"The most valuable truths are the ones most people don't believe. They're like undervalued stocks. If you start with them, you'll have the whole field to yourself. So when you find an idea you know is good but most people disagree with, you should not merely ignore their objections, but push aggressively in that direction." Paul Graham
Solar-electric energy will always require very large land or roof surface areas in order to produce significant amounts of electricity because solar energy is distributed on the Earth with low intensity per unit area. … http://www.garynorth.com/public/3237.cfm
Here, Arthur Robinson lays out a possible scenario that could play out if business in the United States do not develop the technology to generate energy that other countries are working on.
This scenario would be great for people who live in Oklahoma and Texas. These states are into commodity production, including energy production. It would create a hard life for others.
The Iranians have said that this time they have 140,000 American hostages, in the form of U.S. troops in Iraq. If either Israel or the U.S. attacks Iran, we could lose an army.
How could such a thing happen? The danger springs from the fact that almost all the supplies our forces in Iraq use, including vital fuel for their vehicles, comes over one supply line, which runs toward the south and the port in Kuwait. If that line were cut, our forces might not have enough fuel to get out of Iraq. American armies are enormously fuel-thirsty.
I’m in love. Her name is Oklahoma City. And I will give myself up for her “to make her holy, cleansing her by the washing with water through the word.”
The one I love is growing up quickly. She has the potential to become a beautiful woman or a rebellious person. A lot of that is going to be determined by what kind of leadership she has over the next five years.
Yes, you heard me right. That’s five years. That’s because the greatest benefit is going to be derived by noticing changes in our city early, while they they’re still potential but highly probable trends. You get a beautiful eighteen-year-old by parenting her when she’s eight. And we can start to disciple beautiful eighty-year-olds when they’re still twenty-eight.
I’m going to point out some of the early growth trends in Oklahoma City using principles from Christian economics.
And in case you want my conclusion right now, here it is:
We don’t have a lot of time.
Inflation
Most of my analysis is going to depend on one concept: Inflation of our country’s money supply. If you understand that, then it will be easy to see why Oklahoma City is poised for enormous growth.
Your silver has become dross, your wine mixed with water. (Isaiah 1:22)
Ever since Old Testament times, people have dealt dishonestly with one another. Some people mixed silver with less valuable metals (”dross”), creating counterfeit coins, and presented the coins to others as if the coins were made of pure silver.
We agree that it’s wrong when individual people do this. But when governments legalize the process, we call it inflation. And everyone seems okay with it.
Although the dime has not undergone any major design changes since its introduction, its composition changed significantly in 1965. The Coinage Act of 1965 removed the silver content from the dime (as well as the quarter and, in 1971, the half dollar), and replaced it with a clad composition of 75 percent copper and 25 percent nickel. Dimes with the silver composition were minted in 1965 and 1966 but bore the date 1964 to increase mintage figures and prevent hoarding of it. (Wikipeida)
Let’s get this straight. In 1965, our government stopped minting dimes with silver and started minting them with copper and nickel. And it minted those 1965 and 1966 coins with a date of 1964 so that they could not be distinguished from the dimes that were made of real silver.
There is a moral issue here. There is also a real consequence.
Do not have two differing weights in your bag—one heavy, one light. Do not have two differing measures in your house—one large, one small. You must have accurate and honest weights and measures, so that you may live long in the land the LORD your God is giving you. For the LORD your God detests anyone who does these things, anyone who deals dishonestly. (Deuteronomy 25:13-16)
It gets worse.
The Federal Reserve
The dimes are chump change compared to the money that’s created digitally. When the government overspends, it needs to borrow money. When it doesn’t want to pay the market rate of interest, it goes to the our national bank, the Federal Reserve, which creates money out of nowhere and lends it to the government. Most of this money will never be printed out in dollar bills. It simply circulates through the economy through bank accounts and credit cards.
Inflation has never been so easy. Its consequences will be disastrous for most people but beneficial for Oklahoma City, as I’ll explain later.
With more money circulating through the economy chasing the same amount of goods, prices eventually go up. The more money is created, the more prices go up.
