Unexpected consequences

Meghan McCardle links to the news from the 1930's blog comparing
green shoots in the economy today to green shoots that seemed to be
appearing in 1930. Linked in the same day's WSJ was the story:

Hoover signs London Naval Treaty; now awaiting ratification by Britain and Japan. Under conditions of treaty US will reach naval parity with Britain by 1936; Japan naval building will almost stop.

In 1930 this must have seemed like a small story compared the economic crises
of the day, sort of like voluntarily canceling the F22 program is today. The london
naval treaty gave cover to the usa and britain that didn't want to build ships to stay
ahead of the japanese, when the earlier policy for britain was to stay twice as big as
the nearest competitors, post-treaty parity would be acceptable. Only problem being
what happens when you are fighting the germans and the japanese attack in the
pacific.

I wish I had more confidence in the government that they were paying attention to things all around the world, what development will bite us in the ass in 2020 when Hillary is just starting
her 2nd term and Obama has just finished chiseling his own face on mount rushmore.

To me buying more F-22's is cheap at the price right now, as is another aircraft carrier
and strategic missile defense. In the 10-20 year timeframe that borrowed money will
either be paid back easily in inflated dollars, or the government will default. The option
where the economy grows it's way robustly at 4% and we pay back all the debts a little
at a time seems unlikely. Borrowing money to build things that will last 30 years is a good
idea (weapons systems, nuke power plants, space based solar power, x- prizes). Borrowing
money to pay welfare is the same as buying groceries on a credit card, you buy, eat and
crap it out, then you owe the money.

Hopefully some of the genius' in washington are looking for future ass-biters and thinking
what to do about them. Here's today's wsj headlines that I think could spell problems down the road:

Biden Says Weakened Russia Will Bend

Biden said Russia's economy is "withering," a trend that will force it to make concessions on national security, including loosening its grip on former republics and shrinking its nuclear arsenal.

California's IOUs: Latest Sub for Dollars

To creditors of California who got paid in IOUs, take it from historians -- things could be worse. You could be getting clamshells or plywood.

• Photos: Depression-Era Currency

Iranian Police Disperse Protester

Iraq's Kurds Head to the Polls

• Ahmadinejad Bows to Top Leader
• 
  
• Pakistan Court Delays Terror Trial
• • 
    

No mad max, but maybe Bogota on the Bayou

Over at the Next Big Future blog they have an interesting
post laying out the reasons that society won't collapse, we're
not heading for mad max territory. The first two reasons
make the point; that assuming a reasonably competent government,
things won't collapse to the point where I have run the flame thrower
on top of the family defensive wall:

1. Efficiency, conservation and an energy plans can be enhanced beyond current levels with minimal strain. There has been partially voluntary reductions in energy demand during the credit crisis. 10% reductions with minimal effort and 20% reductions with more austerity.

2. Rationing of food, fuel and clothes was successfully maintained in many countries during World War 2. Any resource decline or environmental situation can have governments use rationing to buy time for a transition.

The UK had stricter rationing than the USA during and after the war.

Thus it shows that oil and food supplies can be greatly reduced while maintaining a war-level mobilization.

On the other hand, things don't have to collapse too far for them to really suck.
This account of someone living in argentina during the recent crash makes the point all too clearly. When we lived in Colombia in '99-'00, rolling kidnappings were frequent enough
that 2 coworkers were kidnapped. It's better now, but calling a taxi is still a requirement,
taking a taxi on the street is asking to do the tour de atm's.

In the USA even the poorest gang banger has a car, if things get bad, kidnappings
will be more common than the pizza guy showing up. I think in the long term,
things will be much better as we move away from an oil economy, but in a crash
the short-term could be fairly uncomfortable, especially if you make the assumption
that everything will be fine and the government will take care of all problems we
could end up with a nation-wide Katrina.

I think the advice from Argentina is something to consider, if we move back home
this year the house we buy will have a big back yard for a garden and we'll keep up
the practice of keeping extra food and water on hand. If we do build a compound
then when I put up the walls I'll install the tubing for the wall mounted flame thrower.
But meanwhile, we'll keep spending like normal, now is the time to see europe while
we don't have to make that long flight to get here.

reading tea leaves

I can't decide what is going to happen, a spiral into deflation
and joblessness or inflation. There's what's good for me personally
and there's what's good for the country, low oil prices could mean
that i'll be unemployed, and if the economy stays low at the same
time I could be unemployed for a long time, such as the oil crash
in 1986 dumped most oilfield workers out of a job for 5 years leading
to uhaul rental as louisiana's biggest economic activity until 1991.

If prices are high then no matter what else is happening to the economy,
somebody somewhere will be drilling for oil, unless the banking industry
really is destroyed. Then we'd see a real disaster, no fuel available,
gas rationing, brownouts and blackouts, and I'd probably be unemployed.

Maybe I'm just a pessimist, but I don't see a good scenario happening.