Wikinvest Wire

"Pixel money" for highway improvements

Monday, December 08, 2008

Jim Kuntsler thinks we might be better off improving our railway system rather than our highway system given the potential for the current economic troubles to ultimately hasten the world's energy problems.

So much artificially-generated pixel "money" is being pumped into the system now that it will eventually overtake the quantity of capital currently vanishing in the form of exposed securities swindles, unwinding bad debt, and imploded worthless counter-party contracts. The pixel money will express itself as super or hyper inflation, lagging from 6 to 18 months from the time it was actually introduced in the form of bailouts. For the moment, money is moving into the presumed safety of US Treasury paper. Personally, the safety of this is not something I would presume. But in the current deflationary stage its hard to find any other place to park cash, and when asset values are crashing everywhere, cash is king. Gold is physically unavailable in the form that non-millionaires usually buy it in, ounce and half-ounce coins.

President-elect Obama has announced his intention to kick off a massive "stimulation" program when he hits the White House "running" in January. Early indications are that it will be directed at things like highway repair. If so, we will be investing long-term in infrastructure that we probably won't be using the same way in ten years. But I doubt there is any way around it. The American public can't conceive of living any other way except in a car-centered society.
Stimulus aimed at perpetuating mass motoring will be a tragic waste of our dwindling resources. We'd be better off aiming it at fixing the railroads (especially electrifying them), refitting our harbors with piers and warehouses in preparation to move more stuff by boats, and in repairing the electric grid. Unfortunately, our tendency will be to try to rescue the totemic touchstones of everyday life, things familiar and comfortable, regardless of whether they have a future or not.
The "snapback" move for oil prices, expected to come sometime next year after the bailout and stimulus money works its way into the system, will likely be greeted with lots of jeers.

After having watched the price of oil plunge in late 2006 and then again in 2008, nearly everyone will be expecting it to happen again in 2010.


Anthony J. Alfidi said...

Traders are going to be especially bullish on oil if OPEC announces a production cut later this month.

Heywood Mogroot said...

Kunstler is such an idiot.

Capital isn't vanishing any more than successful bank robbers destroy capital after a heist.

Capital is being looted perhaps, but not destroyed, and if Shadow Stats is to be believed the M3 curve of USD supply over time has actually been rather flat recently.

We've got 10 years of oil, plus Canada has got another 30 years of swing supply in its oil sands provided we can build some nukes up there to help with the cracking process.

Having lived in Japan I agree about the railroads of course. What we have is worse than a national disgrace. . . . the rail systems I've seen make the USPS level of customer service esthetics look like the chic W hotel chain.

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