Nicole Foss on 40 ways to lose your future. June 17 2009 theautomaticearth.com
- Deflation is inevitable due to Ponzi dynamics (see From the Top of the Great Pyramid)
- The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply
- Cash will be king for a long time
- Printing one’s way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)
- Debt will become a millstone around people’s necks and bankruptcy will no longer be possible at some point
- In the future the consequences of unpayable debt could include indentured servitude, debtor’s prison or being drummed into the military
- Early withdrawls from pension plans will be prevented and almost all pension plans will eventually default
- We will see a systemic banking crisis that will result in bank runs and the loss of savings
- Prices will fall across the board as purchasing power collapses
- Real estate prices are likely to fall by at least 90% on average (with local variation)
- The essentials will see relative price support as a much larger percentage of a much smaller money supply chases them
- We are headed eventually for a bond market dislocation where nominal interest rates will shoot up into the double digits
- Real interest rates will be even higher (the nominal rate minus negative inflation)
- This will cause a tsunami of debt default which is highly deflationary
- Government spending (all levels) will be slashed, with loss of entitlements and inability to maintain infrastructure
- Finance rules will be changed at will and changes applied retroactively (eg short selling will be banned, loans will be called in at some point)
- Centralized services (water, electricity, gas, education, garbage pick-up, snow-removal etc) will become unreliable and of much lower quality, or may be eliminated entirely
- Suburbia is a trap due to its dependence on these services and cheap energy for transport
- People with essentially no purchasing power will be living in a pay-as-you-go world
- Modern healthcare will be largely unavailable and informal care will generally be very basic
- Universities will go out of business as no one will be able to afford to attend
- Cash hoarding will continue to reduce the velocity of money, amplifying the effect of deflation
- The US dollar will continue to rise for quite a while on a flight to safety and as dollar-denominated debt deflates
- Eventually the dollar will collapse, but that time is not now (and a falling dollar does not mean an expanding money supply, ie inflation)
- Deflation and depression are mutually reinforcing in a positive feedback spiral, so both are likely to be protracted
- There should be no lasting market bottom until at least the middle of the next decade, and even then the depression won’t be over
- Much capital will be revealed as having been converted to waste during the cheap energy/cheap credit years
- Export markets will collapse with global trade and exporting countries will be hit very hard
- Herding behavior is the foundation of markets
- The flip side of the manic optimism we saw in the bubble years will be persistent pessimism, risk aversion, anger, scapegoating, recrimination, violence and the election of dangerous populist extremists
- A sense of common humanity will be lost as foreigners and those who are different are demonized
- There will be war in the labor markets as unempoyment skyrockets and wages and benefits are slashed
- We are headed for resource wars, which will result in much resource and infrastructure destruction
- Energy prices are first affected by demand collapse, then supply collapse, so that prices first fall and then rise enormously
- Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years
- Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)
- Political structures exist to concentrate wealth at the center at the expense of the periphery, and this happens at all scales simultaneously
- Taxation will rise substantially as the domestic population is squeezed in order for the elite to partially make up for the loss of the ability to pick the pockets of the whole world through globalization
- Repressive political structures will arise, with much greater use of police state methods and a drastic reduction of freedom
- The rule of law will replaced by the politics of the personal and an economy of favors (ie endemic corruption)
The highlights above are mine, not Nicole’s