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Clusterfuck Nation Archives 
October 2, 2006
I don't think it's accurate to call it a "war" anymore. It was one briefly back in 2003, and it may become a wider one again in the region. But for now the American situation in Iraq has degenerated into a dangerous, half-assed policing operation. We're not really fighting anyone, just getting in the way of factions fighting each other. A large part of our failure in this project has been our inability to get the electricity and water running properly. Any group of Americans might be equally pissed off and crazy after three years of that.
President Bush has done a bad job of articulating the strategic purpose of our presence there. It's certainly not about "freedom." It is in human nature to prefer simple order to some abstract notion of freedom, and the Iraqis had simple order under Saddam. Anyway, the kind of trashy freedoms that Americans enjoy -- freedom to gamble in Las Vegas, freedom to buy pornography, freedom to enter into ruinous mortgage contracts -- might not seem so appealing to people in an Islamic society.
The purpose of our Iraq project was to stabilize the Middle East by creating a successful buffer state between Iran and Pakistan to the east and the nations west of Iraq, especially Saudi Arabia. Why? To preserve the status quo in our oil deliveries from the region.
Ironically, this last item is the only thing that we have succeeded in -- so far. And one of the reasons the Democratic opposition to Bush has been so unsuccessful is precisely because for all our failure over there, America has not yet experienced a cut-off of Middle East oil -- while anti-war media stars on the Left like Al Franken and Harry Shearer still get to hop in their cars and drive wherever they like without a second thought.
The sentiment among the American public runs increasingly against our adventure in Iraq. But just as no politician has articulated our reason for being there, no one has expressed any coherent idea of what might happen if we had no military presence in the Middle East. I will try to outline a picture of this now.
Possession of the largest reserve of the world's crucial resource, oil, has no doubt driven the people of the Middle East crazy. It has fed the resurgence of a militant Islam that seeks to punish and antagonize the Judeo-Christian West (and, call it whatever else you will, the 9/11 attack was certainly an act of antagonism). It has also caused populations to swell far beyond the carrying capacity of the region, with predictable results. But with most of the Middle East nations now at or past peak oil production -- including Iran and Saudi Arabia --we can expect only more dangerous behavior.
Whatever else might motivate Iran, control of the adjoining southern Iraq oil fields centered around Basra, and the oil facilities offshore in the Persian Gulf, must be high on the list. And a US withdrawal from Iraq would certainly lead to that outcome. Next on Iran's list is the wish to drive a Shiite wedge westward across Iraq to Saudi Arabia, which contains a large Shia population of its own, conveniently occupying the Persian Gulf coastal region where most of Saudi Arabia's oil comes from. The purpose of this "Shiite wedge" would be to bring down the ruling Al Saud family and replace it with an Islamic fundamentalist government. All of these moves are predicated on Iran assuming nominal leadership among the Islamic nations of the region. And all of it would bode ill for American oil supplies.
An American withdrawal from Iraq would leave US bases marooned in the landlocked backwaters of Asia -- with outposts in Afghanistan, Uzbekistan and Kyrgyzstan. The purpose of these bases so far has been for staging operations from Afghanistan westward toward Iran, Iraq, and the Arabian peninsula. These bases happen to be next door to China, to the east. Would these tiny bases in Asia be used to stage operations against China in some future conflict? Good luck. They would last about five minutes.
Pakistan has been off the radar screen of the American media for years. It is arguably the most dangerous state in the region. It has a thousand recent years of Muslim experience on top of perhaps 100,000 previous years of other influences. The people of Pakistan are not ethnically Arabs or Persians, yet they are even more violently anti-western. Pakistan is overpopulated to the extreme. It has no oil but owns at least twenty nuclear bombs. Very little stands between the current government of General Pervez Musharraf and either complete chaos or an Islamic fundamentalist government. If Musharraf fell, would the US try to insert itself in a meltdown of Pakistan? Good luck on that one. For the moment, only fear of a nuclear exchange with its neighbor, India, stands to modify or influence Pakistan's behavior.
Let's say the US did withdraw from Iraq. This would leave us with bases in Oman, Qatar, Kuwait, the United Arab Emirates and Turkey. These present a full frontal opposition to Iran, but would have meaning only if we went to war with that country. Such a war would probably leave the oil infrastructure of the Persian Gulf in utter ruin. Which is to say it would do nothing to advance America's strategic interest in maintaining the oil lifeline from the Middle East.
Sooner or later America will lose its ability to influence the people and events in the Middle East, and at the same time we will probably lose access to the oil of the region. Yes, oil is a "fungible" resource that finds its way through markets. But the markets themselves will be badly destabilized by the economics of post-peak production. Do not expect on-time delivery.
The US will withdraw back into the Western hemisphere. We have about 25 billion barrels of conventional crude left of our own. We currently use seven billion a year. Canada has been our largest source of oil imports. They will be left with little besides the tar sands of Alberta. Whatever else might be said of them, the tar sands will make for very expensive oil products. (Ditto the oil shale of the Rockies.) We will not be able to maintain our current living arrangements on these things, nor on coal liquefaction.
The Canadian producers have substantial contracts with China for the products of the tar sands. I have no doubt the US will invoke the Monroe Doctrine to cancel those contracts. Expect a pissed off China. The same goes for Venezuela. Anyway, that nation is way past its production peak and the oil it has left is low quality heavy crude. Mexico is on the verge of an especially steep oil production decline. The low-hanging fruit of the Western hemisphere is gone. Colombia and Ecuador are not going to save American Happy Motoring. Don't get too excited about Chevron's "Jack" discovery in the deep waters of the Gulf of Mexico. Even at its most fantastical extrapolation, it would represent about two years of US oil consumption, and it would be expensive to a laughable extreme.
