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Title: Clusterfuck Nation by Jim Kunstler
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URL Source: http://jameshowardkunstler.typepad.com/
Published: Dec 20, 2007
Author: Jim Kunstler
Post Date: 2007-12-20 13:56:30 by gengis gandhi
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Clusterfuck Nation by Jim Kunstler Failure Beyond Finance Events are driving us now, not personalities or even policies. Ben Bernanke, Hank Paulson, and the other characters in the headlines might pretend that they are managing things, but the truth is that problems in the financial sector have spun wildly out of control. The wheels are coming off and we are in that long sickening moment of sideways sliding motion when no attempt at steering will avail to avoid the crash. That it is happening at the very height of the Christmas season, when events have previously been controllable -- the season of manufactured Santa Claus rallies and $50 million bonuses -- shows how perilous the situation is. The reason the financial sector is crashing is really pretty simple: it created too many fraudulent securities. What has been conspicuously absent so far is any sense of accountability for what may go down as history's greatest swindle. It's really impossible to imagine that a bunch of low-ranking worker bees in the banking hives spun out all these bundles of collateralized debt obligations, mortgage-backed securities, and similar trash on their own without the say-so of their bosses -- a group that includes the current Secretary of the Treasury, Mr. Paulson, formerly CEO of the Goldman Sachs organization. And, of course, the questions naturally follow: what about those in charge of the ratings agencies that awarded AAA status to high-risk junk investments; and where were the banking regulators when outfits like Countrywide Financial, Washington Mutual, and Ditech were handing out miracle mortgages to borrowers without normal qualifications; and where was the Securities and Exchange Commission when the wholesale trade in creatively-engineered debt instruments ramped up to high volume, and what was the board of directors at Merrill Lynch thinking when it allowed disgraced CEO Stan O'Neal to back a truck up to the company loading dock and fill it up with $160 million in bonus-and-termination payments after O'Neal presided over at least $8 billion in losses? What we're also seeing is a crisis of authority on top of a crisis of capital, and it will probably lead to a crisis of legitimacy -- by which I mean a catastrophic loss of faith that this society can govern itself at any level. Leadership across the board has failed, in government, in business, in what used to be called the press, and in education. Leadership in every sector went along with the program, marveling stupidly at their society's ability to get something for nothing. The general public did not perform any more honorably -- due to whatever failure of civic norms they operate within -- and indeed the nation as a whole may deserve all the suffering it faces. But however bad the general public's behavior, or dark their fate, a failure of civic norms is ultimately a failure of leadership, which is about clearly stating the boundaries and terms of behavior. When anything goes, nothing matters. Since that was our leaders' attitude, the public did what it naturally does: it follows the example set by leadership. We haven't begun to see where all this will lead yet. Since what is happening is basically the evaporation of trillions of dollars in supposed wealth. At the very least we're likely to see an impoverished nation very soon short of money to buy necessities. Historically this is known as a ruinous deflation. The last time America went through such an experience was the Great Depression of the 1930s. Like this situation, it came at the end of an extraordinary expansion of credit -- loans largely made in that day for the purchase of stock "on margin." One difference between then and now is that in 1929 a relative small minority of Americans were involved in stock purchases. Today, a relative large number of ordinary citizens own overpriced houses bought using extraordinarily risky loans, and a large number of institutions such as pension funds, banks, hedge funds, and money markets own fraudulent securities based on these house loans, worth a fraction of their face value. Some other differences this time around: in the background is a "real" economy of depleting natural resources (oil, soils, aquifers, etc) and the systematic disassembly of an industrial manufacturing infrastructure. In the 1930s, many people could return to family farms and get by, even with little money. Today there are far fewer family farms. The nation is acting just now like a crowd of bystanders watching a car wreck that has nothing to do with them -- as though they were just occupying the Nascar grandstand on a particularly bad day. They'll discover soon that it's their own society that's hit the wall out there on the track. It raises the question, under the circumstances, as to whether the next presidential election will have any legitimacy. December 17, 2007 in Commentary on Current Events | Permalink | Comments (246) Spirit of the Season The clowns in charge of things understandably feel that they have to do something -- or pretend to -- in the face of what is shaping up to be not just a credit "crunch," but a potentially lethal illness in the credit system per se -- that is, in the very process of trading in paper that claims to represent faith in the future creation of wealth. That process underlies all of modern finance. Investments, currencies, economies, and nations hang in the balance. President Bush, seeming very much the clown-in-chief, led the way last week by proposing a mortgage crisis bail-out that would appear to have no chance whatsoever of working as advertised. He called it, arrestingly, the Hope Now Alliance. It blithely assumed that those "servicing" mortgages -- that is, collecting the monthly payments -- have the ability to suspend scheduled upward re-sets of adjustable mortgages for five years for certain select homeowner payees -- so that theoretically said homeowners could avoid foreclosure. What might have worked in 1934, when the originators of mortgages were local banks that also "serviced" them (i.e. collected the monthly payments) is unlikely to avail today since the mortgages have been sold off in bunches to pension funds, hedge funds, money markets, and foreign investment funds -- none of which have an interest or the ability to renegotiate loans with millions of schlemiels from Cleveland to Denver to Fresno -- while the companies "servicing" these contacts are mere errand boys, with no say over the terms of anything they collect on. So, what if these loans are not "restructured," that is, renegotiated on new terms by both parties on what is, after all, a contract? What if the government just "declares" that the current terms are void? Since the mortgage contracts have been bundled into bonds and sold off, it means that the value of the bonds is no longer what they were sold to represent. So, while a command to suspend mortgage re-sets might give comfort to schlemiels who used bad judgment in signing mortgage contracts for houses they couldn't afford, it will further impair the value of the bonds dispersed throughout the investment markets and increase disarray in the basic system of creating future credit. That is, if it worked as advertised. But how can it work? The president said that this relief action would apply only to those who were current in their payments or no more than 60 days behind. Is it possible that a federal bureaucracy that could not even helicopter bottled water to desperate people trapped in plain sight on highway overpasses in New Orleans in 2005 can process millions of sheaves of relief applications in 60 days? Or even concoct the forms and print them? Even if the paperwork could be designed, printed, and distributed overnight, in reality, the applications would collect in the in-boxes for decades. Meanwhile there would be no way to meaningfully establish time-based qualifications for relief. The absurd process would quickly only cast more doubt on the market value of the bonds sitting "out there" while it would create a monumental disincentive for any financial enterprise to lend money for future mortgages (or perhaps anything else). So the New Hope Alliance would have the dual effect of killing the housing "industry" and the credit markets. It could easily have a