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Monday, May 20, 2019

the 2020 crash


THE 2020 CRASH
No, you cannot time the collapse.  I’ve tried before and been rather embarrassed.  Not that my attempts were a waste of time-not by any measure.  Y2K prompted me to learn far more than I ever had previously about big picture vulnerabilities ( mostly thanks to the noble efforts of Gary North ).  I also prepped much better than ever before.  Fear of the housing bubble popping prompted by acquisition of land and the fire under my ass to move off grid.  And the fear of the next crash prompted near total Alpha Strategy levels of complete supply independence for five plus years.
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And, to enthusiastically toot my own horn, I did all of that while under the yoke of the ex-wife’s financial stranglehold and at times earning mere minimum wage ( but always, far below what most of you earned-in other words, ANYONE can so prep if motivated.  Unless you prep for Forever Happy Motoring and FLIR scope ownership ).  Yet, even knowing I’m an idiot and that I’m going to be sorry, I’m still going to call the next landmark economic collapse at 2020 ( with the understanding it has started this year but will be obvious next ).
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The last collapse COULD be argued as 2007 being the actual start of the process ( although, I claim 2005-more on that in a moment ), but sudden oil price spikes and other sudden shocks such as leading institutions bankrupting was probably when most folks pegged The Beginning Of The End as occurring.  You COULD say that this next collapse began the day the Fed started raising interest rates again after eight or nine years of near zero rate stimulus.  Which would make it 2015/2016.  But most folks didn’t notice a huge amount of change until now.
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And even then, the change is more instinctual than readily apparent.  Even so, I’ll just call the last crash as 2007/2008 and this one 2019/2020.  Note of course I have no crystal ball.  No one thing is causing this.  The coming food price hikes from Midwest flooding could be pretty bad, IF our trading partners restrict replacement grain exports.  Or, it could just be a repeat of, say, when ethanol caused sugar and meat prices to triple.  Bad, but more irritating than life threatening.  Ten days ago ( from when I publish this ) there was a big kerfuffle with China trade.
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It could be posturing and nothing happens.  Which has been what has been the norm.  Anymore, MOST times the talking head spits and sputters and then moves the Infamous Red Line back again ( big talk, sanctions if you buy Iranian oil, then quietly put another six months delay in enforcing that ).  It could be a repeat of the Great Depression of 1929 when global trade broke down.  Then, we had so much food we were destroying it.  Now, we do import some amount of food.  Russia exports more wheat than we do.
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We need trade for our oil, obviously.  Our “fracking miracle” STILL leaves us without enough oil if we do not import 2/5ths of it.  And that brings us to today’s breathless panic and ranting.  This countries first major oil fields supplied us with gushing surplus for a good solid forty years ( the average lifespan of a field if not over-exploited ).  After the crash from that winding down, we turned to Alaska, the Gulf of Mexico and, as far as the western economy as a whole, the North Sea.  Alas, that started winding down in just half the time ( 2005 global Peak Oil ).
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That oil bonanza was not only lower EROI oil, it was pumped too enthusiastically and only delivered an economically viable amount of oil for twenty years.  Saudi Arabia, at the time of Matthew Simmon’s writing near fifteen years ago, had already started seeing production drops from forty years of pumping AND overproduction.  They were already frantically pumping from everywhere else besides Ghawar, to keep up production.  That doesn’t mean they ran out.  It means they will drop drastically in production, more than likely, at their twenty year mark.  They will NOT bail us out this next time, is all I’m trying to convey.
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Mexico started seeing 6-9% declines a year after near a century of production, as did Venezuela ( in conventional crude, leaving tar as a poor substitute ).  Here is the dirty little secret of Fracking Oil.  It doesn’t pump at forty years.  It pumps for four.  After a bit over ten years of production, the frackers would see a 80% decline in each well if as a whole they were not frantically adding new ones all the time for an aggregate slight increase or at least plateau production.  That miracle could end at any time, especially given worsening economic conditions.
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The fracking industry as a whole NEVER made money.  Ever.  It is in the bankers interest to lose money on it, because ultimately energy IN allows the bankers to manipulate the economy successfully.  My point isn’t that as soon as the fracking oil runs out we crash.  More like, as soon as enough economic contraction bleeds money away from fracking, that entire 6 million barrels a day of supply is endangered.  And we are already seeing major economic contraction.  But even THAT isn’t the major problem.  Before the fracking fields crash in production, JUST the lack of fracking increases cause trouble.
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Remember that under our system, you cannot stop growing.  The spice must flow, by which I mean the interest payments must keep up with the constant increase in additional loans.  You cannot simply add more money into the system.  There must be SOME backing to that money.  It has been oil that feeds our economy.  Which means that JUST to keep up, oil must increase in supply.  When the oil supply fails to grow, that alone causes economic failure.  And while the fracking oil has increased massively in supply these many years, so has the amount of borrowing.
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That is where the weakness is currently.  So much money has been borrowed to paper over the old bad loans from 2008 on, it is becoming impossible to service those loans.  Especially when the growing legions of unemployed can no longer buy the company’s products.  Or, taxpayers can no longer support the loans the local governments took out to keep the lights on.  I’ll continue tomorrow.
( .Y. )
( today's related Amazon link click here )
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note: this was just a coincidence ( since I write one week ahead ), but yesterday I saw a video by "Truth Never Told" which says that global trade is down 30%.  Which is worse than 2008/2009.  Make of that what you will.
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note: how about a $115 manual leather stitching machine?  Churn out leather goods as fast as an Ornamental factory, or great for the apocalypse.  Video click here
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note: free for today books.  YA dystopia here 
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14 comments:

  1. I still remember when I finally got it about the ROE in oil. Before I was a sceptic because I did not think we would run out of oil like you were saying but suddenly I finally understood that we were not going to run out of oil we just were not going to be able to afford it! That was a huge game changer for me! Thanks

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    1. Glad to help. It ain't no picnic shedding the programming. Congrats.

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  2. Saw this on the local news this morning Jim, and thought that you might find it interesting: How Far a $100,000 Salary Goes in America’s 50 Largest Cities…

    Here are a few examples:

    San Francisco

    Federal income taxes: $17,262.50
    Net pay after income taxes: $72,305.44
    Annual rent: $52,200.00
    Annual groceries: $5,361.00
    Annual utilities: $1,418.76
    Annual driving costs: $8,856.00
    Annual healthcare: $7,203.00
    Income leftover: -$2,734.00

    So a $100k annually won’t even cover your basic cost of living in san fransicko, and leaves you minus nearly $3k in the hole. But you do get the added bonus of watching the junkies and the homeless, shooting up, and defecating in the streets, and if you’re feeling a little more adventurous, you can head on down to the local park to watch the homosexuals having anal sex :D (Note the transportation costs per city, since this is a topic near and dear to yourself).

    Sacramento is a little better. You when all is said and done, you will have $24k disposable income left over. Annual driving cost: $13,352.00

    Huston was one of the better cities, leaving you with $39,060 disposable income annually.

    I think that Memphis Tennessee was rated at or near the top. Unfortunately, Memphis is Tennessee’s version of Oakland Ca.

    One anticipates that the cities in which a $100k goes the farthest, are the cities in which earning a $100k a year salary is less likely, but that’s just speculation on my part.

    http://themakemoneysite.com/how-far-a-100000-salary-goes-in-americas-50-largest-cities/

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    1. I think relentless cost cutting of the 9% will see salaries in these secondary cities drop VERY quickly. If the jobs aren't just eliminated wholesale. Want to still work? Our data shows the cost of living is 40% lower here. Pick a haircut or a pink slip. Good call-I think you are correct.