The bottom line is that the only meaningful project for the US now is to turn its attention and remaining resources to the job of preparing for civilized life without oil. This is the topic that is absent from our political discourse on all sides and at all levels. The anti-war community is itself either lost in raptures of Bush-hatred or preoccupied with fantasies for running the interstate highways on used french-fry oil. We have to talk about things beyond just running our cars by other means.
We are a profoundly unserious nation, for all our pretensions.
September 25, 2006
The story this coming week, I think, will be how much the collapse of the Amaranth hedge fund may end up infecting other "playas" in the big leagues of finance. Hedge funds being what they are -- rackets using "leverage," or other people's promises to pay, to make bets on "spreads," or differentials in other people's bets on the price of things -- there are a lot of other people out there who might get sucked through the event horizon of one big fund's black hole of bad betting.
So far -- through the weekend of the 23rd and 24th -- the banks and other manipulators of capital have been successfully quarantined from the Amaranth infection. Sunday night, as I write, the business desk reporters are waddling back to the fridge for a second bowl of Chunky Monkey. Many of them will go to sleep in a few hours thinking that the price of gasoline is headed down further and all is right with the world.
But the Amaranth fiasco has made about six (or is it eight?) billion of somebody's dollars disappear. Either those dollars have meaning, and those somebodies will suffer from the loss of them, and so will the people who the somebodies owe money to, or else the dollars will have had no meaning per se -- they may not have been dollars so much as IOUs denominated in dollars, or loans of bundles of IOUs, or promises of future loans of bundles of IOUs -- in which case their value as a medium of exchange will be perceived to be less than was previously assumed.
This is what comes of living in an economy of hallucinated finance instead of an economy of wealth-generating work. It all seems to add up until the old assumptions just don't add up, and then things break down.
This is the season when crashes like to happen. Perhaps it's something about the frost on the pumpkin, those premonitions of the dark and freezing nights ahead, that provoke hard-wired human brains to get real. When people get real and the basis of their currency looks more and more unreal, shit will happen. And unhappen.
Some commentators, such as Doug Noland, at Prudentbear.com, think that the liquidity game -- of evermore loans based on other loans based on promises to pay based on IOUs -- can keep this alternative universe of rackets going for a while longer. (At least that's what Doug said in an interview with Jim Puplava this weekend.)
Myself, I think something's gotta give. There are too many real things that are going wrong. A tapped out public with no savings. A glut of houses sinking the sprawl-meisters. Nobody buying cars. Balance of payments steadily worse. Overseas adventures failing. . . .
Despite temporary appearances, the energy predicament has not gone away. Worldwide oil production is on track to go down 3 percent in 2006. If it keeps on going that way, the 84.5 million available to the world now will shrink to something like 50 million in 2015. Ultimately that will determine the fate of our economy and the financial infrastructure that is supposed to serve it.
A world of increasing energy scarcity will be a world that generates fewer things of value, less "wealth." All the paper "instruments" that represent our hopes that society is bound to produce more wealth will be discredited. This is a fundamental fact of peak oil, and perhaps the most implacable reality. Not only will there be less wealth, and fewer paper certificates that can be construed to represent wealth, but promises to pay back loans of putatively existing wealth will lose their credibility too. The long chains of promises to pay back this debt and that loan will be broken, and all the paper associated with those promises.
If, however, America could find some way to harness the energy in the smoke it blows up its own ass every day, we would never face an energy crisis. Wouldn't that be the day?
September 18, 2006
To find any news on the cable news networks these days is getting as hard as finding a pay telephone in an airport. This weekend I went to MSNBC three separate times to see if anything was going on in the world, only to find Matt Lauer interviewing Deborah LeFavre, the blonde babe Florida schoolteacher who got down-and-funky with a 14-year-old student. ("He wanted it; I gave it to him.") I guess the network execs could not resist running the segment nearly around the clock. If they could show porn instead, perhaps they would be even happier. Elsewhere around the cable menu, CNN-Headline has passed the baton to geeks like Glen Beck and Nancy Grace, who offer the equivalent of biting the heads off chickens, CNBC ran a seemingly endless loop of cops-in-cars-chasing-lowlife around (pick it) Florida, Las Vegas, or Phoenix, while over at regular-CNN Larry King was discoursing with Sean Penn on world politics (in lieu of someone who actually works in government or foreign policy).
This is an interesting case of the diminishing returns of technology, the stealth disease that is corroding our economy and our culture. The concept is not as abstruse as it seems. It is related to Gresham's law of economics, which states that "bad money drives out good." If you have a society on a gold standard of circulating money, and you introduce silver as an acceptable medium of exchange, Gresham said, the gold will all disappear from circulation due to hoarding, until only silver is left in circulation. Likewise, there is a tendency with the layering of technologies to diminish the real value of whatever these technologies are applied to in our culture, like broadcast news -- the more cable channels, the worse we are informed.
The most obvious example of the diminishing returns of technology is something that probably drives millions of Americans batshit every hour of the day -- the inability to connect to a live human being on the telephone. This situation has come about precisely because of the investments made in computer upgrades of telephone systems since the 1980s. All over America, in companies, banks, colleges, doctors' offices, machines now answer the phone and the caller must submit to the absurdity of negotiating with a robot (usually a perky female robot). At best, these systems waste a quarter-hour of your time. At worst, I daresay a few poor souls have literally killed themselves over a failure to connect to some crucial person at a crucial moment. I don't know for sure, but my guess is if all these companies, offices, and institutions had just continued to pay salaries for a few receptionists each over the years, instead of investing an equivalent amount of money in the latest technology, we would be a much happier nation -- and at least a couple of million people (probably women) would have decent jobs intelligently and swiftly routing caller's needs to the right person in their organization.
