Economists expect report of first deflation in 54 years

[DanS]

Well, this thread's bought it.

There is still some good stuff here. Barnabas' post was good, f.e. A real-world experience of deflation. I've sure not experienced it personally.

But we would all be better off if some people would weigh more carefully what they choose to reply to. These string quotes are unbearable.

[Felch]

Is it not logical, that if one side failed, because it did not compete aggresively enough, that had it done so, the other side would have failed instead? Like Japanese cars and playstations - each formely non-´western´ country being equally successful - imagine what that would have meant for the ´west´ ! Would that even be possible at all?

Everybody profits from competition. I drive a Honda, but I play an X-box. Honda makes better cars (in my opinion) than Ford or GM. Would I be better off with a Ford? Nintendo made a better system than Atari, but lost ground to Sony, which lost to Microsoft. I'm happier with my 360 than I would be with a 2600. Competition brings out the best in people, and that's why it works.

The caveat there is that unfair competition, like with corporate espionage or something, is no good. The free market works when there are laws that govern it.

[Victor Galis]

I'll have a look when I can. Any good places to check?

I've run into it in classes and seen references to it in other places, I'm trying to see if I can get a good source online. Generally though growth in the 1870s-1900s was below 1% per year while, now it's on average 2-3% per year. I still need to find a source to back that assertion.

How many trillions are floating around? My guess is that it would raise the inflation rate by ~2%. But then again, I have no idea about the true numbers.

I don't think anyone can give you a good guess. The problem is that money is mostly created by the financial sector these days through credit. The question is how many trillions would be created by that initial trillion.

Then they walk away. Junior tranches were sold at a discount for that very reason.

Right, but you'd have to negotiate with them. If the holder of the junior tranche is different from the holder of the senior tranche, the guy you'd wipe out by renegotiating has no stake in seeing you not foreclosed upon. I agree that if the mortgage were still together or the junior tranche deep enough, there'd be some incentive to renegotiate to prevent foreclosure.

I agree. I'm wondering how Agathon feels about the the practical history of Marxist theory.

I have a feeling that Marxist theory could produce a workable economic situation if: 1) It were democratic, 2) the rest of the world didn't go out of its way to destroy it, 3) the vast majority of inhabitants wanted the country to be communist, 4) some other conditions that escape me at the moment. Needless to say, none of the communist countries came even close to meeting those conditions. The countries that might have, instead put a social safety net in place and the workers calmed down because things weren't so bad anymore. (I also suspect that solution beats Marxism.)

DanS has been buying. I've been buying. I think that the bubble was irrational, and people came to their senses. You're right that a lot of lemmings sold things they shouldn't sell, but they're idiots. You can't stop human idiocy, it's a powerful force.

And other people sold things they shouldn't have sold because they were forced to raise money from somewhere and the bad stuff wasn't selling.

Sounds good. Would it pull us out of a deflationary spiral though?

Probably. If not... that would imply we can print money with no consequences (inflation being the normal downside to printing money).

Environmental disasters would be interesting. The guy with the most guns will eat though, so sell your Prius and buy a Bushmaster.

Maybe. I'm thinking the guy with most guns that starts in the least devastated part of the world will eat. Actually... drinkable water may be the real crisis. We're already having problems on that front.

[Victor Galis]

[QUOTE=Blaupanzer;5536652][QUOTE=Agathon;5536532]
This is pure faith based economics, and deserves no more time than a witch doctor's economic theory.

The witch doctor's theory is probably amorphous, filled with truisms, and cannot link micro with macro in a single theory.

Beware macro theories that can link with micro in a single theory. We're not there yet.

The First World War had relatively little to do with capitalism. It had very little to do with anything really. It happened to be the case that the countries involved were more or less capitalistic, but they probably would have gone to war regardless.

There are non-Marxists who would disagree with you. Some of them explain it as an anti-Globalization backlash. I'm not sure I buy that. I used to know a lot more about WWI, and a few years ago I could have probably spoken at length about it. I seem to remember blaming Kaiser Wilhelm and his buddies. WWI would have never happened if Bismarck had been alive and in control.

[Felch]

There is still some good stuff here. Barnabas' post was good, f.e. A real-world experience of deflation. I've sure not experienced it personally.

But we would all be better off if some people would weigh more carefully what they choose to reply to. These string quotes are unbearable.

Dan, you're no fun.

[DanS]

If there's more than two quotes in a post, I just skip the whole thing.