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  3. Following. A field report from the southern outpost down here in Las Vegas. The economy is churning away down here, with many elements in play. Commercial construction is throwing up forests of warehouses and light industry buildings. Road and infrastructure improvements and new additions are underway. Stadium (s) are being built, pro franchise sport teams are coming in. I put junk metal out on trash day in my older immigrant neighborhood and it is not scooped up at all by salvagers, (they now have some such jobs nowadays). But my simpleton observation believes it is free money banker financing (put in the pipeline financing this years ago) that is contingent on other good macro indicators and is quickly cancelled from play in a new arrival of a bad weather economy downturn scenario. "No one thing is (or will be) causing this". (Next economic downturn / crash) there will be a whole host of influencing factors not of the economic variety that will upset the apple carts of commerce and economies. The April N.I.C.S. checks (broke another transactions record) for gun sales proves gun buying is still off the hook big, even in Trumpland and good economic smokescreening and gaslighting of the population. They feel or sense something to be voting with dollars at Ye Olde Gun Emporiums. There is much macro influencers from field to table, and raw goods to finished product, to delivery and sales etc. A wrench casually thrown into the gears by "anyone" (by whatever motivation) in the chain will trip that horse right out from that wagon pulling, then the ride is over for everybody aboard and awaiting at the stations. Sad pandas all around then again, as before, but expect worsening chapters as the plot goes along.

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    1. It should be interesting up here in Elko. I imagine it might be a reversal from a decade ago. Other areas rebound as we collapse. Looking forward to it, and wish it would hurry along.

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  4. Right. There are whiffs of bigger slowdowns going on globally outside conus that are by default eventually linked up to our economy. (Zero hedge, etc) We are only above average economically (by "perceptions" not by true statistical measurements) as a result of banksters stinky finger stimulation manipulation of free digital synthetic money injections into the business community rumps. Expect October surprises, black swans, false flags, and various other shenanagins or incompetence to derail things. History repeats. DARWIN WINS!

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  5. A couple points:

    re: big cities

    *** I visited Sacramento California last week.
    Cellular telephone service was the equivalent of ten-seconds out of sixty-seconds.
    Texts burst through, but voice calls and Internet instantly collapsed.

    *** I was in Portland Oregon Saturday. Same thing. No signal, failed connection, active text but slow voice or Internet.

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    re: today's book == TWILIGHT IN THE DESERT

    Recognizing their death-rattles approaching, what if Arabians accelerate their conquest of The West™?

    With diminishing oil income, would Arabians grab at any available resources to maintain their illusion of power? Minerals in Africa, factory fishing vessels the size of medium cities? A monopoly on repairs to a failing electric grid?

    On the other hand == always the optimist == I could be giving them too much credit.

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    1. The Arab wealth paradigm is the same as Africans. Tribal, the other guys tribe in charge and the guy just rewards himself and family and few others. The masses have little interest in following any plans unless they can share in the loot. And since the loot is falling...As for cell phones. A couple of years ago when Elko was bursting at the seams, the Internet went out more frequently, brownouts, water pressure crap. Since those idiots moved out, much better delivery services for everything. So, Sac and Portland have way overshot their infrastructure base. Good times.

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  6. Just for Shits and Giggles and not to stalk you, checked out your local police crime reports on line.
    Man you wern't kidding, arrest's, tickets, big fines for little things.
    Forget to turn on headlights? $400.00. Throw a small object at passing car? $550.00. Shoplift a $2.99 article? 3 months jail plus fine.
    Looks like your right! Got to pay those pensions and salaries!
    Another section had job openings listed, 3 for educated workers at 3 different mines, no dirt movers needed though.
    And 1 that caught my eye, Sheep herder! Experienced, able to
    vacinate and diagnose sheep.
    Able to be alone for long periods of time (not good for the nervous sheep) trailer and food provided starting at $1895.00 a month, appears to be south of you.
    Interesting place that Elko.

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    1. Well, you are more abreast with local goings on than I am. I actually didn't realize it was THAT bad! Thanks.

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    2. Looks like they left out a crucial component to that ad.

      “Must not be sexually attracted to sheep”. “Kiwi’s and Aussies, need not apply” (Not directed at any fellow minions :D )

      But in all seriousness, it actually doesn’t sound like a half bad gig. The pay isn’t too bad either. That would have been a perfect gig for a dude such as Claude Dallas, that actually sought out that kind of lifestyle.

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    3. I'm sure I've seen that ad before-so they must have a hard time keeping help. Perhaps they actually are checking the sheep for herpes :)

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