third and not inconsiderable effect of destroying the credibility of the currency of the nation engaging in such obviously foolish political theatrics. And if the dollar goes, the entire global system of currencies could enter a state of dangerous instability. These are some of the hazards of suspending law as applied to financial markets, which can only function on the basis of contract law. Once contract law goes out the window, so does the faith of parties with reserve capital in lending out capital at interest. If the interest rate can be changed arbitrarily or capriciously by third parties, then those with capital would be better off buying gold or impressionist paintings or Manhattan apartments or private armies for protecting their Hampton estates, than lending money at interest established by contract. Anyway, this argument is academic because the Hope Now Alliance is just a political sham. The purpose of it is not to save the hapless occupants of over-leveraged houses, but first to buy a little more time so that the worker bees in the financial industry can justify awarding each other multi-million-dollar Christmas bonus packages, and second, to postpone the "workout" of all this bad investment as far into the future as possible. I have been wrong in the past about timing things, but I don't see any way on God's green earth that such a workout of mis-investment can be put off until somebody else is sworn in to lead the government in January 2009. The capital allocation system is already listing and groaning like a leaky ship in a hurricane. Maybe all the players really know that keeping the ship afloat until Christmas is really the best they can hope for. Christmas means a lot in this country. It represents all Americans' old hope that miracles can happen. Bums turn out to be Santa Claus. Old curmudgeons are transformed overnight into loving uncles. Angels save us when we jump despairingly into icey torrents. And Goldman Sachs executives pass out multi-million-dollar checks to the wizards who "innovated" an ingenious way for the rest of their country to commit financial suicide. December 10, 2007 in Commentary on Current Events | Permalink | Comments (524) Magic Wand Finance Note: Bloggers who would like to sign up for review copies of my forthcoming "post-oil" novel, "World Made By Hand" (March publication) can apply at this address: kunstler@aol.com. You must send your URL to establish qualifications and a shipping / mailing address for the book. Make sure all the info can be easily clipped and pasted in one chunk. Now onto today's blog. . . . For those of you concerned about my sense of pride -- yes, I sure got that eggy feeling all over my face last week after calling for a thousand-point Dow plunge, only to watch it put on the greatest two-day melt-up in five years. I suppose I underestimate the desperate moves of desperate people against the backdrop of an economy (and a finance sector) that remains unsound to the max despite the 700+ point sucker's rally or dead cat bounce, or whatever you want to call the giddy action in recent days. Whatever else you think of it, there is an awful lot at stake in manipulating the collective mood of those who traffic in capital. Beneath the momentary fugue of triumphalism, markets have never been so distressed in the lifetimes of most of us living. It's not just the folks in charge of things whose legitimacy is at stake, but the system itself. When the markets really do start to manifest their true state of extreme disorder, many will blame "capitalism," not the swindlers who have been gaming it in recent years. I would pause to remind readers how I regard capitalism in the first place: not as a belief system or a political ideology, but merely as a set of laws describing the behavior of surplus wealth and the "money" that represents it. Compound interest has worked for communists and Republicans alike. The trouble in our case today stems not from the inherent defects of capitalism which, like gravity, exerts its laws no matter how people think or feel, but from cavalier indifference to its laws. One of these is the idea that capital markets will perform credibly -- within reasonable limits of risk -- only if there is agreement that its tradable paper has some value. When markets work properly, fortunes are made and lost on the basis of relatively slight differentials in notions of value. In other words, people must have some idea what they are trading. This is referred to as "transparency," meaning that those working the markets can see through the blur of daily action and know, for instance, that IBM common stock is fundamentally valuable (as back in, say, 1969) because every single office in the nation was buying IBM Selectric typewriters and paying for the service contracts that went with them. Nobody doubted that IBM had value, only whether it was worth $57 or $63 a share in a given week, or about how many Selectrics IBM might sell in the next quarter. The action in the markets now all hinges on how certain species of "derivative" paper -- certificates based on the value of other certificates -- are valued. The certificates in question are mortgage-backed-securities (MBSs), collateralized debt obligations (CDOs), and other instruments based on debt rather than equity, that is loans rather than wealth. Of course, one problem associated with these things is that they exist now mainly in the forms of electrons in computer systems, represented by pixels on screens, not in paper contracts or promises to pay. Thus they are abstracted not just in derivation but in representation. The further and more crucial problem is not that there is necessarily disagreement over their value, but that, in fact, there's a growing consensus that their value is close to zero. And there is enough of the worthless crap to choke banks all over the world. The current distress in the markets derives from the frightening recognition of this problem and perhaps even more from the efforts to conceal it. There was a ton of action on that front last week, which ignited the fools' rally in stocks. For instance, Citicorp, like many other big banks, is choking on scores of billions of dollars denominated in pixels derived from bad loans. Citicorp is in the unhappy position of not being able to cover its losses on this dreck. It appears to have liabilities exceeding its capital assets. It is even having trouble "papering over" these losses -- i.e. borrowing more money to appear solvent. The loan of $7.5 billion it got last week from Abu Dhabi's sovereign investment fund (a nationalized enterprise) came at the cost of 11 percent interest, a rate more commonly associated with New Jersey racketeers than legitimate bankers. The event was greeted with triumphal sighs of relief on Wall Street. My guess is this was so only because the managers of money think it will keep appearances pasted together just long enough for them to crawl over the Christmas bonus finish line. It seems to me that there is still plenty of room left for things to go awry. Another big spur to last week's engineered rally was the chatter about a distressed mortgage bail-out scheme by Secretary of the Treasury Hank Paulson and others. It would be nice, perhaps, if some honcho-wizard could wave his magic wand and command the adjustable mortgages to magically stand pat for an indefinite period -- say, long enough to sort out the value of all those dubious MBSs and CDOs -- but despite the appearance of good intentions, such a program has no practical viability whatsoever. For one thing, nobody really knows where the actual ownership of the individual mortgages has actually landed. This is a major awful consequence of the scheme to disperse risk so widely in the creation of these derivatives. The scheme was so successful that now nobody knows which mortgage belongs to whom and how to begin renegotiating it. So any talk about restructuring these mortgages is absurd, since to do so would require agreement between the borrowers and the lenders. All the lawyers who ever lived would not be able to sort out this mess, and most of the money at stake would end up going to the lawyers now living if the process were to go forward. All this is apart, by the way, from the question as to whether insolvent homeowners could keep up with their payments whether the rates were frozen or not, not to mention the further unsettling prospect that the interest deferred would only end up being added to their principal even while the market value of their houses spiraled ever-lower in the ongoing bubble bust. A blanket freeze would