Getting back to the original matter of the television news, what was going on around the world this weekend was not very much of anything. The Pope was the latest in a long line of individuals who spoke their minds about something (in this case, the implacably violent ideology of Islam), and then tried to take it back when a few mullahs affected to be offended. But aside from the Pope acting like an Ivy League university president called on the carpet by vengeful correctniks, not much was actually happening in the world.
Which leads me to the real subject of this Monday blog, which is the question of oil prices. Cheerleaders for an obsolete reality, such as Michael Lynch and Forbes Magazine, are hailing the current drop from the mid $70-range to the low $60-range as an epochal tide-turning return to the salad days of cheap oil. (Lynch predicts it will go down to the $20's.)
Here are some of my current theories. For one thing, being at-or-near peak does not remove price volatility from the picture. It may, in fact, increase volatility as oil markets -- like any large-scale complex system -- are likely to be destabilized by the uncertainties of what peak will do to all the other big complex systems in our hyper-connected world.
What we've probably seen over the summer, with oil prices entering record territory, is large users laying in inventories in fear of even higher prices. Most of this fear premium revolved around the anticipation of another wild hurricane season, which so far failed to materialize. It was also pegged to the Israel-Hezbollah war, which further induced dread of a wider Middle East war, a showdown with Hezbollah's sponsor, Iran, and the threat of disruptions to oil exports out of the Persian Gulf.
Now, a matter of speculation circulating in the rumor-stream of the Internet is the idea that some large entity (i.e. the US government) has managed to manipulate the oil markets in order to calm the voters down prior to the fall elections. Personally, as I have expressed countless times, I am allergic to conspiracy theories. Oil prices are not actually set by the oil companies or the exporting nations. Prices are set on the futures and spot markets, where major buyers of crude bid on either short-term or long-term contracts for the stuff, in order to run their enterprises in a rational, businesslike way. Earlier this summer they bid the prices up.
Some buyers may have simply dropped out as the price of oil exceeded their practical ability to pay -- and by this I mean mainly the governments of Third World countries. This would represent significant demand destruction, but the pain incurred by people in Third World economies would likely occur off the "radar screen" of the US news media. (How many Americans, for instance, are up-to-speed on the horrific economic suffering in Zimbabwe?).
Don't look at China for demand destruction. Its oil consumption actually grew by 15 percent this year.
If there is demand destruction in the US, it has not shown up yet in the overcooked and overspiced statistics emanating from the federal agencies -- though the housing slump-or-crash-or-whatever is beginning to make an impression on economy-watchers. There is otherwise no evidence that fewer cars are clogging the Capital Beltway or the Santa Monica Freeway.
But here's one thing I wonder: what if the number one user of oil products in the US had laid in huge inventories of the stuff earlier in the year and has lately withdrawn from bidding in the futures and spot markets? I am speaking of the US Military. It would make sense, against the background of Iran rattling its nuclear capabilities, and the Israel / Hezbollah affair, that the US armed forces filled their tank farms to the max this summer and are now stepping back from bidding on any additional oil for the time being. This could be easily "managed" by the people who run this massive organization -- namely, the President, the Secretary of Defense, and the rest of the civilian authorities based in the executive branch of the government. They don't have to consult with congress on their oil purchases.
I apologize for veering into conspiracy territory on this -- and I don't have a shred of evidence that this is happening. It's just a thought, a caprice, a "wild hair," a theory. Surely there is some enterprising graduate student or trust fund nerd on the peak oil web sites who might investigate this dark notion. Has the US military gone on an oil-buying vacation as we head toward the elections?
September 11, 2006
This was the day five years ago that war began between the US and Jihad, an unincorporated combine of Islamic nations, gangs, sects and tribes united in a campaign to harm, disable, defeat, and exterminate "infidel" Christians and Jews. There are various explanations for why this started. I have my own.
It's essentially an ecological crisis, conveniently pegged on an old religious beef. The population of many Islamic nations, fed by oil wealth, has reached critical overshoot. In particular, there are too many young men with no positions, no incomes, no prospects, and no hopes. Their glandular energies have been enlisted to act out the righting of real and imagined grievances against their"infidel" enemies. Their actions range from the sheer sadistic thuggery of small gangs to the strategic geopolitical maneuvers of major nation states.
We will be fighting with them for as far ahead as anyone can see, because our society can't function without their leading (in some cases only) resource, oil, and we are used to getting regular supplies from them. To aggravate things, the world is in a peculiar situation with this resource. The shorthand phrase for it is "peak oil."
Peak oil means that the oil-producing nations have reached their all-time maximum output and now face a certain relentless decrease in this resource and the wealth derived from it. This is especially problematical in a global economy based on steady incremental growth. Peak oil promises only incremental contraction in everything from industrial activity to available food. The people of the world will fight over what's left and they will divide into teams to do this. Right now, two teams facing off in the arena are the US and Jihad. Perhaps a few years from now Team China, Team Russia, Team Europe, and Team Japan will jump into the contest. Anything can happen now. Peak oil has the capacity to drive the world crazy.
It is certainly driving the US crazy. Last week, Chevron announced the discovery of a major oil "play" in the Gulf of Mexico, a collection of deep-water fields code-named "Jack." The announcement was uniformly greeted by the news media with headlines that said, in effect, ENERGY PROBLEM SOLVED.