[OzzyKP]

I'm with Dan actually.

I have a feeling that Marxist theory could produce a workable economic situation if: 1) It were democratic, 2) the rest of the world didn't go out of its way to destroy it, 3) the vast majority of inhabitants wanted the country to be communist, 4) some other conditions that escape me at the moment. Needless to say, none of the communist countries came even close to meeting those conditions. The countries that might have, instead put a social safety net in place and the workers calmed down because things weren't so bad anymore. (I also suspect that solution beats Marxism.)

When an economic system is batting 0 for 30, at what point do you stop hoping that next time "gets it right" and start figuring there is some inevitible link between the government stepping in to control the economic life of a nation and the government stepping in to control the political/social life of a nation?

[MrFun]

Bring us enlightenment, Ozzy!!

[Kidlicious]

Really? You honestly believe this? You're like a Commie Kenobi.

Cuba was boned after the Soviet Union pulled out. It was "saved" by resorting to a limited form of capitalism, where Canadian and Europeans would spend their vacations at crappy resorts the natives were forbidden from entering. Then when Hugo Chavez came into his oil wealth, Cuba was able to tone down the capitalism. Hardly a success story.

Where do you get your information from?

Cuba survived an artificial peak oil. How do you think a capitalist economy would do under those conditions? Pitifully I can assure you.

[Felch]

Cuba survived an artificial peak oil. How do you think a capitalist economy would do under those conditions? Pitifully I can assure you.

Where do you get your information from?

Seriously.

[Felch]

If there's more than two quotes in a post, I just skip the whole thing.

Having a thousand quote blocks per reply is a Poly tradition, dating back to the good old days of Middle East and Abortion threads.

Don't you have any sense of nostalgic longing?

[Kidlicious]

Where do you get your information from?

Seriously.

Seriously, no really seriously, here it is.

http://www.yesmagazine.org/article.asp?ID=1462

Summer 2006: 5,000 Years of Empire



Peak oil preview: North Korea & Cuba
by Dale Jiajun Wen



A tale of two countries: How North Korea and Cuba reacted differently to a suddenly diminished oil supply


That peak oil is coming is no longer a question. It’s only a matter of when. The global food system we are familiar with depends crucially on cheap energy and long-distance transportation—food consumed in the United States travels an average of 1,400 miles. Does peak oil mean inevitable starvation? Two countries provide a preview. Their divergent stories, one of famine, one of sufficiency, stand as a warning and a model. North Korea and Cuba experienced the peak-oil scenario prematurely and abruptly due to the collapse of the former Soviet bloc and the intensified trade embargo against Cuba. The quite different outcomes are partly due to luck: the Cuban climate allows people to survive on food rations that would be fatal in North Korea’s harsh winters. But the more fundamental reason is policy. North Korea tried to carry on business as usual as long as possible, while Cuba implemented a proactive policy to move toward sustainable agriculture and self-sufficiency.

The 1990s famine in North Korea is one of the least-understood disasters in recent years. It is generally attributed to the failure of Kim Il Jung’s regime. The argument is simple: if the government controls everything, it must be responsible for crop failure. But this ideological blame game hides a more fundamental problem: the failure of industrial chemical farming. With the coming of peak oil, many other countries may experience similar disasters.


See Also: It Takes Energy to Make Energy
North Korea developed its agriculture on the Green Revolution model, with its dependence on technology, imported machines, petroleum, chemical fertilizers, and pesticides. There were signs of soil compaction and degradation, but the industrial farming model provided enough food for the population. Then came the sudden collapse of the Soviet bloc in 1989. Supplies of oil, farming equipment, fertilizers, and pesticides dropped significantly, and this greatly contributed to the famine that followed. As a November 1998 report from the joint UN Food and Agriculture Organization and World Food Program observed:

The highly mechanized DPR [North] Korean agriculture faces a serious constraint as about four-fifths of motorized farm machinery and equipment is out of use due to obsolescence and lack of spare parts and fuel. … In fact, because of non-availability of trucks, harvested paddy has been seen left on the fields in piles for long periods.

North Korea failed to change in response to the crisis. Devotion to the status quo precipitated the food shortages that continue to this day. Cuba faced similar problems. In some respects, the challenge was even bigger in Cuba. Before 1989, North Korea was self-sufficient in grain production, while Cuba imported an estimated 57 percent of its food1, because its agriculture, especially the state farm sector, was geared towards production of sugar for export.