further degrade the legitimacy of contracts between all borrowers and lenders, making it impossible to price in risk for any future lending contracts -- since they would now be susceptible to arbitrary changes-in-terms by authorities in charge. In the meantime, a court in Ohio has already ruled that one major bank (Deutsche Bank) which thought it held mortgages there, had no legal standing to foreclose on non-performing properties (STORY). Also meanwhile, public investment funds from Florida to Norway are hemorrhaging because of mortgage-associated derivatives clogging their portfolios. Meanwhile, moreover, credit markets have seized up because those supposedly holding capital can't say how much they really have, and are now terrified of loaning out "money" that might actually not be there, not in accounts receivable, not on or off any books, just... not... there... anymore.... The recognition is growing that our financial markets have been subject to mischief so egregious that there will be hell to pay. The current "distress" is the inability of the markets to function -- no matter what the Dow Jones Industrial Average appears to say at any given moment. The legitimacy of the markets and those now pretending to preside over them hangs in the balance as we slide sickeningly into the holidays. December 03, 2007 in Commentary on Current Events | Permalink | Comments (571) Either / Or? Note: I'm getting a lot of complaints about bad behavior in the "comments" section of this blog. Report the email addresses or "handles" of the pests and I'll block them from participating. The great debate among those of us on the Economy Deathwatch seems to be whether the debacle we observe around us will resolve as a crash or a slow-motion financial train wreck. It seems to me that at every layer of the system, we're susceptible to both -- in tradable paper, institutional legitimacy, individual solvency, productive activity, real employment, "consumer" behavior, and energy resources. Some things are crashing as I write. The dollar is losing about a cent every three weeks against other currencies. A penny doesn't seem like much, but keep that pace up for another year and the world's "reserve currency" becomes the world's reserve toilet paper. Oil prices are poised to enter the triple-digit realm, the psychological effect of which may be jarring to 200 million not-so-happy motorists. The value of chipboard-and-vinyl houses is tanking beyond question. Of course, the government's consumer price inflation figures and employment numbers are dismissed broadly as lacking credence. But anybody who has bought a bag of onions and a jar of jam lately knows that things are way up in the supermarket aisles, and so many illegal Mexican migrants were employed in the Sunbelt housing boom, that their absence in the bust won't register on any chart. It's hard to describe what constitutes the bulk of the stuff moving through the world's financial markets for the simple reason that it was purposely-designed to be so abstruse and provisional that traders would be too intimidated to ask what it represents -- and the growing terrified suspicion is that it's mostly worthless. By this I refer to the global freak show of derivatives, concocted "plays" on hypothetical "positions," credit default swaps, arbitrages in imagined "differentials," nifty equations, hedges, promises, algorithms executed by robots, and "off-book" wishes chartered in the Cayman Islands. Probably all of them, in one way or another, are just scams, since they are unaffiliated with productive activity. At a more fundamental level, these mutant "investments" were derived from a very tangible trade in loans and mortgages made to flesh-and-blood chumps, but even those are only the last in a long spiral of serial "bubbles," or market frenzies based on unreal expectations. And this leads into the very real realm of poor choices, fiscal and fiduciary irresponsibility, deliberately deceptive policy, criminal malfeasance, and the broad abandonment of standards in acceptable behavior by people in authority. A lot of observers attribute this to the Gordon Gecko ethos -- the discovery back in the 1980s that "greed is good," which was meant to trump a previous ethos that life is tragic. Anyway, the trade in mutant investment entities appears to be collapsing now as their worthlessness in market terms (as opposed to theoretical terms) becomes manifest. The major holders of this dreck are losing the ability to conceal their losses, but suspicion now reigns that the losses are far greater than even the massive multiple billions reported so far by the likes of Merrill Lynch, Citicorp, and others. I suppose that what we've been seeing lately is a desperate attempt to hold things together just long enough to cut those Christmas bonus checks so that when the pink slips do finally fly in 2008, at least some Big Boyz will walk away with enough cash to cover a hacienda in Uruguay and the salaries of a half-dozen private security goons to guard it. But I must say, at the risk once again of sounding extreme, that the structural and systemic sickness in the finance realm is now so severe that it is hard to imagine we will get through the month of December without some major trauma in the markets. In fact, I'd go so far as to predict a thousand-point drop (or more) in the Dow just in this week after Thanksgiving. Real wealth "out there" is evaporating like popsicles dropped on the floor of Hell's fifth circle. It is coming out of the system whether the Big Boyz or anybody else likes it or not, and its absence will assert itself. At the risk of sounding even more extreme, I would be hard put to believe any reports that "consumer" spending in the days following Thanksgiving will match the hopes and wishes of economic officialdom. My own hunch is that average Americans are so maxed out on debt that they don't know whether to shit or go blind. Perhaps lot of them are willing to take a last step into fatal insolvency in order to put a plasma TV screen under the Christmas tree and appear as heroes to their families. If that's the case, it would only imply a greater bloodbath in credit card default thundering through the system in February and March, which would only deepen the carnage in collateralized debt instruments further up the food chain. That stuff probably has a long way to unwind, even as the "train" of losses hits the immovable obstacle of reality and the "boxcars" of consequence fly off the rails. The slow-motion train wreck could sweep away an awful lot of familiar things in its path -- banks, companies, government-sponsored enterprises, whole industries, whole economies, nations, up to and including the prospects for civilized existence, if severe hardship leads to war, which it often does. To some extent, the speed and severity of the financial train wreck will occur in a mutually reinforcing relation to what happens in the oil markets. The rise in price is only the mildest symptom of growing instability for the system that allocates the world's most critical resource. Even in the face of "demand destruction," weird changes are occurring in the way that the oil producers do business. The decline in export rates and the new spirit of "oil nationalism" will take center stage now, even if the US economy seizes up. These phenomena will represent a new cycle in world affairs: the global contest for remaining fossil fuel resources. Sooner rather than later, the next symptom will appear: spot shortages around the US and hoarding behavior. This is what will finally wake the American public out of its long sleepwalk (and Matthew Simmons said this first, by the way) -- when the lines form at the gas stations and the tempers flare and the handguns come out of the glove compartments. In the financial markets and the economies of nations, it's not a case of either / or. It's a matter of either / and. November 26, 2007 in Commentary on Current Events | Permalink | Comments (455) Either / Or? Note: I'm hearing a lot of complaints about behavior in the "comments" section of this blog. If you report the email addresses or "handles" of the pests, I will block their comments. The great debate among those of us on the Economy Deathwatch seems to be whether the debacle we observe around us will resolve as a crash or a slow-motion financial train wreck. It seems to me that at every layer of the system, we're susceptible to both -- in tradable paper, institutional legitimacy, individual solvency, productive activity, real employment, "consumer" behavior, and energy resources. Some things are