There are reasons to be unpersuaded. Chevron's "Jack" has been estimated to contain as little as 300 million barrels and as much as 15 billion barrels of oil. Nobody really knows yet. It will be years before we find out. During those years, production from the other oil fields of the world will decline by an amount that will cancel out any purported gain from even the best estimates of "Jack." The world uses about 30 billion barrels of oil a year. The US alone uses about 7 billion.
The oil from "Jack" will be expensive and difficult to produce. It is more than a mile underwater and another four miles under the rock under the water. It will require a lot of pipe and a lot of pressure to move that oil up, and the seabed in these deep-water operations is too far down for pipelines, so the oil will have to go directly into tankers. If oil's future is in deep-water, then its future is expensive and precarious.
It was interesting to see the price of oil on the futures market plummet down into the mid $60 range last week. I take two conclusions from that. One is that the psychological stress of peak oil has increased the emotional dimension of the trade to a dangerous degree, i.e. driven the traders crazy. The intense wish to solve the energy problem has momentarily overcome the reality of it not being solved. The second is that the US economy may be in greater trouble than the news media realizes, especially the economic "engines" of "home" building, real estate sales, and the associated mortgage rackets, with their spin-offs in the financial markets. There may be a hell of a lot fewer 18-wheelers shlepping chipboard and sheetrock around the nation this fall, fewer family trips to the WalMart, fewer Di-tech Mortgage customers dredged out of the sub-prime muck, and fewer bundles of interest-only ARMS passed through to the hedge funds.
Thus we would have a profile of exactly what oil geologist Colin Campbell and other peak oil opinion leaders have predicted: roller-coaster-style economic activity pegged to up-ratcheting oil prices, with increasingly deep economic troughs and ever higher oil price peaks. In short, massive economic instability.
Meanwhile, in the deep background of all this looms Jihad. We will have to be resolute in the face of Jihad and much more adaptable at home. So far, on the home front we have done nothing but defend and rationalize a stupid mode of existence -- suburbia -- and an insane economy based on building more of it -- the housing bubble. We have no leadership in politics, business, science, news media, or education informing the public that we have to make other arrangements for daily life -- not ten years from now, but right away.
Five years after 9/11/2001, the "progressives" want to wish away Jihad and the "conservatives" want to wish away the need to change daily life in America. Real political leadership, if it emerges at all, will have to come from some place off the normal political scale.
September 4, 2006
A note of apology to readers:
In haste to take off for New Zealand two weeks ago, I forgot to post a vacation notice in this blog-space. I appreciate the letters asking if I was okay. A few people wrote asking if I had resigned from blogging because of all the carping and hate mail I'd received on my Middle East commentaries. Two people reported a mythical phone conversation in which I supposedly said I was quitting. That was somebody's fantasy, I guess. Several idiots wrote to say, apropos of the Middle East, that I should "stick on-topic" to issues of energy and American lifestyles. Please note that my last book, The Long Emergency, contains extensive discussions of Middle East politics and history, and that I consider the subject completely on-topic in this blogspace. Anyway, it's Monday and I'm back. . . .
We often forget, I think, how magical the blandishments of the high-energy life really are. The Digital Earth Conference organizers, led by former NASA and UN scientist Tim Foresman, were extremely kind to me, starting with business-class travel to Auckland. It is magical enough to be able to get to the South Pacific in one day. The last time I went down there, to Australia in the 90s, I sat in economy with the rest of the livestock, where, in a fugue of insomnia, I watched at least five Sandra Bullock movies end-to-end and got off the plane feeling like my brains were pulled out through my nose. But I did get there virtually overnight.
This time, flying NZ Air business class out of the odious LAX, I had my own little slumber pod, kind of a tricked up Pullman berth with a built-in mini home entertainment center. We boarded late in the evening. The crew plied us with every conceivable luxury from steaming towels to roast lamb, fine sauvignon blanc, and mango ice cream. After that, I scrolled through a video library of classic films and settled in with Robert Altman's original 1970 M*A*S*H movie (Donald Southerland, Elliot Gould) on my personal LED screen while snuggled under a duvet in my little trundle bunk. Somewhere over the Pacific, perhaps between the Clipperton Fracture Zone and Pitcairn Island (and with the help of Ambien 10mg) I zonked out. I woke up hours later, feeling pretty alert, with dawn breaking as the crew hosed us down with caffeinated beverages and excellent croissant. An hour later we touched down in Auckland tra-la.
The geography of New Zealand is stunning to an extreme, but Auckland is not a handsome city. What little architectural history it might have possessed had been mostly destroyed in a Post-WWII rampage of modernism and automobile retrofit. The few extant pre-war bungalow nighborhoods are cute (and supernaturally overpriced), but the newer districts of post-war ranch houses show almost as much genius for horrifying banality of design as their American counterparts. That said, the city center was far more active than any comparably-sized US city, full of shops, bistros, and bustling pedestrians, even at night. Imagine a place about the size of Nashville, only with some human life in it.
There was quite a bit of recent waterfront gentrification in the form of condominium blocks, with bistro-lined promenades along the yachting slips, and much of it was admirable in scale and quality. However, like most cities in the "advanced" nations, Auckland seems to overlook the possibility that waterfront property might some day, not far off, have to be used again for maritime trade operations -- with all the gritty infrastructure of wharves, warehouses, and sailors' flophouses implied. Isolated as it is on the map, NZ in particular had better make some provision for this, as global energy scarcities develop, and air freight becomes less and less viable, and they have to get serious about shipping again.