After the Soviet collapse and the tightening of the U.S. embargo, Cuba lost 85 percent of its trade, and its fossil fuel-based agricultural inputs were reduced by more than 50 percent. At the height of the resulting food crisis, the daily ration was one banana and two slices of bread per person in some places. Cuba responded with a national effort to restructure agriculture.

Cuban agriculture now consists of a diverse combination of organic farming, perma-culture, urban gardens, animal power, and biological fertilizing and pest control. On a national level, Cuba now has probably the most ecological and socially sensitive agriculture in the world. In 1999, the Swedish Parliament awardedthe Right Livelihood Award, known as the “Alternative Nobel Prize,” to Cuba for these advances.

Even before the 1990 crisis, primarily in response to the negative effects of intensive chemical use as well as the 1970s energy crisis, Cuban scientists began to develop bio-pesticides and bio-fertilizers to substitute for chemical inputs. They designed a two-phase program based on early experiments with biological agents. The first stage developed small-scale, localized production technologies; the second stage was aimed at developing semi-industrial and industrial technologies. This groundwork allowed Cuba to roll out substitutes for agricultural chemicals rapidly in the wake of the 1990 crisis. Since 1991, 280 centers have been established to produce biological agents using techniques and supplies specific to each locality.2

Though some alternative technologies were initially developed solely to replace chemical inputs, they are now part of a more holistic agroecology. Scientists and farmers recognized the imbalances in high-input monoculture, and are transforming the whole system. In contrast to the one-size-fits-all solution of the Green Revolution, agro-ecology tailors farming to local conditions. It designs complex agro-ecosystems that use mutually beneficial crops and locally adapted seeds, take advantage of topography and soil conditions, and maintain rather than deplete the soil.3

Agro-ecology takes a systemic approach, blurring traditional distinctions between disciplines and using knowledge from environmental science, economics, agronomy, ethics, sociology, and anthropology. It emphasizes learning by doing, with training programs allocating 50 percent of their time to hands-on work.The wide use of participatory methods greatly helps to disseminate, generate, and extend agro-ecological knowledge. In short, the agricultural research and education process has become more organic as well.4


Important institutional changes have eased the transition. Big state farms have been reorganized into much smaller farmer collectives to take advantage of the new labor-intensive, localized methods. The change from farm-laborer to skilled farmer is not an overnight process—many newly established collectives lag behind established co-ops in terms of sustainable management, but programs are in place to help them catch up.

Cuba’s research and education system played a pivotal role in the greening of the country. The focus on human development has practically eradicated illiteracy. Cuban workers have the highest percentage of post-secondary education in Latin America. This highly educated population prepared Cuba well for the transition to the more knowledge-intensive model of sustainable agriculture.

In the 1970s and 1980s, most agricultural education was based on Green Revolution technology. The 1990 crisis rendered many agro-professionals powerless without chemical inputs, machinery, and petroleum. In response, agricultural universities initiated courses in agro-ecological training. A national center was created to support new research and the educational needs of the agricultural community. Now, courses, meetings, workshops, field days, talks, and experiential exchanges are organized for farmers. As some traditional methods of organic farming have survived among small farmers or in co-ops, farmer-to-farmer communication is widely utilized to facilitate mutual learning.

The coming of peak oil will shake the very foundation of the global food system. The hardship Cuba and North Korea experienced in the 1990s may very well be the future we all face, both already ailing rural sectors in many Third-World countries, and highly subsidized agriculture in the North. Cuban agriculture shows that there is an alternative—increasing output and growing better food while reducing chemical inputs is possible with proper restructuring of agriculture and food systems.

It is unlikely that we will have an abrupt peak-oil scenario where half the fossil-fuel agricultural inputs disappear overnight; more likely we will have gradually yet steadily rising oil prices, making conventional chemical inputs increasingly unaffordable.

This is the advantage we have over Cuba and North Korea — while virtually nobody predicted the sudden collapse of the Soviet bloc, we know peak oil is coming and have time to prepare. We have disadvantages as well: peak oil will be a global crisis, probably made worse by global warming, so there will not likely be any international aid to bail people out in the face of a major food crisis—either we deal with the problem now, or nature will deal with us.

Not only politicians, but also ordinary people need to consider the question: should we try to shore up the system and carry on business as usual for as long as possible, or should we take preemptive measures to avoid disaster? This choice may determine whether we end up with a more sustainable agriculture like Cuba, or with disastrous famine like North Korea.