crashing as I write. The dollar is losing about a cent every three weeks against other currencies. A penny doesn't seem like much, but keep that pace up for another year and the world's "reserve currency" becomes the world's reserve toilet paper. Oil prices are poised to enter the triple-digit realm, the psychological effect of which may be devastating to 200 million not-so-happy motorists. The value of chipboard-and-vinyl houses is tanking beyond question. Of course, the government's consumer price inflation figures and employment numbers are dismissed broadly as lacking credence. But anybody who has bought a bag of onions and a jar of jam lately knows that things are way up in the supermarket aisles, and so many illegal Mexican migrants were employed in the Sunbelt housing boom, that their absence in the bust won't register on any chart. It's hard to describe what constitutes the bulk of the stuff moving through the world's financial markets for the simple reason that it was purposely-designed to be so abstruse and provisional that traders would be too intimidated to ask what it represents -- and the growing terrified suspicion is that it's mostly worthless. By this I refer to the global freak show of derivatives, concocted "plays" on hypothetical "positions," credit default swaps, arbitrages in imagined "differentials," nifty equations, hedges, promises, algorithms executed by robots, and "off-book" wishes chartered in the Cayman Islands. Probably all of them, in one way or another, are just scams, since they are unaffiliated with productive activity. At a more fundamental level, these mutant "investments" were derived from a very tangible trade in loans and mortgages made to flesh-and-blood chumps, but even those are only the last in a long spiral of serial "bubbles," or market frenzies based on unreal expectations. And this leads into the very real realm of poor choices, fiscal and fiduciary irresponsibility, deliberately deceptive policy, criminal malfeasance, and the broad abandonment of standards in acceptable behavior by people in authority. A lot of observers attribute this to the Gordon Gecko ethos -- the discovery back in the 1980s that "greed is good," which was meant to trump a previous ethos that life is tragic. Anyway, the trade in mutant investment entities appears to be collapsing now as their worthlessness in market terms (as opposed to theoretical terms) becomes manifest. The major holders of this dreck are losing the ability to conceal their losses, but suspicion now reigns that the losses are far greater than even the massive multiple billions reported so far by the likes of Merrill Lynch, Citicorp, and others. I suppose that what we've been seeing lately is a desperate attempt to hold things together just long enough to cut those Christmas bonus checks so that when the pink slips do finally fly in 2008, at least some Big Boyz will walk away with enough cash to cover a hacienda in Uruguay and the salaries of a half-dozen private security goons to guard it. But I must say, at the risk once again of sounding extreme, that the structural and systemic sickness in the finance realm is now so severe that it is hard to imagine we will get through the month of December without some major trauma in the markets. In fact, I'd go so far as to predict a thousand-point drop (or more) in the Dow just in this week after Thanksgiving. Real wealth "out there" is evaporating like popsicles dropped on the floor of Hell's fifth circle. It is coming out of the system whether the Big Boyz or anybody else likes it or not, and its absence will assert itself. At the risk of sounding even more extreme, I would be hard put to believe any reports that "consumer" spending in the days following Thanksgiving will match the hopes and wishes of economic officialdom. My own hunch is that average Americans are so maxed out on debt that they don't know whether to shit or go blind. Perhaps lot of them are willing to take a last step into fatal insolvency in order to put a plasma TV screen under the Christmas tree and appear as heroes to their families. If that's the case, it would only imply a greater bloodbath in credit card default thundering through the system in February and March, which would only deepen the carnage in collateralized debt instruments further up the food chain. That stuff probably has a long way to unwind, even as the "train" of losses hits the immovable obstacle of reality and the "boxcars" of consequence fly off the rails. The slow-motion train wreck could sweep away an awful lot of familiar things in its path -- banks, companies, government-sponsored enterprises, whole industries, whole economies, nations, up to and including the prospects for civilized existence, if severe hardship leads to war, which it often does. To some extent, the speed and severity of the financial train wreck will occur in a mutually reinforcing relation to what happens in the oil markets. The rise in price is only the mildest symptom of growing instability for the system that allocates the world's most critical resource. Even in the face of "demand destruction," weird changes are occurring in the way that the oil producers do business. The decline in export rates and the new spirit of "oil nationalism" will take center stage now, even if the US economy seizes up. These phenomena will represent a new cycle in world affairs: the global contest for remaining fossil fuel resources. Sooner rather than later, the next symptom will appear: spot shortages around the US and hoarding behavior. This is what will finally wake the American public out of its long sleepwalk (and Matthew Simmons said this first, by the way) -- when the lines form at the gas stations and the tempers flare and the handguns come out of the glove compartments. In the financial markets and the economies of nations, it's not a case of either / or. It's a matter of either / and. November 26, 2007 | Permalink | Comments (10) Formerly Normal November 19, 2007 Venturing into the rural outlands of the upstate New York counties these days, you see new houses everywhere in what was, until about the 1970s, mostly farm country. Almost all of them are stand-alone houses; there are very few multiple-unit subdivisions up here, a la the vast beige housing monocultures found in the sunbelt. But they seem no less tragic to me. These new houses all follow the "normal" programming of their time -- a time that is stealthily ending. The program is as follows: Each house occupies an out-parcel of an acre or so of what used to be a farm or a woodlot. The house is set in the middle of the plot, surrounded by an apron of decorative foundation shrubs and grass lawn. The scheme derives from the English idea of "a manor in a park." You can tell, because if trees remain (or get planted) on the lawn, they are always deployed arbitrarily, never in formal rows, as the French would do it. The idea is that every homeowner is the "lord of the manor." Of course, a major feature of this is the asphalt pad-and-driveway where the household stores (and not incidentally displays) its collection of cars, one for each adult family member plus "training" models for the adolescent offspring. This part of the package is indispensable, the umbilicus that connects the household to all the necessities of life, from paychecks to Slim Fast bars. Its continuation is assumed. In fact, the value of the house depends on that assumption. The appeal of this program is obvious in the consumer-democracy of recent times. The stupendous aggregate wealth ginned up at the climax of the cheap energy fiesta made everyone an aristocrat. As Tom Wolfe has pointed out, the average American roofer or insurance adjuster of these times has enjoyed a more comfortable life than Louis XIV. They certainly bathe more regularly, in sumptuous vinyl tubs, with motor-drive water jets, and possess refrigerated larders of delicacies from thousands of miles away (not to mention access to colonoscopies and periodontics). This luxurious life is a fragile thing, though. The fragility is actually expressed in the houses themselves, which are uniformly constructed from materials that would not seem to have a glorious destiny: wood-chips, glue, and vinyl. Anyone who visits the Palatine Hill in Rome must be impressed by the way stone blocks and masonry walls melt away over time. Imagine what would happen to a box made of chip-board over fir studs after a few decades of poor maintenance. You can even state categorically that the vinyl cladding was not designed to be maintained, only replaced. And in as much as vinyl siding is