Occupy Calgary

The global occupy movement has had a hard time being relevant here in Calgary though it’s not really that surprising in this conservative city with plenty of jobs to go around. Though it’s also a city with a massive divide between rich and poor.

It is frustrating to listen to the ignorance in the media and from people who obviously haven’t thought about what’s actually happening and what the trickle down effects of action or inaction will be.

There’s a lot of things happening that have lead up to this societal problem which could get much worse in the coming years. There is a confluence of effects coming together which will make the next few years very difficult for large portions of the global population.

First is the US Economy. The credit crisis followed by the housing bubble evaporated a lot of money from the money supply. The loss of money created some deflationary pressure on the US currency. To counter act that deflationary pressure the Fed started printing money which in the US debt based currency resulted in a massive and growing debt. The debt is becoming more of a burden. This massive printing of money in the US created inflation and the prices of gas, food and other goods have spiked over the last year. The USA is in bad shape right now. Europe is not doing well either and China is cooling down.

To prevent other currencies from being devalued against USD other countries have attempted to match their inflation to the US by printing more of their own money. With all of the worlds currencies becoming de-valued there is a risk of hyperinflation which would not be good for people.

Second is the Baby Bust In the USA the Roth IRA and 401K plans along with similar retirement plans in other countries helped millions people of invest trillions of dollars in the stock market. Those funds make up much of the value on the public markets. Over the next few years as more of those Baby Boomers start to pull out of those retirement funds prices on the stock market will almost surely have more downward pressure than there had been previously. If the stock market remains flat or starts declining over a longer term it could trigger more selling from nervous investors. There is a serious risk of a massive sell-off if people attempt to cash out before it drops further.

Third is Peak Oil All the easy oil is gone. The discoveries of new oil actually peaked in 1977 and peak oil production is right about now. With a growing global population and economic growth in India and China creating even more demand the supply of oil is becoming more constrained. Oil provides power and power (from high school physics) is the ability to do work. The more expensive, harder to get oil will make our ability to get work done more expensive. That means everything could become vastly more expensive, faster than expected. It takes power move products and yourself around the world, to light your house, and create new things. Without the ability to perform work cheaply everything will be legitimately more expensive. A complete viable price competitive alternative to oil is nowhere to be found in the near term.

Concentration of Money Somehow without any real evidence to prove it’s effectiveness many of the global economies around the world have undertaken more and more tax cuts in order to compete globally against countries with lower taxes. These tax cuts were supposed to make business attractive and result in the creation of more jobs and higher tax revenue.

Evidence suggests that it doesn’t work. Lowering taxes on corporations just means that the people at the top of those businesses can pocket the cash as extra profit rolls in. The people at the top make dramatically more money, while the people working in those businesses won’t make more unless they ask for a raise – which many won’t do. This has resulted in a massive income discrepancy between people who own or control businesses compared to the people who work in them.

The concentration of money and power by a smaller and smaller number of people results in societal problems. The French Revolution is a good analogue for what can happen when this class separation becomes too extreme, but in current events the fighting in Libya and Syria could be seen as the result of this sort of discrepancy in power. Regardless of whether it is a dictatorial government or through economic incentives that you remove people’s hope of having a better tomorrow the end result will surely be the same.

All these things are coming to a head over the next 5 years and could compound on each other making the situation worse. For example the increasing cost of oil will increase the costs on the government leaving less money to work on constructive stuff and making harder to pay down the debts. It could also incentivize additional printing of money, and therefore further inflation. Inflation and higher cost of oil could make retirees pull more money from the stock market increasing the risk of a stock market crash.

The Occupy movement may not communicate their message particularly well, but they have an intuitive sense that bad things will happen in the next few years if things don’t change. I think they’re right.

If I think of a solution to all of this I’ll let you know.