China
Right now, the Federal Reserve isn’t creating very much money. That’s because China is lending money to the government. It creates hordes of its own currency, the yuan, and converts some of it to dollars to buy U.S. Treasury bills.
If China’s currency is weak (lots of money in circulation) and the U.S. dollar is strong (not very many dollars in circulation), the dollar will buy a relatively large amount of yuan. That makes it profitable for U.S. retailers to convert their dollars to lots of yuan and buy TVs, toys, and other consumer goods to sell to U.S. customers.
Low inflation of the dollar helps us import stuff and makes it hard for us to export stuff. Conversely, high inflation of the dollar hinders our imports and strengthens our exports.
What do you think will happen when China stops lending money to the U.S. government? Our government will start borrowing more money from the Federal Reserve, which creates money out of nowhere. This leads to a higher rate of inflation.
At some point in our future, government overspending and China’s eventual refusal to keep subsidizing the dollar will lead to high inflation.
And when that happens, I want to be invested in a city that will benefit from an economy where it’s hard to import stuff and easy to export stuff.
What “stuff” are we currently importing that we’ll have to start producing within our own country? Oil.
What will we export more of in the future? Food.
War with Iran
Now look at what happens if we attack Iran in 2008.
Time frame before our city begins its major growth: 12 to 24 months.
War with Iran will impact China. China has been undergoing some incredible growth:
China is just building the beginnings of its own system of national highways, and filling up the roadways with its own domestic version of motorized carriages. If China were to burn as much gasoline on a per capita basis as does the U.S., China alone would require the entire world’s daily oil output and then some. But that is just extrapolating the present into the future, and things are going to change dramatically long before something like that could occur, if it were even possible….
Overall, China is constructing buildings and roads and infrastructure that is the equivalent of a “new Houston,” about every month. And last year, in 2006, China added more electrical-generating capacity than exists in the entire state of California, where they have been building generating capacity for 100 years. So China is growing, and growing fast. (Whiskey and Gunpowder, 2007 April 18)
And if we go to war with Iran, do you think China will become more motivated to (A) keep on lending its money to the U.S. government OR (B) use that money to buy more oil instead?
I’m siding with option B. If China starts buying our oil and stops subsidizing our government, three things will drive up the price of oil.
(1) There will be a decrease in the supply of oil, since Iran will no longer be available as an exporter.
(2) There will be an increase in demand for oil, since China and other countries will begin an emergency buying frenzy when they see the price going through the ceiling.
(3) There will be high inflation in the U.S., making it hard for us to import oil from other countries.
This would throw most of the country into an inflationary recession. Take the “stagflation” we saw in the late 1970s, with rapidly rising prices and long lines at gas stations. Add to that the mortgage and banking crisis already building up today. That’s what I think we’ll see if we attack Iran.
The oil-producing states in the U.S., such as Texas and Oklahoma, will benefit from this. We will see a repeat of the oil boom that began in 1973.
Everyone else will suffer.
If we go to war with Iran next year, this will create the perfect situation for economic growth in Oklahoma City.
This gives us one to two years to train our leaders to influence our community before major changes begin to happen in Oklahoma City.
Peak Oil
We are heading towards a recession right now because of the banking crisis that is building up. If we don’t go to war with Iran, the recession will slow down the fundamental changes that are taking place in the city. This ought to buy us a few years.
Time frame: about five years, I think.
After we get through the recession, inflation will re-assert itself. China will also demand more and more oil as its economy grows. Over time, these factors will make it harder for us to import oil.
Combine this with the fact that production of oil is likely to slow down over time: the problem of peak oil.
We produce a lot of oil and natural gas in Oklahoma City.
We also have a lot of railroads that will be increasingly used to ship goods as the price of gas goes up. It takes less energy to ship by rail than by truck. Don’t forget why we’re better than Guthrie: we used to be a railroad town.
I’m guessing that the rising price of oil will begin to have a major influence on our city in about five years. That’s if we don’t bomb Iran. We’ll have to weather a recession with a temporarily lower demand for oil.
That gives us about five years to train leaders to impact this city in a major way.
