Monday, November 9, 2009

Credit Crisis vs. Permagrowth Crisis

Yeah, OK, the Credit Crisis may have abated - at least according to the Sage of Omaha (a.k.a. Warren Buffett, see story here). For example, the spread between BAA and AAA corporate bond interest rates has subsided to a historically reasonable level (see chart below).

Corporate Bond Spread: BAA - AAA

But unless you are amongst the bankers/traders/speculators who survived the bloodbath and is about to see his or her bonus rise once again, you really don't give a damn. Because for you what really matters is the Real Economic Crisis and the chart that really applies is unemployment (see below).

Unemployment Reaches 10.2% - Highest Since 1983

Oh, the pundits will immediately say, but unemployment is a trailing economic indicator and once things are back to normal it will go down fast. Nothing to worry about...

Oh, really? What if this no longer applies? Today's economy is not characterized by fast-reacting manufacturing with short hiring/firing cycles that accommodate domestic production swings. We have exported this dynamic to China, along with much of our manufacturing base, so we are likely to see a very, very slow recovery in job creation.

And if no jobs are to be had, income will suffer and so will consumer spending, which is the foundation of our entire Permagrowth economy. Yes, there is a chance that we will revert to substituting consumer debt for earned income, as we increasingly did during the Bush II era. But if we do, then we will indeed have learned nothing and soon be responsible for our own demise... again.

Therefore, we should immediately start revamping our economy along Sustainable lines. For a model, perhaps we should start looking at Japan from a different perspective, outside the GDP-metric box. I mean, does anyone think that the Japanese are suffering, or are they enjoying a high living standard after well over a decade of so-called "stagnation"?

Let's bottom-line things: Permagrowth/Permadebt is like the high-wire acrobat who must forever keep moving in order to keep his balance and not plunge to the ground. Likewise, our economic model depends on ever more frantic activity to generate more debt and thus more "money" to service this debt. Debt conservation has replaced human development as the self-evident goal of governments.

If this were only a shocking ethical tragedy we could just shrug our shoulders and quote Cicero: O tempora, o mores! Unfortunately, Permagrowth/Permadebt is also completely antithetical to natural law, the simple truth of energy conservation and the constant increase of entropy.


  1. Re: "we will indeed have learned nothing and soon be responsible for our own demise... again"

    Amen, on this you and I truly agree

    So I see you have come back to the other stage you truly excel at, namely your kinder and gentler Malthusianism- Kudos.

    But there are a few scattered pieces in this thread you suggested you might put together so the rest of us could see the model better:

    1. How will debt forgiveness save flipper?
    2. How will you change people's behavior?
    3. What system of control do you suggest we install that you do not see as totalitarian?
    4. What will be the consequence of failure to comply?

    You reject a gold standard where people might have less influence on supply (I don't really know if this is true or not) for a standard linked to energy growth (but easily manipulated when the scientists are corrupted), etc...

    But it seems your model is complex, with lots of parts dependent upon one another, and in the end simply swaps one risk for its twin in the end.

    Awaiting the rest of the model


  2. "Permagrowth/Permadebt is also completely antithetical to natural law"

    Absolutely. I'm just stunned how daily life seems to be ambling forward as usual even though our nation's financial machinery is self-destructing beneath us.

    It reminds me of a character in Lucifer's Hammer (a sci fi book about an asteroid strike hitting Earth). Not knowing what to do after the "hammerfall", The Mailman decides to just keep delivering the mail in his sack. He doesn't question what he will do when his sack is empty or why people even need their deliveries at this point; he just doesn't know what else to do.

  3. ShadowStats now has U3+U6 unemployment at 22.1% AND we are still bleeding.

    CRE is now starting to roll over so it's going to get much worse. The next leg down is upon us.

    I see this as a baton pass-off. The British passed it to us and now we shall pass it to the east.

    TPTB have no interest in national borders. They simply control money and move it to where it best suits them.

    Joe M.

  4. Poor Hellasious,

    My brethren and I piteously regard these quixotic ideals. We have transcended the nation-state. Sun Tzu would learn much from us. We have contingencies for Sigma events. If Rome falls, we will move on. We will adapt, others will perish. The laws of nature work in our favor. Entropy is a powerful fulcrum, we use it to leverage at our whim. Even when you think you have achieved victory, it is simply an intentionally engineered societal control. Oh, Cicero! We will abuse your patience indefinitely!

  5. As an addendum to Banker X's post, Lloyd Blankfein's stated that banks are doing "God's work". They really are a bunch of arrogant and self righteous asses.

  6. ..Lloyd Blankfein's stated that banks are doing "God's work"...

    First I thought it was a joke, or editorial hyperbole. Sadly, however, it's true - he did just say it at a Times of London interview.

    What can I say, but: "Those whom Gods wish to destroy they first make mad".

    Oh, and it's a pretty good contrarian sign, like the hedge fund guy who said he could raise a billion dollars at the snap of his fingers. About six months before the bottom fell out...

  7. Then I'll quite fittingly post this:

    2 hours, yes, but doesn't get boring at any point

  8. "Permagrowth/Permadebt is also completely antithetical to natural law, the simple truth of energy conservation and the constant increase of entropy."

    Hell, Would you please explain the term 'permagrowth' or point me to some other post that does so? I understand the rest of the topics you discuss, but this particular term is unfamiliar to me.

  9. Permagrowth refers to the presumed perpetual growth of credit/debt, resource/energy requirements, and population. Politically, socially, and economically, much of the globe operates with this model. Hellasious, and others, postulate on the causes, possible outcomes, and possible alternatives to the permagrowth juggernaut including its possible demise or eventual transformation by fire or perhaps the advent of rational cooperation with planned sustainability (don't hold your breath Dave, unless you are trying to bypass the pod bay doors)

  10. Thanks for the explanation HAL. I promise to keep your memory units intact (smile).

  11. What would a narcissistic, godless, worshipper of Mammon like Lloyd Blankfein know about the work of The Almighty?