Re: SC63

http://carolynbaker.net/site/content/view/392/

RICHARD HEINBERG: MAKING THE MOST OF A GLOBAL DEPRESSION

It’s becoming increasingly likely that 2008 will go down in history as the year the Second Great Depression began.

The unraveling started with the subprime mortgage fiasco and is spreading fast. The total value of all US$-based mortgage bonds is $10.4 trillion, of which 30 percent is now expected to be lost in defaults and property devaluation. That’s $3.2 trillion in losses.

Trillions more are likely to evaporate from the related derivatives markets.

It’s true that the global economy is pretty big, and a few hundred billion get lost under sofa cushions from time to time (as happened during the savings and loan crisis of the 1990s), and still, life goes on. But when we’re discussing trillions of dollars (with a “T”), we’re talking real money.

Get ready for bank runs, a stock market collapse, and, perhaps, a money panic.

Such things have happened before (in 1833, 1837, 1857, 1907, 1920, and 1929), but this time it’s different. Now the problem is not just financial mismanagement; there is a deeper instability: the global economy is based on a fundamentally unsustainable exploitation of depleting natural resources, and that whole system is teetering. In his essay, “Barreling into Recession: How Oil Burst the American Bubble,” Michael Klare points out that

“The economic bubble that lifted the stock market to dizzying heights was sustained as much by cheap oil as by cheap (often fraudulent) mortgages.”

Veteran geologist Colin Campbell, in his ASPO Newsletter #86, steps back for an even broader overview:

“The Oil Age opened 150 years ago, releasing a flood of cheap energy, such that today’s production is equivalent in energy terms to 22 billion slaves working around the clock. The resulting economic prosperity allowed the banks to lend more than they had on deposit, confident that Tomorrow’s Expansion was collateral for To-day’s Debt. It sounds a rather dubious principle but worked well enough during the First Half of the Oil Age allowing at least some countries to reap great prosperity. The Second Half now dawns, and being characterized by falling supply, effectively removes the Collateral for debt. . . . Whereas the post-peak physical decline of oil . . . is only gradual, . . . the perception that past economic growth must now give way to contraction can come in an instant, prompting radical changes in the financial world.”

So, as the oil drains away, the view is all downhill from here. A Depression is, well, depressing even to think about, much less to live through.....................