Agriculture
Remember that rising inflation will make it easier for us to export goods to other countries.
China’s enormous growth makes it a prime candidate for U.S. exports.
China is already importing a significant amount of wheat and beef from other countries. I expect that amount to increase over time as China’s standard of living goes up.
And guess what we produce here in Oklahoma City?
Where do all the highways and railroads cross by which all of these agricultural goods will be shipped?
Time frame: ??
When this does hit, it will hit big. We’re currently paying farmers not to farm. This keeps the price of food artificially high. Imagine what will happen when this trend reverses and farming won’t need a government subsidy any more. The United States has the capacity to feed a large portion of the world.
I think agriculture is one of the most undervalued sectors of our economy.
I don’t know how much time we have to train leaders for our aggie city. This is something we should keep our eye on.
Social Security and Medicare
Social Security and Medicare are under-funded programs. The only way to keep them alive is by borrowing money: more inflation.
When these programs really start to go under, we can expect to see high inflation, which will strengthen the production of oil, natural gas, and food in Oklahoma City. It will probably also increase our city’s importance as a rail shipping center.
High inflation also means that many people on fixed incomes, especially retired people on pensions, will find that they can’t afford to live in the more expensive areas of the country any more. Inflation means that their monthly checks will buy less and less over time.
The same will happen for young families with kids and new careers. Companies who can’t afford to pay California salaries based on California real estate prices will move to less expensive areas.
The median home price in San Jose, California is $649,000. In Oklahoma City, it’s $154,900. In relation to salaries, San Jose was overvalued by 44% 20 months ago, while Oklahoma City was undervalued by 5%.
People are already starting to move into Oklahoma City from other states. Outside of Oklahoma, California is sending more money to buy Oklahoma City real estate than any other single state in the country.
Time frame: 2015??
Like agriculture, this is going to hit big. If you think we have a generational problem now, imagine what’s going to happen when twentysomethings and seventysomethings begin to move in droves into the same city, and the twentysomethings are made to pay taxes to support a larger and larger group of retired seventysomethings.
There’s going to be conflict. But this is better than having the seventysomethings move back in with their children and grandchildren, which will be the California alternative.
It’s hard to put an exact date on when this will happen, since it depends a lot on how quickly the Baby Boomers retire. The smart ones will realize that they’ll have to stay on the job or else be forced to move to Oklahoma.
The really smart ones will move to Oklahoma and use their increasingly worthless pensions to buy them a short retirement. Their time can be used to buy rental houses. Inflation and economic growth in Oklahoma City will cause property values and rents to rise dramatically over time. At some point, they will sell some of those houses to pay off the mortgages on the rest and retire into comfortable careers as property managers.
Our Opportunity
Future inflation offers us a dual opportunity. We can train leaders to be ready for these changes in the city and offer solutions, both in our churches and in the political realm. We can also help our future leaders see the potential of starting companies and buying rental houses in the Oklahoma City area.
People who are financially independent, whose businesses are producing a lot of passive income, have their minds and time freed up to consider how they can be God’s servants in the city which we love.
Even more importantly, people who have become financially independent usually have done so because they’ve developed the ability to make educated guesses about the future status of the economy. And this gives them an edge when they’re making ministry plans for a city that’s poised on the edge of enormous growth.
Take action. Start a business. Buy a rental house this year. Provide for your future grandchildren. Start looking after our city’s future.
Fall in love with Oklahoma City. Take leadership. Help her become a wonderful woman the entire world will admire.
This is what the LORD Almighty, the God of Israel, says to all those I carried into exile from Jerusalem to Babylon: “Build houses and settle down; plant gardens and eat what they produce. Marry and have sons and daughters; find wives for your sons and give your daughters in marriage, so that they too may have sons and daughters. Increase in number there; do not decrease. Also, seek the peace and prosperity of the city to which I have carried you into exile. Pray to the LORD for it, because if it prospers, you too will prosper.” (Jeremiah 29:4-7)
Speak, O Lord, till Your church is built
And the earth is filled with Your glory.
