Stagflation 2008, what's the good thing about recessions?

stagflation_economic_downturn2008 looks like a year where we will (we being the EU, USA, and likely Asia) will face a recession, in America the fears are even a little bit more as they might suffer from Stagflation which is the mean-eyed just got out of prison older brother of recession.

Stagflation [just to be clear] is where you have the decreased or negative GDP in an inflationary environment. This could happen in the US because currently the GDP there is reducing, America is not really a manufacturing nation any more, so it relys on services and consumer spending, actually about 2/3’s of the US economy is based on consumer spending. So picture that fact, and then picture a world where the Dollar to Euro is at $1.50 and oil is at $100+.

That means that anything imported is much more expensive, so people will not continue spending at the same rate. Then to exacerbate that situation you have expensive gasoline and a country where car engines are only getting bigger, whether or not people can no longer afford to drive to work, its the sentiment that expensive oil evokes in the USA which is worrisome.

The reality is that sometimes during hard times the best solutions to that kind of thing are born. Surgery and medical advances are usually at their most prolific during war times, and water conservation ideas are never more productive than during drought. For this reason I have no doubt that an ongoing Oil Crisis, typified by high oil prices will result in some of the actual solutions that may derail the crash course to global warming that our planet is on (to be totally correct I should say the crash course we are placing the planet on)

corn biofuelThis will come in several fashions, firstly there is bio-fuels, in the US they are looking to ethanol as an answer, but ethanol has an inherent carbon footprint in making it and many professional sources are saying that ethanol, at least from corn sources, is not the answer. Brazil and their bio-fuels which are made from Sugar Cane are proving more hopeful but there is basically a US embargo on Brazilian ethanol, one thing for certain is that Brazilian labour is cheaper than labour in the US so eventually, and perhaps for nothing more than economic reasons that embargo may lift.

Alan Greenspan is a man whom I hold in pretty high regard, he basically led the US economy for two decades and as far as I’m concerned he did a damn fine job for the most part. He has been saying for years that the USA and indeed the world, need to reduce their dependence on oil, specifically middle eastern oil.

President Bush is trying to ‘buy’ his way out of a recession via Ben Bernanke, he is going about this via rate cuts and printing money. Bernanke is still new enough on the job that he probably doesn’t relish telling the most powerful man in the world to take a hike, Greenspan would have do that, because until the bottom of the housing market is reached there can be no chance of recovery.

The best route at this point would be to let the recession happen, every time there is a blip in the economy there are those that scream ‘they sky is falling!’ but the reality is that usually its a heavy shower. The likelihood of a recession is now greater than 50% according to Greenspan.

The worrisome factor presently is that the US housing market and economy could very well go the route of Japans 1990’s recession which has taken over a decade to un-funk. However Japans rise and subsequent fall was actually bigger than the mess which threatens the US.

Energy and commodities are going to be the biggest factors going forward, 10% of people that have ever been alive in the history of the world are alive right now, today. That means that things like food and water will be the next big thing, by that I mean they are going to be the factors driving the market, in the 80’s we had pharmaceutical, the 90’s was engineering and the Internet, 2000’s were financials and property and for the next decade at least we can expect to see commodities to be the powerhouse, unless there is some massive population re-adjustment, for that to happen there would need to be a war which would later be referred to as world war three or some rapidly spreading disease with no cure.

nuclear energy is one option that is probably not being embraced enough, over 17% of the worlds energy is used for lighting, that’s a huge amount huh! The EU move to use only energy efficient bulbs is a massive and intelligent move, however the bulk of fossil fuels is used in cars, which brings us onto the next thing, cars that run on air.

air_carYes, there are cars being made that run on air, compressed air. I bought some compressed air today, it was in the form of scuba diving tanks, however, there are cars that can run on compressed air namely the one being developed by MDI.

Air cars are due for release in late 2008, this is a mega-development. When I was a kid I had a toy called an ‘air jammer’ and it was a car that you pumped up full of air and it had a switch and when you flicked it the air-jammer would fly like a bat out of hell until the compressed air was used up, a good run was about 50 feet, so naturally when I saw articles talking

about an actual Car running on compressed air I was instantly fascinated, at the same time i was kind of skeptical, however I have since seen a clip which is available on Youtube and I’m convinced, imagine if you incorporate a solar panel into the roof of an air car so it can self charge?

You might not be able to pull a big payload but to be fair the majority of transportation is about getting a person and perhaps a small degree of cargo from A to B, that’s why not every car has a trailer hitch. The heavy work can still be done on deisel but a highly affordable car that runs on compressed air would mean that we would have clean air in the cities, and we can run cars (in essence) on electricity, electricity runs the compressors which charge the cars, so it opens up energy being made from solar panels, photovoltaic panels, hydro-electric damns, tidal energy, biomass etc.

Now the car maker Tata – who recently hit the press for making the most affordable car out there- are also in on the project.

These are things that are going to seriously shape the future of our cities and also of mankind. I would be hopeful that if anything positive comes from high oil prices and an economic downturn that it is something like air cars being rolled out on European wide scale.

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