Wednesday, July 18, 2007

People who Save are Frickin' Idiots!

This post could also be known as "The Genius of the Collective".

I know, I know....crazy, huh? FuBarrio spends a lot of time harping on the idiotic behaviour he believe he observes in the herd mentality of people at large.

However, it's time to propose a competing argument in favor of the sheeple.

The last couple of years I've been bewildered by the willingness of consumers to overpay for nearly everything in the "other" Americas (North America). It has truly been consumerism at its most grotesque for quite some time, however, I would like to put forward the competing viewpoint that perhaps these sheeple aren't the ones lining up for the slaughter.

There is a children's tale of some fame where an ant works through the summer and a grasshopper spends its time buying "louie" bags, pedicures, and bad hair-weave jobs. Of course, in the end the grasshopper, so wishes he had wasted his youth slaving away and ferreting away those tasty scraps for the long, hard winter.

But what if the food they ant was storing had some bacteria in it and would all be rotted away by the time winter arrived?

There was a "study" done (supposedly) back in the dot-com heyday to point out the brilliance of a bunch of independently acting, not incredibly brilliant, autonomous entities. When the actions of the collective are evened out, you get a very "intelligent" behaviour, supposedly.

Since the beginning of 2006 the USDX, the dollar index, has gone from around 92 to a whisker above 80 as I type this. When you compound on top of that, that the dollar index is just an index of how easy it is the for the dollar to buy OTHER fiat currencies -- or other paper that is just being printed at will -- you get a really ugly picture.

It's a breakneck race for the bottom.

Ok, so what?

Well, the a**holes like me who saved their money, with the vain hope that i would be able to use the value received for work performed in the past (my pay from a few years ago) to purchase goods and services in the future (now and in the next few years) was incredibly naive.

So far, it has seemed to be a silent tax (to the masses anyways). Not that many people are ranting about it in wild gesticulations and maniacal tirades (with a few notable exceptions). And yet, it seems that maybe...just maybe...the North American populace isn't just a bunch of greedy, stupid, undisciplined children (who want it "NOW") :)

Perhaps, in consuming like there is no tomorrow (negative savings rate), they are voting with their wallets. Why put off what will give you 10 minutes of consumerism pleasure to hold paper that is sure to bring even less pleasure a year or two from now.

As a side note, something I haven't blogged about a lot, but one of the reasons I moved to South America. I think food inflation, especially in meat, is getting ready to take off. Feed grains are getting scarce as the developing world starts eating more and more meat. When the meat producers' hedges come off (the only thing in my opinion that has allowed soy, wheat, corn, etc prices to SOAR while keeping meat prices in check), it could get ugly fast.

It will be interesting to see if the meat prices soaring will be blamed on a weather event, ethanol subsidies, greedy oil companies, war, population growth, or irresponsible creation of cash and credit. I guess it depends on whatever sells the most advertising time.

ciao ("chow" -- food inflation is goin to get worse)

1 comment:

fuBarrio said...

oh yeah...

i forgot to mention this, but the btu to btu equivalent of nat gas to crude oil right now is about 2X what it "should" be if the two commodities were freely convertible across all uses, consumer and industrial.

They aren't.

There are lots of reasons that crude trades at higher than the 6x (rough) equiv of what a strict btu to btu conversion should dictate. However, when it gets this extreme, it *can* signal the potential for there to be pressure on one commodity or the other (nat gas up or crude oil down) in the intermediate term.

my (big oil) energy play has been COP (Conoco Philips) for years and has a pretty healthy mix of both (nat gas and crude) however, it also has a geopolitical risk profile that gives me ulcers when the position is too big -- so i'm forced to keep it quite small.