If your worldview is broader and deeper than what schools are teaching you, then you may also realize that your life doesn’t have to follow the path that others have laid out for you. Maybe you don’t need to get a job and work 9-to-5. Maybe the world isn’t even headed in that direction any more.
Think of what technology has done to snail mail and long-distance phone bills. Who’s to say that it won’t eventually make equally radical changes to our work environments? When Californians call a big company’s customer service line, they get a voice from India or Oklahoma. It’s more economical to outsource customer support to places where the cost of living is low.
Now combine what you’ve learned about economics, science, math, and current events. What will these companies do to eliminate gasoline costs and commute time as the price of oil rises? Perhaps someday, customer service employees will work from their living rooms or bedsides. They could be paid per call or per telephone minute.
Peak Oil
Work environments are likely to change soon because of a problem called peak oil. Demand for oil is going up faster than the speed of production. At some point very soon, production will actually start to decline because our oil fields are running out.
Increasing demand and decreasing supply lead to higher prices.
What if the price of gasoline doubles? Triples? Prices of consumer goods will start to go up as shipping costs go up. The further trucks have to drive, the more things will cost. House prices will also rise because of shipping costs for new construction materials.
Eventually, it will cost more to drive to work than it will to take a lower-paying job close to home.
Get Smart
Smart businesses will prepare for this by beginning to give people the option to work at home through the Internet.
Peak oil will cause a lot of problems for the economy. Producing and shipping goods locally will reduce the division of labor. But as usual, there will be opportunities for profit. I believe three kinds of property will appreciate faster than average:
(1) Rural property in high-population-growth counties. It will be bought up by tech-savvy workers. (Three counties adjacent to Oklahoma City are poised for this.) It doesn’t cost much to produce food locally and ship it within rural areas. This kind of property is also in demand by baby boomer retirees.
(2) Downtown residential houses and apartment buildings. (Oklahoma City) Some jobs can’t be done over the Internet. I believe this kind of property would find increasing demand anyway because of the rise of the echo boomer generation.
(3) Property located in oil-producing areas. (Oklahoma City) Peak oil doesn’t spell the end of the oil industry. A peak has two sides to it.
Oil production will decline slowly. On the far side of the peak, oil’s price will rise rapidly because three factors will be working together: decreasing supply, increasing demand, and inflation. Petroleum companies will make a lot of money before the game’s over.
Get Ready
I think it would be wise to learn as much about the Internet as you can. Look at how fast the technology is developing, just in time to meet the demands imposed on businesses by peak oil. Most people won’t be Web programmers, but many will have to do at least some of their work through the Internet.
Watch these two videos about peak oil before making any major career decisions.
Who is there in all the earth in whom I can put my trust?
Who can move these mighty mountains? Whose voice can calm these seas?
—
My goal: I will make a two-person income so that my kids can spend more time with their mom. I will find a way to make a two-person income without sacrificing my time with students.
One possible way to reach it: Find a place to live with a university or middle school so I can continue working with students. Make sure it is in a state where the houses are cheap. Houses are affordable in about 40 of the 50 states. Make sure the rents in that area are high enough that there is money left over after paying the mortgage and other expenses on the houses.
—
I’m looking for a place I’d be willing to spend a lot of time in, since I plan to fly back and forth between California and the new area for years to come.
Here’s my choice:
NORMAN, OKLAHOMA
Why Oklahoma?
(1) I am looking for a small city or large town containing a good university. If one of my goals is to work with students, I may as well live among them. Students should also provide a recession-proof pool of renters.
(2) The area must have affordable housing. For me affordable doesn’t necessarily mean “below a certain price.” I need to look at properties as investments, not as places for me to live. If housing prices are high but rents are also high, that’s fine. If prices are low and rents are high, that’s even better. If I can put 5% down and take out a loan for 95% of the value of the house and still have money left over after the rent pays all the house’s expenses, that’s good.
Considering (1) and (2) left me with these choices:
Dallas, Houston, Austin, College Station (all in Texas)
Albuquerque, Santa Fe (New Mexico)
Norman/Oklahoma City (Oklahoma)
Lawrence (Kansas)
Urbana (Illinois)
I like Texas, especially College Station, but property taxes are really high. I’m scratching Texas off my list for now but would be willing to move there later if Oklahoma doesn’t work out.