[MrFun]

Summary of the article Kid provided:

"The sky is falling! The sky is falling! The sky is falling!"

[Unimatrix11]

About what capitalism has to do with WWI (you will slap your forehead, cause this is so obvious): Imperialism? Militarism? Both are capitalistic off-springs.

Imperialism wants ressources, or new markets for -producing goods and sell them with a profit-. The states paid for the protection of the colonies and thus painted them their national colors, but mostly colonialism was private people seeking profit overseas (or, in some cases, state-capitalist enterprises). Now, i dont have to list up all those colonial disputes you can read up on in any history school book, right? It was said, that the million little business disputes between the germans and the englishmen amounted to the greatest reason for war ever.

Militarism: It is in fact true, that after crash of 1873, the economies did not do all that well in europe. How do you get people back in labor, if the private sector fails? Public spending! Today it´s bailouts, yesterday it was keynesanism, and at the end of the 19th and in the 1st half of the 20th century, it was mililtarism. The decicive point of all of which is to increase the state quota, in order to keep up the process of reproducing capital via paid labor. The utitlity-aspect reveals itself as a mere pretext in these situations btw.

Now, i dont really have to show, how these two then impregnated each other and finally lead up to the great war, for which the assassination of crown prince Ferdinand and a jingoistic policy of Conrad von Hötzendorf and Kaiser Wilhelm II. was only the ignition.

Conduct:

Without the massively enhanced production capabilities of the industrial revolution, which took place under capitalistic conditions, the war would have not turned into a industrial slaughter house for which a whole generation was sacrificed. Without the conditioning of people to the needs of the machine (rather than vice versa), the tremendous ammount of stress could have never been born by the men at the front. Imagine laying under artillery fire for a whole fortnight, even hoping it will not end, for when it does, even worse things will happen. Sounds like the oridinary day in the factory at the day pretty much - only raised to a new level: Long workshifts of labor conditioned by machines (fast, monotone, loud and dirty), always under stress and fear, you might get ´fired´ (!). The machine is your friend, your enemy is human (but so are you). In that sense, WWI even ´refined´ capitalism, as it showed, that people can not be totally submitted to machines, without reaching a state which can only be called insane even within its categories.

Without financing the war on massive credits btw, it would have had to end after about 3 months at the most, since all the countries involved would have been utterly bankrupt by then. (It could be argued, that from that point on, America had already won the war, despite the fact, that it had two more years to go before it even entered it - and it did enter partly to make sure it would get his loans paid back).

Aims:
America wanted ´freedom of trade´ - no wonder, his corps where by now operating globaly and it was not a co-incidence, that america entered the war about the commercial losses inflicted by the german subs. Germany wanted ore fields in the west and the economic colonization of russia. And then there were the reperations. In the treaty of versailles, the value of a human life was actually ´calculated´: An american $4,720, a frenchman $2,900, a Russian $2,020. These assessments ´were based as carefully as might be managed on the productive capacity of an individual balanced against the amount he would consume in his estimated lifetime´ (Stokesbury, ´A Short History of World War I´, p. 310). It´s not so much the fact that it was tried to assess a life´s value in monetary means - that has probably been tried before. It´s the fact, that this was done, not to account for a couple of hundreds, like might have been done in some medievel feud, but for millions - and that an american should be worth more than, say, a russian! This is not an isolated thing, but just one of the most drastic examples, how in capatilsitically domesticated societies, the value of a person is almost ´naturally´ measured in such categories (production vs. consumption) and how they have the tendency to wanting to get rid off their ´unused hands´. It goes as far as the morality of: ´You have to earn your life (and only paid labor counts).´ Jobless people, who want to work, are just useless (or a cost-driver), but if you refuse to do paid labor, you are frowned upon like the ho that doesnt want to spread her legs. How much, do you think, an african life would have been worth at Versailles ? Considering the fact, that their grandmas still used to knit socks instead of buying them, i´d guess pretty much 0...
EDIT: And if you consume more than you produce (always for someone else), it follows from this logic, that society puts a price on your head.

[Felch]

That article didn't prove your case that planned economies are better than free markets. In fact, North Korea is more restrictive than anywhere else in the world, and it failed. It also didn't prove that free market economies would fail in the event of peak oil. It showed that Cuba survived by adjusting to diminishing resources.