Friday, October 17, 2008

It’s the end if the world as we know it part II…

Before I get to the end of the world let me comment on recent stock market events.
Mish Shedlock at wrote a post a day or two before the last DOW rally that a look at Elliot Wave theory would suggest another sharp move up on the DOW then another fall . Nice call Mish! That rise came right away.

Gold has been in a downward trend lately, erasing recent gains. It looks set to test its September lows which broke below $750. per once. We could see a major sell off down to the $500. level or lower if panic selling takes hold. I don’t like gold at these prices as they are historically high and jumping in here leaves little cushion for down- turns. Personally I’m on the sidelines waiting for a much lower entry point.

The End of Civilized Society
What makes America unique is it is a group of united states or small countries, if you will. All working together in co-operation. It’s unprecedented in world history. The European Union is an attempt at duplicating this success and we are flattered.
Keep in mind though that co-operation of this sort is so rare that finding similar examples in history is practically impossible.

We are on the cusp of letting it all go. Anyone who’s been divorced can tell you when it comes apart you can’t put it back together the way it was, if at all.

Many states are facing shrinking tax revenues now which will only worsen. Property taxes were the first to dry up. Sales taxes are drying up now as are income taxes. The big three.

You only have to dial 911 in an emergency to appreciate some of the critical services these taxes pay for. Police, fire, road maintenance, the list goes on. What happens when the police don’t come or your house burns and no fire fighters show up? Many would ask how schools would remain open or parks and community services for that matter. The basic perks of socio-economic co-operation. A rapid breakdown in the quality of life in your town, I answer.

As police leave for better paying prospects or are let go due to shrinking budgets, less law enforcement results, less law enforcement more crime.
Something I remember from the 1970s is the quality of officers on the local police forces. Mostly I encountered small minded bullies and crooks with badges in the suburban Seattle neighborhood where I grew up. I could go on with examples but you get the picture. It promises to be worse this time.

The most notable condition of the 70s I remember was crime in my neighborhood. We used to leave our keys in the car and our front door unlocked. Then the economic downturn came and we had our car stolen and more than one time we woke to find a stranger in our house. Drug sales became part of the scenery and the crime that followed it. This too will come again but a higher octane version this time around I’m afraid.

Gangs are now much more prevalent than they were in the 70s. They proliferated through the 90s and as city dwellers can attest, they are a much larger threat now than before. In the absence of law enforcement, gangs will only get worse, carving out wider spheres of influence with the most criminally psychotic individuals rising to the top and controlling their fiefdoms as tyrants or warlords.

A dark vision of the future?
Fiefdoms are the most common political structures in history. Mistrust of outsiders will always contribute to this kind of social structure. Gang style hierarchies built on brutality, greed and a lust for power over others, over generations will build to monarchies. These seldom grow into what we would call democracy. In fact the global co-operation we now enjoy is so fragile once broken it may go missing for many generations.
We are now facing a breakdown of our system and the loss of co-operation among countries, states cities businesses and individuals. And the road to Fascism is not much further.

How will governments deal with the impending loss of tax income and social decay on the back of the largest public bailout of private firms in recorded history?
Raise taxes.

During the Roosevelt administration the tax rate reached 73% leading to the largest black market in American history, and a Soviet style decay of domestic markets, workmanship and industry. Why work at all when your government takes it all away?

If you thought the quality of 70s era cars and ‘made in America’ everything was horrible (and it was) wait and see what comes out of this mess.

We are in for rough times. Don’t get me started on peak oil. Oil will probably drop to $50. per barrel but won’t stay there forever. Even with a pullback in demand driven by recession we are still close to peak production with Mexico and Canada dropping off as world suppliers fast. Petroleum is part of nearly everything we use in the modern world.

How screwed are we now?


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