(3) I want a place that’s diverse enough so I’ll feel comfortable. The cities in Texas have a large percentage of Asians, but I’ve already scratched Texas. I also like Urbana, which is more diverse than San Francisco’s East Bay area but less diverse than the SF Pensinsula area. I had to scratch Santa Fe and Lawrence because they’re not diverse enough, even though I really like the weather.
The areas remaining on my list are Albuquerque, Norman, and Urbana.
(4) I’m looking for an area with conservative-minded people. It’ll be easier to live with neighbors who think like I do, especially when their votes will affect my freedoms. I’m a libertarian, which means I value freedom of religion, freedom of speech, freedom to defend my family, freedom to do business without regulations, and freedom from taxes.
If we can’t have a fully Christian government, then let’s have one that leaves us alone so we can do God’s work and preach the gospel. I believe that a libertarian government would unknowingly support Biblical values by giving Christians the freedom to change the world for the better.
I urge, then, first of all, that requests, prayers, intercession and thanksgiving be made for everyone— for kings and all those in authority, that we may live peaceful and quiet lives in all godliness and holiness. This is good, and pleases God our Savior, who wants all men to be saved and to come to a knowledge of the truth. (1 Timothy 2:1-4, NIV)
Dallas, College Station, Norman, and Lawrence are conservative. Houston, Austin, Albuquerque, Santa Fe, and Urbana are more liberal.
Only three states in the Union had every county vote for Bush in 2004: Oklahoma, Nebraska, and Utah. While I don’t support all of President Bush’s views or everything he does, I agree more with what he says than with the candidates from the Democratic party who have run against him.
(5) A lot of states are already feeling water shortages. For example, the cities in the dry state of New Mexico buy their water from the distant Colorado River. They’re working on channeling water from a river in eastern NM, but until that happens, watering has been so restricted that most people don’t have lawns.
Although Kansas and Oklahoma are going through a drought right now, I think Oklahoma will be fine long-term, since it has a lot of natural and artificial lakes.
(6) In the event of a national disaster or very high oil prices, big cities are the last places I want to be. Imagine what would happen if the price of gas doubled and trucking companies started to go out of business or raise their prices. How far does food travel in a truck to get to San Francisco as compared to Norman in Oklahoma, which is just a few miles from Hickville?
The situation would be even worse if the airlines, which are already in trouble, went bankrupt because of high fuel prices or more terrorist activity. Large cities tend to rely on airports a lot more than small ones.
Things would be truly grim if the airplanes brought something back with them [cough]. No, that wasn’t a subtle hint. It was the first sign of an avian flu epidemic.
There are lots of small college cities in the United States with a very educated population but Hickville only a few miles away. You may complain now, but I’m sure you’ll lighten up when the hicks show up with food and weapons to help their neighbors in a national emergency.
(7) Commodities like food, oil, and coal will go up in price over time because of a weakening dollar. It will be harder to buy commodities and other goods from other countries. The weaker dollar also encourages other countries to buy things from us.
The long-term prospects of Texas, Oklahoma, and Kansas are good, since they produce a lot of food and fuel. If it’s expensive to import them, there will be more demand for the amounts that are locally produced.
California, with its high city populations, will need a lot of food and oil, but production will be far away. High oil prices means that it will cost more to ship these goods to cities, and the cost of living in the big cities will go up faster than in small cities and towns.
There are very solid, fundamental reasons why the dollar should get weaker over time:
The American dollar will get weaker as the government gets closer to not being able to pay off its multi-trillion dollar debts on Social Security, Medicare, and federal pensions. They want the dollar to become weaker, to be worth less and less over time, because that makes it easy for them to pay their debts back. Thirty years from now, if the dollar is only worth one quarter of what it’s worth today, the government could pay its debts four times more easily than it could today. The poor folks who lent money out will get stiffed: paid back with money that is worth less than it was when they lent it out.
The government has been weakening the dollar for a long time now by borrowing money. That’s right: in order to pay back their debts, they need a weaker dollar. To weaken the dollar, they borrow more money.