made from petroleum byproducts, one can easily foresee future replacement problems. There are also the things that you can't see: the furnaces and the mortgages. The expectation that it will be possible to get affordable heating oil or propane gas a decade or so into the future must be considered, shall we say, a crap shoot at best -- and in the climate of upstate New York, that can't be reassuring. As for the mortgages, we already know what is happening to them -- like the "transformer" entities of the movies, they are morphing into monsters that destroy everything in their path. I guess what really gets me about these houses popping up in the former cornfields and meadows is that the owners have absolutely no idea what a problem they are creating for themselves and their families (and their society), especially now as we move into a critical period of post-peak-oil instability. It's both poignant and pathetic, and a little disgusting. Their expectations are plain to see: that the life of luxury and incessant mobility is so assured that they can invest everything, even their anticipated future earnings, to enjoy all that the program had to offer. But they have tragically missed the fact that the program has changed. Of course, I am aware that my ability to venture easily into the outlands of Washington County, New York, is not something that I can take for granted much longer. A year or so from now, I may have to plan ahead, even make sacrifices, to travel so distantly from where I live. In the meantime, I wonder with the keenest curiosity what is going through the minds of the people who dwell out there. Surely they've noticed that gasoline is $3.25. One can easily imagine the granite countertop in the kitchen where the bills are piling up, the frightening invoices from Master Card and Discovery, along with dunning letters from the company that "services" the mortgage. One can imagine the feelings of despondency creeping up the veins of the household lord and his lady as they contemplate the distress sale of their motorboat, jet skis, snowmobiles, and RV -- and the futility even of trying. I think we are entering a time when what has seemed utterly normal to us will suddenly appear alien and threatening. If there was ever a recipe for an extreme social response, this will be it. As the poet said, the center cannot hold. November 19, 2007 in Commentary on Current Events | Permalink | Comments (726) Peak Money November 12, 2007 The multi-dimensional meltdown underway in the finance sector illustrates perfectly how the complex systems we depend on start to wobble and fail as soon as peak oil establishes itself as a fact in the public imagination. Mainly what it shows is that we don't have to run out of oil -- or even come close to that -- before the trouble starts. Just going over the peak and heading down the slippery slope of depletion is enough. Peak oil, it turns out, is also peak money. Or should we say, peak "money?" First of all, what is finance exactly? I'd bet that a lot of people these days don't know, including many working in the financial "industry," as it has taken to calling itself. Finance, until very recently, was the means by which investment was raised for useful economic activities and productive ventures -- in other words, the deployment of capital, which is to say accumulated wealth. Historically, this accumulated wealth was pretty meager. There wasn't a whole lot to deploy and the deployment was controlled by a tiny handful of people statistically greater only than the number of Martians in the general population. They operated as families or clans, and everybody knew who they were: the Medici, the Rothschilds. Even the Roman Empire was a kind of financial Flintstones operation compared to what we see on CNBC these days. Not having the printing press, the Romans had to inflate their currency the old-fashioned way, by adding base metals to their gold coins. Finance in the 200-odd-year-long industrial era evolved step-by-step with the steady incremental rise of available cheap energy. More to the point, the instruments associated with finance evolved in complexity with that rise in energy. It was only about two-hundred years ago, in fact, that circulating banknotes or paper currencies evolved out of much cruder certificates that were little more than IOUs. Once printed paper banknotes became established, and institutions created to regulate them, the invention of more abstract certificates became possible and we began to get things like stocks and bonds, traded publicly in bourses or exchanges, which represented amounts of money invested or loaned, but were not themselves "money." Much of this innovation occurred during the rise of the coal-powered economy of the 19th century. It accelerated with the oil-and-gas economy of the 20th century, up into the present time. So, for about 150 years -- or roughly since the end of the American Civil War -- we've had a certain kind of regularized finance that enjoyed continual refinement. Even in the face of cyclical traumas, like the Great Depression, currencies, stocks, and bonds retained their legitimacy if not always their face value. Russia was a bizarre exception. Crawling out of the mud of medievalism relatively late in the game, Russia pretended to abjure capital while still faced with the need to deploy it in industry. They solved this paradox conditionally by disqualifying the Russian public from participation in any part of the industrial economy except the hard work, and pretended to pay them in promises for "a brighter future," which never arrived as long as the Soviets remained in charge. (The Russian people repaid the system by only pretending to work.) In any case, finance for the purpose of deploying capital has prevailed as reality among people who use the implements of the dinner table, but something weird has happened to it in recent years. It has entered a stage of grotesque, hypertrophic metastasis that now threatens the life of the industrial organism it evolved to serve. Its current state can be understood in direct relation to the run-up to peak oil (peak fossil fuel energy, really, since coal and gas figure into it, too). The oil age, we will soon discover, was an anomaly. Many of the things that seemed "normal" under its regime will turn out to have been rather special. And as the beginning of the end of the oil age becomes manifest, these special things are starting to self-destruct pretty spectacularly. For one thing, finance in the past twenty years has evolved from being an organ serving a larger organism to taking over the organism, becoming a kind of blind, raging dominating parasite on its former host. Or to put it less hyperbolically, it has become an end in itself. That is what they mean when they say that the financial sector has been "driving" the economy. A feature of this ghastly process has been the evolution of financial instruments into ever more abstract entities removed from reality-based productive activities. Stocks and bonds were understood to represent direct investment in enterprise. Sometimes the enterprise was a failure, and sometimes the people running it were swindlers, but no one doubted that common stock represented the hope for profit in a particular venture like making steel or selling laxative chemicals. The new "creatively-innovated" financial "derivatives" of recent years are now so divorced from any real activities or product that often the people trafficking in them don't understand what they're supposed to represent. I'd bet that more than half the people in the New York Stock exchange any given day could not explain the meaning of a credit default swap if a Taliban were holding their oldest child over a window ledge across Wall Street. The innovation of mutant financial "products" is a symptom of the "crack-up boom" that characterizes society's response to peak oil. The main implication of peak oil for an industrial economy is that the 200-odd-year-long expectation for continued regular growth in combined energy-activity-and-productivity at roughly 3 to 7 percent a year under "normal" conditions -- that expectation is now toast. Under the new regime of peak oil and its aftermath, regular energy depletion, society can expect no further industrial growth but only contraction, and all the certificates, instruments, and operations associated with the expectation for further industrial growth lose their legitimacy. Seen in this light, one can then understand the temporary value of these mutant financial derivatives. They allowed participants to conceal the fact that