Even worse, I’ve cleaned out my Washington Mutual account, since I don’t want my money frozen when they go bankrupt.

Overtaken by events. It already crashed through parity last night as the Asian markets opened, although nobody noticed as the yen and Bear Stearns stole the show.

While generally I agree that the Club of Rome is right, just too early to get credit for it, there are a couple of things to consider:

First is that commodities prices went up 20% plus in two months after a 30% ish gain last year. While they may have been undervalued before, they look overbought now.

Second, what enabled us to escape in the 1970s from supply limitations was exploration, improved productivity in extraction, and some substitution. What hasn’t been factored in (yet) is how far we can get with conservation.

One of my favorite factoids is that BP decided to reduce its carbon emissions (I think this was circa 2003) to its 1990 levels. They did it at a cost of something like $30 million and it yielded $650 million in savings.

The McKinsey Global Institute has ascertained that “global executives” (Gods, the newspeak) believe that if they invested in carbon/energy conservation, they’d save money, but they haven’t done so. High energy prices will overcome the inertia.

And of course, a slowdown will reduce demand independent of conservation, a deep recession even more so.

Similarly, metals demand is very sensitive to economic output; most observers thought industrial metals were way out of line with fundamentals.

Finally, the run up in ag prices was due to emerging nations eating foods higher up the food chain (according to EO Wilson, every time you move up the food chain, you get only 10% of the food energy of the lower level. Thus it takes roughly ten corn calories to produce one pork calorie).

Expect everyone to move down the food chain, even Americans. I wish the powers that be were pushing that actively. We will also see starvation in poor countries, but that will have comparatively little impact on demand.

When I was a kid, the line was “clean your plate, think of the starving people in India.” Maybe it needs to become, “Eat pasta, think of the starving people in ____”.

Again, I am NOT saying that the long term trend is not towards scarcity (we really need the world’s population to be about 2/3, better half, of what it is now) but we might be able to stave off the crisis and price crunch for a while longer.

>> Bernanke is betting our future on a lower dollar and higher commodity costs, which will factored out of CPI calculations. IMHO, he is doing 180 degrees opposite of what should occur, i.e, to stop printing money, let the market fall (hard) and let bad banks fail. Investors who are safe on the sidelines will have wait for equilibrium down the road, but it s insane to place our future into the path of a potential hyperinflation firestorm, and crash the dollar to boot! If oil and food skyrocket, who is going to invest in stocks with devalued dollars?

This is no longer a financial trading market. Gambler’s table, and it ain’t bridge anymore. Liar’s poker.

For those who hold major positions already, it is a potential disaster should they suddenly need to sell.

But for those who have accumulated Euros or Pounds or Loonies of Yuan or Yen, etc, the US is on sale. And as equities and real estate prices decline further, buying up the USA will become one of the great investment bargains of all-time.

Evans-Pritchard focuses a little more on the risks than the oppportunities, but does a fair job of mapping the possible fractures.

Joe Shmoe

It is terribly hard to fathom hoew the US markets are up. Ata across the curve saying desks have been instructed to trade light. The history of intervention is not strong.

A good post. Push on the good work. We have the same readings and I’m happy that you take time to comment upon them!

François (gallic)