NZ's car dependency is right up there with the champs of the world (US, Canada, and Australia). In fact, the week before I arrived, the government announced that passenger rail service between Auckland and Wellington, the capital city, was about to be discontinued. I will refrain from remarking further how unbelievably dumb that is. Rush hour traffic in and out of Auckland is utter gridlock. After being in the city about a week, and chatting up some of its leading denizens, I would say that their awareness of the global energy situation was close to nil, and this could not be attributed to their geographical isolation. I could only infer that the psychology of previous investment was as entrenched there as it is here in the US, meaning, like us, they cannot face the fact that they have squandered their postwar wealth on the futureless furnishings of easy motoring and it has therefore become impossible for them to entertain the possibility of living otherwise.
But in the spirit of enjoying the twilight of cheap oil, we rented a car to explore the countryside north of Auckland. Motor tourism is pretty much what the place is set up for. Like America, you cannot see the land any other way. What we found in this "Northland" was a spectacular rugged landscape lightly populated by US and European standards, with a climate like Northern California, gorgeous forests studded with giant tree ferns and other weird flora in the Jurrasic Park style, and countless miles of fantastically beautiful seacoast with utterly empty beaches.
More to the point, perhaps, in those places suited for it, we found much more intensive agriculture than, say, the Eastern US. NZ has three million human beings in a land the size of Great Britain (which has about 60 million). Meanwhile, NZ has as many sheep as Britain has people, and quite a few cattle, too. Where sheep and cattle weren't grazing happily, you saw vineyards and sweet potato fields. The small towns of the region were uniformly hideous -- composed solely of industrial sheds at their centers plus the usual surrounding ranch houses. But, there was next to zero highway sprawl as we know it spilling outside of the towns and we are probably too close to a permanent global energy crisis for much to happen there now.
For those of you wondering, I did not go to New Zealand to scope out a bolt-hole for the tough times ahead. I'm determined to stick around the US and watch the show. But NZ has obvious appeal. Imagine California, un-fucked-up.
During the week we were away, almost nothing newsworthy emanated out of the US. I maintain that we're going to see interesting events unfold in the housing and financial markets this fall, and once the Labor Day holiday is behind us, the fun ought to begin.
August 21, 2006
It is interesting to see how suggestible world opinion can be. Hassan Nasrallah says that Hezbollah "won" the one-month war it started with Israel and the world affects to believe it. Even the Lebanese pretend to believe it, though their economy was wrecked in the process.
What interests me a little more is the absence of any sense of cause and effect among the Lebanese leaders. They allow Hezbollah to operate as a surrogate military within their state, and then they complain when Hezbollah's military transgressions are answered by an Israeli military response against the host state. And now the Lebanese have to pretend to celebrate Hezbollah's victory -- while tourists quietly decide to go anywhere in the Mediterranean except Beirut.
Another body of opinion, exemplified by George Friedman at Stratfors, says that by failing to eliminate Hezbollah's hardened positions in south Lebanon, Israel has lost its aura of military invincibility -- the invisible shield that for thirty-odd years made the leaders of Muslim states think twice before starting a rumble. This might be true for the moment. But it doesn't include the additional reality that sometimes failure is a salutary prompt to rethink one's tactics and strategy. The likelihood now is that Israel will find ways around Hezbollah's (and Iran's) tactic of conducting rocket war from fortified bunkers and Israel will not advertise it when they do.
Israel's current Prime Minister, Ehud Olmert may be viewed as a loser by Israel's Knesset or parliament, and they may replace him with Bibi Netanyahu, who was PM in the 1990s and went through his own years of loserdom, and now might return to power with a more refined tragic sense of politics and circumstance, as Churchill did in England in 1939.
World opinion seems to regard Iran's Mahmoud Ahmadinejad as the current "winner" in the region. He says he aims to kick Israel's ass and sends his goons to show the world how it's done. They're like little kids who go to a neighbor's house, set a paper bag full of dog shit on fire on the door step, ring the doorbell, and hide in the bushes to watch the response. Eventually the police show up.
America's aura of loserdom in the Iraq adventure glows a more nauseating shade of greenish brown every day. But it would be a mistake to think that Iraq was Vietnam all over again. Iraq stopped being a war for us three years ago and became a hopeless police action in a terrible neighborhood. Would Iraq (and the world) be better off with Saddam Hussein still in charge? My guess is he would be vying with Mr. Ahmadinejad to lead the jihad for a return of the Islamic caliphate. That event might have stimulated Europe to take the clash of civilizations a little more seriously a little sooner -- but, alas, we will never know.
As things stand now, Iraq appears poised to crack up along ethnic and regional lines, no matter how many Hummers patrol the streets, which would leave most of the remaining oil wealth of the Shiite-dominant south within Iran's sphere of influence.
Sooner or later America is going to lose access to the roughly 20 percent of the total oil imports it gets that come from the Middle East. The foothold in Iraq was an attempt to postpone that day. It looks like it will not work out. The US army is exhausting itself and bankrupting the civilian treasury. Sixty percent of the US public now disapproves of our continued presence there. Internal pressures among the Middle East oil producers themselves -- including those on the sidelines of the war -- will create additional stresses. Saudi Arabia, Kuwait, Iran, the UAE, all have peaked now in terms of oil production. Meanwhile, their populations still grow, their internal oil consumption increases, leaving less for export, and the quality of the crude goes from light-and-sweet to heavy-and-sour, with further difficulties for refining and marketing.
If America loses 20 percent of its oil imports -- on top of steep depletion rates elsewhere (Mexico, the North Sea), plus political trouble in places like Nigeria and Venezuela -- then we can kiss goodbye a whole roster of things like WalMart, easy motoring on the interstate highway system, Walt Disney World, a continued profitable build-out of suburbia, and a diet of Cheez Doodles and Pepsi. I am on record, of course, as not being in favor of these things, but it would be very messy indeed if they all ground to a halt in a few mere months.