these "investments" were not directed at productive enterprise. They also provided a cohort of sharpies with "vehicles" for converting the leftovers of the industrial economy into assets for themselves -- a form of looting, really. Hence, the employees of Bear Stearns, Goldman Sachs, and Merrill Lynch gave themselves $50-million Christmas bonuses for trafficking in these inscrutable non-productive financial gimmicks, and were able to acquire fifty-room Easthampton houses, Gulfstream jets, and impressionist paintings. Of course, the aftermath might not be so pretty for these guys, since the next thing they may acquire could be long prison sentences. If they flee prosecution in their Gulfstream jets, they will not be able to take their Hamptons estates aboard with them. Those who remain may live to see mobs with flaming torches outside their windows, as in the "Frankenstein" movies of their suburban childhoods. But this has yet to play out. For the moment it appears that we have entered the climax of the crack-up. The slick and inscrutable derivative vehicles infesting the ledgers of the investment banks, are now being systematically revealed as frauds of one kind or another, and, self-evidently lacking in worth. The process now underway is gruesome. The sheer dollar losses involved are almost as incomprehensible as the phony operations and instruments that they are derived from -- twelve billion here, nine billion there. As the late Senator Everett Dirkson once quipped, "sooner or later you're talking about real money...." Or are we? Is it money or "money." And if it's "money," what will become of it? And of us? How will it allow us to live? November 12, 2007 in Commentary on Current Events | Permalink | Comments (227) Ignoring the Obvious (Note: I'm having some formatting problems -- indents, etc -- with this TypePad platform, which I hope to fix by next week. If you want to see a clearer version of my blog this week go to the regular site: www.kunstler.com -- JHK) November 5, 2007, One of the biggest laughs of the season came out of a New York Times business section story last Tuesday by reporter Michael Grynbaum, who wrote, "Oil is on a steady march toward toppling the inflation-adjusted high of $101.70 it set in April 1980, analysts said, though many are at a loss as to what keeps driving the price." (Italics mine.) Actually, lots of people know what is driving up the price -- just not anybody who works at that once-august and now-clueless newspaper. It can be stated simply -- the demand line has crossed the supply line -- though that simple fact has many curious ramifications. 72; Among the most subtle is a theory out of Doug Noland's latest Credit Bubble Bulletin (published every Friday). "There are literally trillions of dollars of liquidity sloshing around the world keen to hold “things” of value. Liquidity sources include the massive central bank reserve holdings as well as funds at the disposal of the sovereign wealth funds. Importantly, the more apparent becomes U.S. financial fragility, the keener they are to stockpile real 'things'. . . . Indeed, it should be noted that this is the Federal Reserve’s first attempt at reflation where U.S. securities are not the speculators’ or foreign central banks’ asset class of choice . . . . Not only is the pool of potential global buying power unparalleled in scope. It is fervidly attracted to tangible assets -- as opposed to U.S. securities -- and is highly speculative in character. At the same time, an unwieldy global boom is stoking unprecedented demand in China, India, Asia generally, and the other “emerging” markets including Russia and Brazil. Throw in various weather related issues and energy production constraints and the prospect for some very serious bottlenecks and shortages has developed." In short, foreigners stuck holding dollars that are hemorrhaging value would rather spend them on something other than dollar-denominated financial paper, and nothing is more crucial to the maintenance of industrial economies than oil. Noland's theory comes on the heels of reported oil and gasoline shortages in China, bad enough to have caused some civil unrest -- and bad enough for China's leadership to want to spend some of its vast US dollar reserves bidding up oil prices in the open markets to quell that unrest. This is nothing more complicated than hoarding behavior on a global scale, a mounting crisis of frightened self-interest that has already been well-described by investment banker Matthew Simmons. Simmons was only one of many analysts who spoke at the mid-October Houston conference put on by ASPO-USA (the Association for Study of Peak Oil) -- to which The New York Times failed to send a reporter. Simmons has also said that the American public (and its leaders) will probably not "get" the fundamental problem with oil until rising prices are joined by spot shortages -- i.e. gas station lines, which will represent hoarding behavior on the basis of individual motorists. Behind the hoarding dynamics are several clear circumstances. One biggie is the growing export crisis, described by geologist Jeffrey Brown. Countries like Saudi Arabia and Mexico that sell oil to importing nations like The USA and Japan are using more of their own oil and producing less. Mexico's trajectory is so steep (due to the severe depletion of its giant Cantarell oil field) that it could easily go from being America's Number 3 source of imports to zero in less than five years. The anticipated yearly growth in worldwide oil demand next year will equal 80 percent of the USA's entire oil production. 72; The export crisis is only an additional layer on top of the general peak oil situation, but it illustrates the way that complex systems we depend on -- and oil markets are one -- are liable to wobble and fail just as the world comes off the all-time oil production peak for good. Finance is another complex system and it, too, is entering a stage of robust instability. Food production is yet another, with a grain scarcity that has driven wheat prices to all-time highs. The roster of complex systems entering phase change is long and gruesome. Another big element behind rising oil prices is oil nationalism. The old "major" oil companies -- Exxon-Mobil, Shell, BP, Chevron, et cet -- now only account for about five percent of world oil production. The other 95 percent comes from nationalized oil industries like Saudi Aramco, Mexico's Pemex, Petroleos de Venezuela, and Brazil's Petrobras. Russia's Lukoil and Rosneft are effectively state-controlled. Not only is worldwide oil in depletion (past peak) generally, but most of the remaining oil is controlled by entities that are inclined to both withhold (hoard) some remaining oil for their own future use and to direct whatever oil they do sell into places other than open auctions on the futures markets. Selling oil to favored customers will be an extremely potent instrument of geopolitics in the decade ahead, and is only one aspect of a desperate global resource contest that could turn ugly and violent. For the moment, though, its meaning for the US is that the two-thirds of our daily oil supply composed of imports is in jeopardy. Another big element of the oil price story is the condition of the equipment used all over the world for getting it out of the ground, moving it around the globe, and refining it into useful byproducts like gasoline and aviation fuel. The world is woefully short of drilling rigs, and the cost of steel is way up. The demand for new equipment is out-of-sight. The existing worldwide inventory of equipment can be fairly described as decrepit. As Simmons points out, there is a frightening gap between the need for investment in new rigs, tankers, and refineries and the money available to just keep production at current levels. The outlook is grim. In fact, the worldwide lack of will to invest in oil industry equipment is itself a symptom of the crack-up of global finance as a complex system under duress. On top of the equipment problem is a human resource problem: the world us not producing enough oil technicians and engineers to keep up with production, let alone increase it, and every year another wave of senior specialists retires out of the system. Beyond these parts of the oil price story are even more sub-plots, like the political strife in Nigeria that effectively holds its oil industry hostage, not to mention the fragile state-of-affairs throughout the Middle East, and dare we leave out the insane habits of America's Happy Motoring utopia. There is really no excuse for The New York Times and