-- Posted Friday, 12 September 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Friday, September 12, 2008
“Phenomenally accurate forecasts”
With the publication of the first-place essay below, by John McIntyre, we conclude our competition on the theme “What Will Save America?” As grim as the outlook is for the U.S. and global economies over the next five to ten years, we cannot afford as a nation to wallow in despair. McIntyre is as pessimistic as we are looking ahead just a few years, and like us, he sees no way to avoid a deflationary depression. But he also sees in this period of economic darkness an opportunity for transformational changes in the way Americans live and work. The path back to prosperity lies in finding and exploiting a new energy paradigm that will solve the world’s fuel problems, he says. His essay is among the most optimistic that we received, but it is also realistic about the difficulties we will face as a nation as we attempt to compete in the radically changed world that emerges from the deep, protracted slump that lies ahead. Here’s McIntyre:
It Is Time for America to Rediscover Herself:
Awakening American Ingenuity and Our Pioneer Spirit”.
The simplest way to understand the root of the problem the United States is now facing is to cite a well-known and stunning statistical fact. America constitutes five percent of the world's population and consumes twenty percent of the world's natural resources. The simple fact is that this is not sustainable. Any person with an elementary school mathematics education could understand this. The problem is that the current model of American capitalism requires this input of resources not only be maintained but be increased continually.
For the past thirty years, the American economy has exploited cheap labor in developing countries such as China in order to increase productivity and export most of the effects of inflation. Now that policy is coming home to roost. With the advent of global communications and the proliferation of American culture, all of those people who once served us now want what we have. Who can blame them? And so what are we to do?
If America constitutes five percent of the world’s population and consumes twenty percent of the world's natural resources, what do we think will happen when China, whose population is roughly four times the size of the United States, sets its sights on an identical pattern of resource consumption. Again, a rudimentary understanding of mathematics is all that is necessary to conclude that China could potentially consume eighty percent of the world's resources. If this were to occur, the U.S. and China would be consuming one hundred percent of the world's resources. The obvious question here is, if that were to occur, what happens to the other 190 countries? Uh, Houston, we have a problem. Obviously radical changes need to be made in the consumption behavior of the developed world. Why not start here and now?
Collapse=Transformation
The question of how to save America may need clarification. Do we want to save the economic model of the past three decades? If that is our desire, it will not be met. The world has changed and it is time for America to change as well. The question should really be, how do we transform America? Firstly, we should be aware that the transformation is already under way. To some observers, current financial markets events may look like the early stages of a collapse of our economy. What is happening is in fact a transformation. What began as a bursting credit bubble and a rapid growth in commodities and energy inflation will succumb to a deflationary depression.
The most important thing we can do to help America right now is begin to talk about the magnitude of what is taking place in our economy without couching it in terms of doom or cataclysm. The level of prosperity we have experienced for many years is no longer going to be our way of life, at least during this transition. We are simply unwinding wild excesses that most anyone would agree have taken place particularly over the past decade. This unwinding process will at times feel scary and appear chaotic to the uninformed eye.
The Upside of Deflated Wages
If we can remain calm and fully cognizant of what is transpiring, we will adjust and we will emerge all the better at the other end. Of primary importance is that we not panic. We remain centered through open and honest communication and rational discussion about the transformational nature of the process rather than focusing on its destructive nature. Yes, destruction will take place but it will be constructive destruction, which clears the way for a new more intelligent economic paradigm.
Once we have purged the excesses of debt and hyper consumption, a new day will dawn for America. What is coming over the horizon is an energy revolution. And the cycle of real estate deflation that is now upon us and wage deflation soon to come will position the United States perfectly to be the world leader in alternative energy technology production.
Without the coming deflationary cycle we could not be competitive in this new global market. Imagine if the median cost of a house in the US in 2012 was $400,000 and the average hourly wage was $35.00 per hour. How could we possibly compete in the newly emerging reality of wind turbines, solar arrays, and hydrogen fuel cells? The input cost of labor would be too high and the opportunities for exports would be limited at best.
Whither the Dollar?
And then there is the issue of the depreciating dollar. When the energy revolution comes, where would we be with a strong dollar? All of the experts on CNBC are always telling us how good the weak dollar is for exports. That weak dollar, which most everyone is hoping will strengthen, will continue to disappoint. There is a lot of talk about a strong-dollar policy, but no real actions are being taken to achieve that end. The interesting thing to note here is that there really are no actions that can be taken to strengthen the dollar. The policy makers are boxed in, as noted by many who discourse on the subject.
There is a similar boxing-in that has occurred in the national real estate market. Month after month we hear of new government bailout plans and projections of a "floor under housing." All the while, the housing-sector collapse accelerates. The best thing to do now is to look objectively at what is actually transpiring, rather than fixating on what government officials and experts claim is going to happen. They will continue to talk of the bottom of the housing market and the reversal in the dollar while both continue to get crushed. In 2012 when the median house in the US costs $60,000 and the average hourly wage is $7.00 we'll all be joyfully building wind turbines and solar arrays for what feels like minimum wage but buys us a nice little house with a picket fence, a dog and a cat.
Seizing the Moment
Finally, and most emphatically, is the need for an organized, grass roots campaign for a transformation of our energy policy. In addition to thoughtfully discussing our current crisis in terms of being a transitional period, we must also form a loud and synchronized chorus calling for the one thing that can get us out of this mess. Innovation, invention and increased productivity have always been the mechanisms that have sown the seeds of security and prosperity for future generations of Americans. What we need right now is not to simply increase domestic drilling for oil and hope that everything will go back to the status quos. We need to take advantage of this crisis moment and allow it to move us into a new era of energy innovation. America loves a challenge and we will always rise to meet it. There is a new era dawning around the world. Most everyone intuitively knows that the world is nearing an inflection point, opening the door to a new energy paradigm. Why not conquer our fears, overcome our anxiety and take the lead into this new frontier? Rather than clinging to yesterday and the technology of days past, shouldn't we look forward to the possibilities that lie ahead? We can innovate our way out of this mess. In fact, this is what we have always done. Why not now?
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Friday, 12 September 2008 | Digg This Article | Source: GoldSeek.com
