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What Doom and Gloom Looks Like (Part 1). Cuba's Special Period

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June 12, 2009 – Comments (5) | RELATED TICKERS: OIH , GS , JPM

SUMMARY

As an adult and an investor you should be able to discuss with some intelligence the possible consequence of a run on the dollar, an oil shock, a greater war, etc... with out using the moronic statement "doom and gloom". "Doom and gloom" should reserved for when the "four horsemen" ride via  Conquest, War, Famine, and Death. An economic expansion then contraction is NOT "doom and gloom", it is a normal part of the business cycle and a consequence of government involvement in the markets.

OVERVIEW 

Another example of what may unfold, if the dollar looses its' reserve currency status or the US defaults or there is an oil shock / embargo or a greater war is Cuba's Special period.

The Special Period in Peacetime in Cuba was an extended period of economic crisis that began in 1991 after the collapse of the Soviet Union and, by extension, the Comecon. The economic depression of the Special Period was at its most severe in the early-to-mid 1990's before slightly declining in severity towards the end of the decade. It was defined primarily by the severe shortages of hydrocarbon energy resources in the form of gasoline, diesel, and other oil derivatives that occurred upon the implosion of economic agreements between the oil-rich Soviet Union and Cuba. The period radically transformed Cuban society and the economy, as it necessitated the successful introduction of sustainable agriculture, decreased use of automobiles, and overhauled industry, health, and diet countrywide.

The collapse of the Soviet Union decimated the Cuban economy. The country lost approximately 80% of its imports, 80% of its exports and its Gross Domestic Product dropped by 34 percent. Food and medicine imports stopped or severely slowed. Perhaps most immediately impactful, however, was the loss of nearly all of the oil imports by the USSR;[1] Cuba's oil imports dropped to 10% of pre-1990 amounts.[2] Before this, Cuba had been re-exporting any Soviet oil it did not consume to other nations for profit, meaning that petroleum had been Cuba's second largest export product before 1990. Once the restored Russian Federation reemerged out of the wreckage of the Soviet Union, its administration immediately made clear that it had no intention of delivering the tanker after tanker of petroleum that had been guaranteed the island by the USSR; in response to this notification, Fidel Castro angrily cut off all oil delivery from Russia, merely one week later. He fell witness to an immediate need to reduce domestic consumption of what remained by 20% over a span of just twenty-four months.[1][3]. The effect was felt immediately. Entirely dependent on fossil fuels to operate, the major underpinnings of Cuban society—its transportation, industrial and agricultural systems—were paralyzed. There were extensive losses of productivity in both Cuban agriculture — which was dominated by modern industrial tractors, combines, and harvesters, all of which required oil to run — and in Cuban industrial capacity.

The early stages of the Special Period were defined by a general breakdown in transportation and agricultural sectors, fertilizer and pesticide stocks (both of those being manufactured primarily from oil derivatives), and widespread food shortages. Australian and other permaculturists arriving in Cuba at the time began to distribute aid and taught their techniques to locals, who soon implemented them in Cuban fields, raised beds, and urban rooftops across the nation. Organic agriculture was soon after mandated by the Cuban government, supplanting the old industrialized form of agriculture Cubans had grown accustomed to. Relocalization, permaculture, and innovative modes of mass transit had to be rapidly developed. For a time, waiting for a bus could take three hours, power outages could last up to sixteen hours, food consumption was cut back to one-fifth of their previous levels and the average Cuban lost about twenty pounds. Although starvation was avoided, persistent hunger, something not seen since before the Cuban Revolution, suddenly became a daily experience, and initially, malnutrition in children under five was evident after just a few weeks of these food shortages.

Read more here:

http://en.wikipedia.org/wiki/Special_Period

Here is a great documentary on the Special Period. Power Of Community - How Cuba Survived Peak Oil

The Full Video is here:

http://www.livevideo.com/video/mercofspeech/CD893609A0CB495D9A9CF04AC9E4AEFF/power-of-community-how-cuba-.aspx

5 Comments – Post Your Own

#1) On June 12, 2009 at 11:27 PM, starbucks4ever (98.71) wrote:

Castro has shown that it's possible to survive peak oil, but to pull off that trick, one has to be Castro. If the comandante's name were Obama, Cubans would suffer the fate of 19th century Indian weavers. We'd be now taking trips to an uninhabited island whose total population would consist of Obama, Bernanke, and Geitner, all very rich after having successfully exchanged 10^48 Cuban pesos for $1 Bln euros when stuf just began to hit the fan, and now enjoying a new permanent residence on the French Riviera. Invisible market hand for the populace, plus the signature "yes we can" for a few who can speak of themselves as "we".

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#2) On June 13, 2009 at 9:32 AM, ralphmachio (26.73) wrote:

Makes me want to move to Cuba.  Having spent some time in miami, i imagine it would be a huge party.

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#3) On June 13, 2009 at 9:40 AM, ralphmachio (26.73) wrote:

I never realized it, but these horsemen could be narrowed down to 1 or two horsemen.  I mean, why be so redundant?  Conquest, war, death- I think these 3 numbnuts should share a horse!  It's time for us all to make sacrifices, and consume less.  The 'four' horsemen should do their part, and I suggest a VW vanagon for the whole lot of them.  

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#4) On June 13, 2009 at 11:02 AM, OneLegged (< 20) wrote:

I always enjoy the gratuitous, irrelevent (and feeble) twistings to blame every thing on whatever political party is at the helm at the time.  NOTHING IS THAT SIMPLE!  These comments are  like a three-year-old beating his head on the floor to get his way/attenion.

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#5) On June 14, 2009 at 1:05 AM, FleaBagger (28.74) wrote:

Conquest, Death, and War do seem a little redundant, but Conquest wasn't an H.O.T.A. It was Pestilence. War, Death, Pestilence, and Famine. Still, it does seem kinda redundant.

As for the merits of mimicking Cuba when we run out of oil: that might work. Letting the free market take care of it might work, too. We'll see what's politically viable when the time comes.

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