the rest of the mainstream news media to not understand what is going on out there. The pervasive cluelessness is a symptom of another complex system out of whack -- the system that informs us what's going on. Meanwhile, the danger mounts. The heating season is underway and the furnaces are clanking. Many Americans will have to start choosing whether to pay their mortgage, fill the tank of the Chevy Suburban, buy that brick of Velveeta, or pay the heating oil guy. It looks like China will be spending more of its accumulated dollars bidding up the price of oil (or making favorable contracts with foreign suppliers) instead of buying Freddie Mac bonds. The USA could not find itself in a less favorable position among all these forces roiling the scene. It certainly can't afford to continue its pathetic pose of cluelessness. November 05, 2007 in Commentary on Current Events | Permalink | Comments (349) Assumptions October 29, 2007, When historians glance back at 2007 through the haze of their coal-fired stoves, they will mark this year as the onset of the Long Emergency – or whatever they choose to call the unraveling of industrial economies and the complex systems that constituted them. And if they retain any sense of humor – which is very likely since, as wise Sam Beckett once averred, nothing is funnier than unhappiness – they will chuckle at the assumptions that drove the doings and mental operations of those in charge back then (i.e. now). The price of oil is up 53 percent over a year ago, creeping up now toward the mid-$90-range. The news media is still AWOL on the subject. (The New York Times has nothing about it on today’s front page.) The dollar is losing a penny a week against the Euro. In essence, the American standard of living is dropping like a sash weight. So far, a stunned public is stumbling into impoverishment drunk on Britney Spears video clips. If they ever do sober up, and get to a “…hey, wait a minute…” moment when they recognize the gulf between reality and the story told by leaders in government, business, education, and the media, it is liable to be a very ugly moment in US history. One of the stupidest assumptions made by the educated salient of adults these days is that we are guaranteed a smooth transition between the cancerous hypertrophy of our current economic environment and the harsher conditions that we are barreling toward. The university profs and the tech sector worker bees are still absolutely confident that some hypothetical “they” will “come up with” magical rescue remedies for running the Happy Motoring system without gasoline. My main message to lecture audiences these days is “…quit putting all your mental energy into propping up car dependency and turn your attention to other tasks such as walkable communities and reviving passenger rail….” Inevitably, someone will then get up and propose that the transition to all-electric cars is nearly upon us, and we should stop worrying. As I said, these are the educated denizens of the colleges. Imagine what the nascar morons believe – that the ghost of Davey Crockett will leave a jug of liquefied “dark matter” under everyone’s Christmas tree this year or next, guaranteed to keep the engines ringing until Elvis ushers in the Rapture. The educated folks – that is, the ones subject to the grandiose story-lines of techno-triumphalism taught in the universities – are sure that we’ll either invent or organize our way out of the current predicament. A society that put men on the moon in 1969, the story goes, will ramp up another “Apollo Project” to keep things going here. One wonders, of course, what they mean by keeping things going. Even if it were hypothetically possible to keep all the cars running forever, would it be good thing to make suburban-sprawl-building the basis of our economy – because that’s the direct consequence of perpetually cheap energy. Has anyone noticed that the housing bubble and subsequent implosion is following the peak oil line exactly? It’s a bit harder to discern what the assumptions really are among leaders in the finance sector, since so much of their activity the past ten years has veered into sheer fraud. The story line that everyone is putting out – from the Fed chairman Bernanke to the CEOs of the Big Fundz – is that American finance is a python that has swallowed a few too many pigs, but if we jigger around interest rates a little bit more, and allow some more money to be lent out cheaply, the python will eventually digest the pigs and go slithering happily on its way along the jungle trail with a burp and a fart. From this vantage, one sees a rather different story: more like a gang of human grifters sweating through their Prada suits as it becomes increasingly impossible to conceal massive losses incurred through overt reckless misbehavior. My own guess is that a lot of these boyz will be in line for criminal prosecution before too long. The political assumptions one hears are the most astoundingly naïve and ridiculous, especially the ones that involve other countries and our relations with them. NY Times followers no doubt believe, along with Tom Friedman, that the global economy is now a permanent fixture of the human condition, and that soon it will transform itself into a colossal engine of “green” (i.e. benign) commerce. Friedman and his followers tend to forget the second law of thermodynamics when spinning their fantasies of a world that can harmlessly manufacture and market an endless number of plastic salad shooters from one side of the planet to the other without incurring any losses to the health of said planet. My own assumptions are somewhat different. I think we’re likely to see a lot of nations scrambling for survival, initially manifesting in a contest for the world’s dwindling supply of oil (and oil-like substances). For instance, when viewing the globe, few people consider that Japan currently imports 95 percent of its fossil fuel. Japan has been a “good boy” among nations since its episode of “acting out” in the mid-20th century and has enjoyed a long industrial prosperity since then. But what happens when there is not enough oil in the world to be allocated rationally by markets among the powerful nations? Will Japan just roll over and die? Will they shutter the Toyota factories and happily turn to placid tea ceremonies. I think Japan will freak out, and it’s hard to predict exactly who will feel its wrath and how. Similarly, Europe. Americans view Europe as a kind of theme park full of elderly café layabouts swaddled in cashmere as they enjoy demitasse cups in the outdoor cafes of their comfortable art-filled cities (some of them not long ago rebuilt from rubble). Europe has let America do its dirty work for it in the Middle East for the past decade while enjoying tanker-loads of oil coming up through the Suez Canal. Europe has only had to make a few lame gestures in defense of its oil supplies. But the North Sea oil fields, which for twenty years have hedged the leverage of OPEC, are crapping out at a very steep rate. Sooner or later Europe will freak out over oil, and geo-political flat-earthers will be shocked to see that all the nations of café layabouts can mobilize potent military forces. God knows whose side who will be on, exactly, when that happens, and where America will stand – if its own military is not so exhausted that it can even stand up. Personally, I think the world will be growing a lot larger again, and less flat, and that eventually America will find itself isolated once again between two oceans – though incursions by desperate foreign armies in one way or another, is not out of the question as the great struggle for resource survival gets underway. In time, however, I think the current Great Nations of the world will lose their ability to project power in the ways we’ve been conditioned to think about it. In the meantime, our own nation has become a society incapable of thinking, and the failure at all levels of rank, education, and privilege is impressive. If you listen to the people running for president – many of them overt clowns – you’d think that that all the comfortable furnishings of everyday life can continue with a few tweaks of the dials. They are cowards and it is possible that they perfectly represent a whole nation of cowards who deserve cowardly leadership. The danger, of course, is that when a non-cowardly leader finally does step forward in a desperate America, he will not shrink from pushing around a feckless people, or doing their thinking for them. October 29, 2007 in Commentary on Current Events | Permalink | Comments (333) Peak Universe October 22, 2007 The big Peak Oil conference of the year took place in Houston last week – but before we get to the substance of that, a few words about where we were. It is hard to imagine a more horrifying urban construct than this anti-city in the malarial swamps just off the Gulf of Mexico. And it is hard to conceive of a more desolate and depressing urban district, even of such an anti-city, than the utter wasteland around Houston’s convention center. Luckily, we didn’t have to enter the convention center itself across the street -- a baleful megastructure the size of three aircraft carriers, adorned with massive air-conditioning ducts to counter Houston’s gym-sock-like climate. And when I say “street” you understand we are talking about four or six-laners, with no curbside parking, which is the norm for this town. The effect is that every street behaves like an extension of the freeway at the expense of pedestrians – but pedestrians have been eliminated anyway because in ninety percent of Houston’s so-called downtown of glass towers there are no shops or restaurants at the ground-floor level, only blank walls, air-conditioning vents, parking ramps, and landscaping fantasias. We were informed that in parts of downtown there existed a network of air-conditioned underground corridors with shopping, but that everything in it closed at 7 p.m. when the last office workers straggled home. Anyway, none of it extended as far as the convention center. The rest of district was devoted to surface parking. It has often been stated that Houston’s ghastly development pattern comes from having no official zoning laws. But all it really proves is that you can achieve the same miserable results of typical American boneheaded zoning with no zoning – as long as your don’t give a shit how people feel in their daily environments. The convention center itself, though, demonstrated something beyond even that degree of thoughtlessness. Its pharaonic hugeness was a metaphor for the fatal grandiosity at the heart of contemporary life in American today, the utter disregard for a scale of human activity consistent with what the planet has to offer within its ecological limits – and of course the oil issue was at the center of that story. Oh, one final thing about Houston life per se. Judging by the local items in the daily newspaper, the so-called city enjoys a level of mayhem that makes Baghdad look like a Sussex garden party. Sample headlines: “10 Charged in Burglary Spree,” “Pit Bull Shot Dead After Pony Attack,” “Jury Gives Man Life in Carjacking Death,” “Two Killed in Home Invasion.” One particularly insane story told of a man who shot and stabbed a visiting friend who “dissed” his dog. We didn’t see any of that action around the convention center's Hilton Americas, where the ASPO conference actually took place, but the news didn’t exactly make you want to venture out beyond the lobby. Anyway, you couldn’t buy a stick of gum within a mile walk of the place, and the thought of traipsing past all those surface parking lots in 90-degree heat was like an invitation to reenact the Bataan Death March. It was a sublime coincidence of fate and history that throughout the ASPO conference, the price of a barrel of oil surged up through the high eighty-dollars range and briefly touched $90-a-barrel on Friday (just as the stock market was tanking by 360-odd points). It was also interesting that as all this action was unfolding, MSNBC was running an interview with Senator Larry Craig (R. Idaho), lately accused of soliciting sex from a policeman in an airport toilet. Apparently what the nation really wants to know about is the Senator’s self-described “wide stance” in bathroom technique. Perhaps when Craig is finally forced from his senate seat, he can get a job as a “personal toilet coach,” and become the pioneer in a whole new realm of self-improvement science, teaching others how to assume the manly “wide stance” and become more effective leaders. So, while the price of oil ratcheted up hour by hour, the ASPO conference members heard from an impressive range of experts who have been leading the public conversation on the Peak Oil story – with no help from the mainstream media or the political sector. Among them were Robert Hirsch, co-author of the now-famous 2005 Hirsch Report, commissioned by the US Department of Energy, which, much to the consternation of its sponsor, first told the nation in no uncertain terms that it was heading for a catastrophic set of disruptions in “normal” American life if we heedlessly continued energy business-as-usual. Hirsch went a little further now, two years on, than he had in his famous report, predicting a future of “oil export withholding,” panicked markets, and allocation disturbances that would make the 1973 OPEC embargo look like a golden age. Matt Simmons, the leading investment banker to the oil industry, who has worked tirelessly to lift public awareness of Peak Oil, also raised the specter of shortages, telling the audience that market allocation problems in the near future would almost certainly induce “hoarding behavior” among the public that would cripple the economy, lead to enforced rationing, and shock the nation. Simmons compared the current public mood over energy issues to a “fog of war.” He also repeated his oft-stated opinion that the drilling rigs and other equipment used around the world to pump oil out of the ground are so uniformly old and decrepit that they pose a problem every bit as dire as peak oil itself. In the meantime, he said, to offset climbing prices, the developed nations have lately dipped so deeply into their accumulated stocks of crude and “refined product” that some countries may breach what is called their “minimum operating levels.” Offstage, he told me, “We’re too preoccupied trying to figure out the exact date of the peak. Meanwhile, we’ll drain the gasoline pool and it will be gone forever.” The other most significant contribution came from Texas geologist Jeffrey Brown who presented a full-blown version of his theory that world export rates from the countries with oil to sell are liable to decline so much more sharply than their actual production decline rates that the world would be thrust into an oil export crisis within the next five years – and that this export crisis would turn out to be the defining condition of the Peak Oil story. There were plenty of other fruitful contributions on subjects ranging from the future of the airline industry to reviving passenger rail service, to the question of nuclear power. And there was one real clunker presentation by a shill from the Toyota corporation, designed to blow green smoke up the audience’s ass about the future of happy motoring (Toyota’s products will save it from Peak Oil). For coverage of the particulars, visit TheOilDrum.com, the nation's best energy discussion website. If there were reporters from the mainstream media present at this event, I didn’t run into of them. They are apparently uninterested in the fate of industrial economies, at least as long as Senator Larry Craig is out there on the frontiers of toilet coaching science, and Britney Spears is still sparring with K-Fed, and Diddy is beating people up in nightclubs, and people are murdering their friends for dissing their dogs. October 22, 2007 in Commentary on Current Events | Permalink | Comments (564) »
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#1. To: gengis gandhi, robin (#0)
Man...what an outstanding collection of columns being posted on 4um today...Devvy Kidd, Frosty Wooldridge, Chuck Baldwin, and now Jim Kuntsler...thanks to all who have posted this material..!
"It does not take a majority to prevail, but rather an irate, tireless minority, keen on setting brush fires of freedom in the minds of men." -- Samuel Adams (1722-1803)‡
Ping to the unUsual Suspects
Note to self: Do some research, and find out who the top three companies are that manufacture drilling rigs and other related equipment purchased by oil extraction outfits. Then consider buying stock in them.
Remember...G-d saved more animals than people on the ark. www.siameserescue.org
#2. To: gengis gandhi (#0)
#3. To: gengis gandhi, *unUsual Suspects* (#0)
#4. To: Arete (#3)
He also repeated his oft-stated opinion that the drilling rigs and other equipment used around the world to pump oil out of the ground are so uniformly old and decrepit that they pose a problem every bit as dire as peak oil itself.
 | Gold and silver are REAL money, paper is but a promise. |
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