We've done a lousy job of preparing ourselves to live differently. In fact, the whole thrust of American politics along the whole spectrum has been to keep the current racket going. This is why the only broad discussion now occurring over our energy problems is focused to the point of neurotic obsession with keeping the cars running by other means at all costs. This is true on left as well as the right. The left is lost in raptures of driving around in cars fueled by used french-fry oil. The right is lost in raptures of executive pay packages for retiring oil company executives. We are putting no thought, meanwhile, into how we will grow our food in an energy-scarce future, how we will conduct manufacturing and trade, or how we will heat all the McHouses.
There are two themes here, related by strange circumstance, and both are a clear and present danger to America's well-being. One is the implacable enmity of an Islamic world bent on vanquishing its old adversary "the Crusader West." And the other is the West's inability to face the practical problems of reorganizing our societies to meet the reality of an energy-scarcer future. The scary thing is, we have to take both of these challenges seriously.
In the meantime, Israel is the West's stalking horse and Jihad's whipping boy. We should recognize the obvious symbolism.
August 14, 2006
The great weakness of the peace movement is its utter inability to think strategically. The deep wish for peace, for an absence of hostilities, eclipses the fact that hostilities abide. Thus, Israel becomes the new villain in the story for carrying the West's water in the struggle against the abiding hostility of Jihad.
The peace movement does not believe in Jihad. By Jihad, I mean a trans-national ideologically-driven campaign to murder "infidel" non-Muslims and to extend Islam's domain geographically as far as possible. An important feature of the campaign is the elimination of Israel, an irritating piece of Western "infidel" grit lodged in Islam's throat.
Ideologically, Jihad despises Israel because Hebrew culture represents the basis of notions central to western civilization -- that there should be rules regarding decent human conduct beyond whatever raw power itself may assert; that we are responsible for our conduct; and that someone above is watching our conduct and weighing our responsibility.
Jihad is not interested in decent conduct per se. That's why many Jihadists endorse conduct like the indiscriminate murder of non-muslims per se, videotaped beheadings of non-combatants by the cruelest methods imaginable, the suicide / homicide bombings of discos and cafes where no military assets are present, and the downing of civilian airplanes with bombs. These things are merely expressions of raw power, which is the antithesis of civilized conduct.
The leaders of Lebanon are not interested in responsibility for the conduct of their policies and the things that happen within their territory. They permit a rogue Jihadist army to operate freely on Lebanese soil, to amass rockets and other ordnance, to fire them at Israel at the behest of the Jihadist's sponsor, Iran, and to use Lebanese civilians as shields and sandbags to defend those military assets -- and then they complain about the consequences when those military assets are attacked.
The peace movement doesn't take Jihad at its word. Jihad is not interested in peace. It is a war movement.
The United States had to take Jihad seriously when Jihad hijacked airplanes and knocked down two skyscrapers and one side of the Pentagon. (And, by the way, I regard theories that Vice-president Dick Cheney "masterminded" the 9/11 attacks to be paranoid nonsense beneath discussion.) The US has engaged Jihad, but rather obliquely. Our "war" in Iraq stopped being a war in 2003. It has been a clumsy and unsuccessful policing job since then against two Islamic sects fighting over the oil production assets of a collapsed artificially-constructed 20th century state that was once known as "Iraq."
The original strategic impetus of the Iraq war was to kick an Islamic state's ass as a reply to the 9/11 attack. Since the 9/11attack was not carried out by a sovereign nation, the US reply had to be made to a target that represented the next best thing, and by default Saddam Hussein was selected because he and his state had caused a lot of trouble in the recent past. Strategically it was deemed that removing him from power would have additional benefits for stability in the region. It was a tragic miscalculation. Life is sometimes tragic and nations make tragic errors. The US effort since the initial invasion was intended to prevent that state from collapsing but turned out to have only stimulated and accelerated the process. The Shia and the Sunni antagonists were not really interested in the one thing that the US had to offer: institutions styled on Western infrastructures for justice and law. The two antagonists were only interested in the assertion of raw power.
One thing the peace movement never considers: what if there had been no US reply to the injury and insult of 9/11? What if we had just sucked it up? I can't prove this, but I believe that such behavior would have only emboldened Jihad to seek more targets of opportunity, and probably enticed Mr. Hussein into the kind mischief and grab for leadership of trans-national Jihad that Mr. Ahmadinejad is now showing. Critics will hasten to point out that Hussein was a secular dictator. I would hasten to remind them that in his final years in power he had taken to such stunts of religiosity as building mega-mosques, and transcribing the Koran using his own blood for ink.
(The 9/11 Dick Cheney fantasy is interesting insofar as it provides the nuttier elements of the peace movement with a justification for not replying to the attacks -- we did it to ourselves.)
What is the meta-strategic objective for the US in the Middle East? It is to preserve the orderly flow of oil resources. Is that a good thing? I happen to be a critic of the way America uses its oil resources, that is in the operation and further elaboration of a living arrangement based on extreme car dependency. I am not convinced that a "cold turkey" sudden cut-off of our oil supplies would be a good thing for our society. However, I have a fatalistic view that sooner or later we will face the loss of these energy resources and that we had better prepare ourselves for the event.
Something else is happening. The US's strategic objective of preserving oil flows is being pre-empted by the objective of defending the West against an increasingly restive and aggressive Jihad. Sooner or later Jihad will turn to its "oil weapon" to throw a wrench in the machinery of the West's defense -- but in the meantime, the greed for oil revenues trumps that action. Anyway, Jihad perceives the West's growing weakness without sacrificing its oil income. The addicts are killing themselves.
