We in the industrialized world, and U.S. citizens in particular, are incapable of envisioning an economy that isn’t growing. If you’ve been reading much on LetTheSunWork, however, you already realize that economic growth must eventually stop. The only question is when. The culture believes the economy will keep growing for generations. We believe it’s going to stop within this generation; sometime during the lifetime of most people reading this, we expect the Triple Threat to cause our economy to stop growing and begin to shrink.
When the economy takes the full hit from the Triple Threat, petroleum prices will increase. Those who commute long distances daily to work will be the canaries in the coal mine. We will see the disposable incomes of this group decrease first, as more workers either (a) pay more for housing close to where they work, (b) opt for lower-paying jobs closer to where they live, or (c) continue commuting and divert more of their income to travel cost.
Anecdotally, we met our first example recently when we visited with May, our server at a small barbeque restaurant in rural Alabama. This was her first day, she told us, although she had been a waitress at a restaurant nearby for several years. Had May left the other restaurant? No, she now worked for both, shuttling between the two based on who needed her when. She had worked as a waitress at the other restaurant for extra money to supplement her job in the city nearby, but recently gave up her city job because gas was costing her too much. She will make considerably less now, but enough to get by, and the high gas bills are a thing of the past.
The economy’s large enough not to feel May’s decision too severely, but when 5 million, or 20 million, or 50 million others join her (and they will), growth will slow.
Everyone who reads knows about the contraction in real estate in the U.S. As we write this, home foreclosures are up in the Atlanta market (despite Atlanta’s healthy economy) by about 150% in less than a decade. And economists estimate that about $800 billion in loans will come up during the years 2007-08 for readjustment of their interest rate, and of course every one of the monthly payments for those loans will be increasing. The U.S. President and Congress, distracted by the oil war the U.S. is now trying to end in Iraq, have paid little or no attention to this ticking time bomb. Soon they will have no choice.
Loan delinquency rates will soar, probably to something in excess of 20%. Lenders will clamor to be “relieved” from the logical result of their own greed, and your President and Congress (being after all well paid to do the bidding of their corporate sponsors) will oblige, but this will not prevent a dramatic slowdown in the economy. Think housing starts down by 30% or more, and think unemployment rates in the building trades of 15% or higher.
As peak oil sets in, the price of petroleum and all things requiring petroleum (read that the price of nearly everything we think we need to live) will rise quickly. We’ve never seen an event like this, so we don’t have any example to point to and say, “it’ll be like this.” It will be like nothing any of us has ever experienced.
One thing we know will happen, because it’s simply a function of our humanity, is that we will continue in denial as long as we can. Our politicians and the media will keep searching for some company or some industry or some nation we can blame, and we will believe them because we will want so desperately to believe this is someone else’s fault. We will cling to the most illogical of arguments to convince ourselves that this is a temporary state of affairs, that next week, or next month, or next year, things are going to get back to “normal.”
Meanwhile, the economy will not grow. In fact, it will shrink. Incomes will fall. The stock market will fall. Our sense of well-being will sink. Our can-do spirit will undergo a profound transformation. We will travel a violent and disconcerting emotional journey from “I can do anything” through “I’m having rotten luck” through “Whom can I blame for this?” through “Somebody needs to invent something to solve this problem, quick” through “We’re screwed” to “Together, we can survive.” It will be brutal, and it will give us a chance to see the worst and the best in those around us.