predictable collapse. The system could withstand normal inflation. All their computer models factored in the inflation that was expected to be caused by the lowered interest rates. But the analysts live in denial of peak oil, and that caused their computer models to also live in denial of peak oil. But in the end, you can only get so far living in denial.

It is important to note that if we had a "solar/wind bubble" instead of a housing bubble, then the consequences would not have been nearly as disastrous. Both bubbles would have created lots of jobs. But instead of increasing total non-renewable energy consumption, we would have decreased it. And that would have enabled further growth. Growth is what brings wealth. We cant have growth if we cant increase energy consumption or energy efficiency.

Now we are stuck in the precarious position of having to increase total energy efficiency by 5% a year in order to have economic growth. That by itself is very tough to do. Especially when there is no interest, thanks to the public being misled by their wolf-in-sheep-skin CFR masters.

But then we have another even larger problem looming over the horizon. And that is the fact that the world's largest oil exporters are also the fastest growing countries in terms of oil consumption. The export-land model shows that oil exporting countries can rapidly deplete their own export capacity once their oil production peaks. The UK and Indonesia are two prime examples. Under the export-land model, Saudi Arabia could be at 0 net exports within 10 years. That is a worst case scenario. (Actually total global chaos is a worst case scenario, but I'm discarding that for sake of optimism.) The point is that these problems just get worse and worse when people deny they exist. The denial will continue as long as people deny that groups like the CFR want to destroy the USA.

How do they do it? How does the CFR control America? How does it decide our fate? Through central planning. If you believe that there are no central planners controlling the market and society, then you're in denial about more than peak oil! They control the media. They control what gets discussed. They control which scientific theories are accepted and rejected. But even if you believe they are acting in some positive manner, they are NOT always right. Expansion tectonics is a slam dunk example of where they go wrong. And that's why central planning is bad. They just deny huge swaths of reality until they basically destroy themselves. That's if they're benign. If they are malignant they destroy entire societies.


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