Finally, it is apparent to Jihad that they face a horizon on the availability of their oil drug (and weapon). Peak oil is well understood by the Islamic oil producers. (Among the most articulate peak oil voices on the international scene is Samsam Bakhtiari, former head of the Iranian National Oil Company.) For the oil-producing Islamic nations, the dwindling of oil supplies, now imminent, has enormous implications. Chief among these is the very existence of large populations predicated on a single resource. Their fear of this future has stimulated millions of young men in these doomed societies to join Jihad, an apocalyptic cult seeking the resolution of last things.
The West, too, has its share of apocalyptarians. While the Republican party in power has flirted with them for political gain, I do not believe that anyone really holding the reins of power, including George W. Bush, really subscribes to these ideas. At worst, George W. Bush subscribes to the idea that Americans should continue to live in an easy-motoring utopia. But the reality of peak oil must even impress him.
So, as the oil predicament becomes untenable for both the suppliers and the addicts, we increasingly face this worldwide campaign of religious wrath. Though it is almost never expressed in the West, out of excessive politeness, Jihad can probably be described as a campaign of sheer vengeance against those who consumed Islam's energy resources and thus its future. The Muslim people got a raw deal. Their kings, princes, and despots enjoyed wealth beyond imagination, while the masses simply bred themselves into an ecological crisis. They possessed a geographical region, large at it is, that is mostly good for nothing except growing dates and sesame seeds. Their fantasies of vengeance are grandiose. The West has to contend with them, has to defend itself against them. Israel is on the front lines of that defense. The prospects for the other Western nations facing this implacable enemy are grim and frightful. We want there to be no fighting. We want everyone to be kind to everybody else. We want peace. They want war.
August 7, 2006
If the stakes weren't so high, and the situation weren't so tragic, you'd have to laugh at the latest US-French attempt to craft a Middle East cease fire. They announced it as though they had jointly tackled the world's most difficult Sudoku puzzle -- and then about five minutes later Hezbollah and the Lebanese government both blew it off.
So much for the conceit that the Great Powers can control this thing.
The rumble in Lebanon continues because, for a change, Islamic terrorists and their sponsors are being held responsible for their misbehavior. Hezbollah has turned all of Lebanon into its personal suicide bomber. If Lebanon gets blown up in the service of killing some Israelis, well, maybe there is a paradise in another world for nations that blunder into self-destruction, where the fountains run with iced coffee, and halvah grows on every tree.
Israel is determined to shut down Hezbollah and the process is going to continue. It's a little hard to imagine that Iran's leaders and the partisans of Jihad will not try to counter that effort by stirring the pot elsewhere in the region. Perhaps they will even go so far as to call Jihad fighters from other muslim nations to go to Hezbollah's aid in Lebanon, and it would be easy to see how that would lead to a wider war that would suck in additional players.
In the background, and over on stage right, a consensus seems to be building, even in the public utterances of American generals, that Iraq is a hopeless mess. Though the situation is casually referred to as America's war in Iraq, almost all the carnage these days involves Iraqi-on-Iraqi violence. That doesn't make it any less hopeless or awful, but it is not exactly a replay of Vietnam.
It is interesting to hear US politicians call for "bringing the troops home," because there seems to be absolutely no consideration of, okay, what happens then? What happens, I think, is that Iraq implodes into three sectors, Iran comes into virtual ownership of Iraq's Shia-controlled southern oilfields, and Iran decides to sell that oil to China, or in some manner withhold it from the US market. American peace activists would suddenly find it more difficult to drive to their meetings.
The battle in Lebanon and the Iraqi melt-down have eclipsed a lot of interesting developments coming from the oil scene. The latest was BP's announcement (on Sunday, when America was out water skiing) that it had to shut down part of its Alaskan operations on account of pipeline leaks. The shut-down will take out 8 percent of total US production (or 2 percent of all US consumption when imports are figured in). Two percent is a lot. We are going to hear yowling at the gas pumps in a few days.
There are also new rumbles about Saudi Arabia's shaky situation with its Ghawar oil field, which gives ominous signs of entering a far steeper and more sudden decline / crash than previously imagined by many observers. A similar picture is resolving with Mexico's dominant Cantarell oil field. Yet another interesting problem all over the map is that oil exporting nations are seeing their internal consumption increase even while reserves and daily production decline, and the net effect is a lot less oil for export. I would take these signals as reason to think the price of oil will pass $100 a barrel before the end of 2006. Of course, Iran could stir that pot without a whole lot of trouble and take the price to $200, or maybe $500.
Jihad and peak oil are related, mutually-reinforcing problems. The world is in a lot of trouble and America is in a lot of trouble in our corner of the world. We talk about a lot of things, but the one thing we've absolutely avoided is any talk about making the necessary changes in our "non-negotiable" way of life. I think the remainder of 2006 will be the start of that national conversation.
July 31, 2006
Got that old 1914 feeling yet? This time the guns of August will be different.
Back then, the armies of Europe marched almost gaily off to what they thought would be a civilized little contest lasting a few months -- sort of like Franco-Prussian War Two -- and found themselves bogged down in the mechanized slaughter of the trenches for four years. Fifty thousand British troops died on the first day of the Battle of the Somme. Total casualties for both sides at the armistice of 1918 were 37 million.
This August, 2006, an aggrieved and energized Islam is mounting a holy war, a Jihad, against its infidel enemies, starting with the Jews of Israel and the Great Satan (America), and wishing to move along as far as Spain now -- according to the recent tapes of al Qaeda's point man, Ayman al-Zawahiri.