How does this work? When the government borrows money, they spend it right away. This money finds its way into banks. This is a problem because a practice called ‘fractional reserve banking’ is encouraged. A bank can take the $100 you deposit and create $800 or more out of nowhere to lend to other people. That money comes out of thin air. $800 can be “created” from $100 because the bank can simply modify the records on their computers and then lend out the “new” money.
When that $800 finds its way to another bank, guess what happens? That bank can create $3200 or more out of nowhere to lend to yet more people.
This is supposed to stimulate the economy because businesses will get excited over having so much money to borrow. They’ll borrow the money to invest and make their businesses bigger. Because of that initial $100 deposit, thousands of dollars have been created out of nowhere. At first, those thousands of dollars are still chasing the same MP3 players, TVs, cars, and so forth, causing prices to go up. This makes businesses even more excited, since they can make more money if prices are higher.
The businesses eventually overproduce because they don’t realize that the higher prices were caused by fractional reserve banking, NOT a fundamental increase customer demand. Now there are too many MP3 players, TVs, cars, and so forth, far more than people are willing to buy. Yet businesses have borrowed a lot of money and have no way to pay it back without making the sales they were hoping for.
That’s right: it’s recession time. Since there are too many MP3 players, TVs, and cars, prices fall into the basement. Business go bankrupt or fire lots of people to keep from going bankrupt. Whatever customer demand was created by the “funny money” has disappeared. Eventually, everything would recover by itself, since fractional reserve banking requires banks to DESTROY money during a recession when people take their money out of their bank accounts. This is the reverse of the money creation process that started when you deposited your original $100.
Think about it: lower prices in a recession means that a dollar can buy more, so a recession makes the dollar stronger. Recessions are simply a way for the economy to rid itself of the effects of money-creation.
Unfortunately, the big-wigs will “save” us by preventing a full recovery from happening. Remember that they have debts to pay off and NEED a weak dollar. They’ll borrow more money in the middle of the recession in order to get the whole money-creation process to start again. Yes, this will pull us out of the recession, but it does so prematurely, before the dollar has had a chance to regain its full strength.
Despite all of its bad effects, it’s possible for some people to profit from a weakening dollar even as the country as a whole is suffering. People in other countries will be able to get lots of devalued dollars in exchange for their own currencies, which will encourage them to buy stuff from us. This will be good for businesses that manufacture goods for export. (The raw materials for those goods will include, not surprisingly, commodities like food, oil, and coal.)
Remember also that a weaker dollar makes it easier to pay debt back. Today, someone may borrow money to rent a house where the rent is barely able to make the loan payments. In the future, the owner of the house must raise his rents in order to compensate for a dollar that is worth less every year. However, the loan payments stay the same. The bank charges a high interest rate for loans because it knows that the dollar will get weaker. So even though not much of the rent money may be left over after making loan payments in the first year, the “leftover” money is bigger and bigger every year thereafter. Buying rental houses with debt is one way to profit when the dollar is going down the tubes.
By the way, there are lots of signs of a coming recession. For one thing, the yield curve is inverted as of mid-August 2006. This is a sign that people are scared that risky investments will go under, and they’re putting their money in long-term Treasury investments instead. In other words, they’re nervous and have already begun pulling their money out of the stock market.
Remember that as the dollar gets stronger, prices go down, but debt gets harder to pay off. People who lose their jobs or who have a lot of personal debt to take care of won’t be in a position to take advantage of low prices. Be prepared. If you can, snatch up a few good investments during the recession and watch the prices go up after the dollar starts getting weaker again.
OKie dokie
I hope it’s clear why I’ve chosen Oklahoma as a place of refuge. While I don’t plan to live there permanently, I do need a place that allows me to manage wise investments from a distance if necessary. It may as well be a place that has good long-term economic prospects and neighbors who have the same values that I do. I’ll need a safe place to live if California gets too liberal. I’ll also need a safe, steady income to allow my future wife, whoever she is, to spend more time with the kids.
This isn’t the only way to take care of a family, future or otherwise. Not all ways are equally effective, though. What are your plans?