The current offensive, led by Islam's Shia branch with headquarters in Iran, has stated its objective of "wiping Israel off the map." And yet world opinion affects to be shocked that Israel is fighting Iran's forward troops, Hezbollah, as though for its life.
Now world opinion is further shocked that dozens of children have been killed in Israel's targeted bombings of Hezbollah missile emplacements at Qana, Lebanon. This is what happens when a fighting force uses little bodies for sandbags, which is what Hezbollah does when it hides its rocket launchers behind its most defenseless civilians. Israel has at least admitted to the tragic outcome of its actions there. Meanwhile, world opinion has failed to notice something: Israel's weapons are at least targeted at military objectives, even when tragic errors like this one occur. Hezbollah's Katyusha rockets are not targeted at all, just fired blindly across the border to land wherever they will, on hospitals, grandmothers, kids, whatever.
It's interesting because it illustrates the fantastic childish irresponsibility issuing from the sponsors and partisans of Hezbollah. Israel, they say, made war on them for no reason. They don't seem to remember crossing over into sovereign Israeli territory two weeks ago, killing eight IDF soldiers while kidnapping two others, and following up with the first missile barrage of what is now over 1500 Katyusha strikes. Lebanese children and women get killed, along with innocent UN observers, but that has nothing to do with Hezbollah planting missile launchers thirty yards away. The Lebanese prime minister, Fouad Seniora complains that his country is being brutalized, but fails consistently to explain why his government won't control the war-making activities of a vicious paramilitary operating freely within Lebanon's borders.
This world opinion can't face the reality of Islamic extremism.
World War Three probably started on September 11, 2001. The responding campaigns by the US in Afghanistan and Iraq have proven to be inadequate efforts at political containment via the nostrum of "democracy." The Iraq campaign especially has backfired because the US pretended it was about something other than guaranteeing our continued access to Middle East oil. The ironic result a few years from now may be that oil fields of Shia-dominated southern Iraq will come under the direct management of Iran. Whoops.
Another evolving reality may also be the end of the conceit that the US controls Israel. Right now, the US is desperate to keep the Islamic world from exploding by reigning in Israel. But Israel is equally desperate to not be "wiped off the map." Israel may keep fighting in Lebanon longer than America wants it to.
Israel's own public management of its war against Hezbollah has been shaky. They sent Vice Premier Shimon Peres on CBS's "Face the Nation" Sunday morning, and the old guy's accent was so thick that his reasonable explanation for all this was barely comprehensible. (Meanwhile, Lebanese PM Seniora's mendacious complaints were delivered, at least, in clear English over on CNN.) Beyond this is the state of the war itself. This beast of world opinion seems to say that a failure by Israel to utterly vanquish Hezbollah will be a victory for that group and its sponsors.
For all the havoc it has created in Lebanon, Israel's military behavior appears less confident than it has in past conflicts with Islamic armies. So far, obviously, it has not overcome Hezbollah's despicable but effective use of civilian human shields to protect its military assets. Israel appears to have dithered for two weeks about the use of ground troops. The Katyushas keep raining down.
I'd guess that Prime Minister Ehud Olmert has another week to stop the Katyushas, or else his government will fall and be replaced by the harder-line Benjamin Netanyahu (previously PM 1996 - 1999).
But Jihad, meanwhile, is on a roll -- or thinks it is, and that is not a fine distinction for so delusional a movement. Events of the past two weeks have evidently emboldened Iran. They will push harder in Baghdad, they will keep fresh rockets coming to Hezbollah. They will manufacture new sob stories of victimization for the masses of the so-called Arab Street. And they will keep toiling away in the labs to make an atomic bomb -- if they haven't already purchased one or two from North Korea.
One wonders what the leaders of the non-Shia Islamic nations are really thinking about all this, Egypt, Saudi Arabia, Jordan. They despise Israel, too, and they have their own political fanatics, but they may be troubled by the specter of maniacs like Mahmoud Ahmadinejad and Hassan Nasrallah running this third world war on their side.
America has been reduced in the current affair to something only a little better than a nervous bystander. America's growing exhaustion and its inability to control events is on display for all to see. So is the foolish intransigence of our easy-motoring, suburban sprawl-building economy, which has made us psychologically the vassals of the Islamic oil-exporting nations. We're doing nothing to prepare for the day when all that oil stops coming through the Strait of Hormuz. Most of the American public not only has no idea what trouble we're in, but they're strangely proud of their cluelessness -- as they kick back and wait for "the market" to "come up with something."
But if the guns of August 2006 really do set something bigger off, and the oil fields go up in flames, or the shipping lanes get shut down, or if any number of other things that can go wrong do go wrong, America will have a whole lot more to think about than Nascar and Jennifer Anniston's love life.
July 24, 2006
Israel says that nothing but the complete destruction of Hezbollah will do for them, but they may have to settle for less. For one thing, it might require the complete destruction of Hezbollah's landlord, Lebanon, which is something that world opinion won't swallow.
But while we're at it, what actually is this world opinion? The nation-players and teams they belong to have various motives for adopting their positions. The Europeans are content to deplore the Israeli response to Hezbollah violence for several reasons. One, they are terrified of their own Muslim immigrant populations and don't want any smash-up riots or subway bombings. Second, they want to appear sympathetic to the oil exporting nations (including Iran) in order to continue enjoying a regular stream of oil imports without paying extra costs, which they are content to shift onto Israel and the United States -- namely, the cost of engaging the aggressive enmity of a restive and belligerent Islam. Third, the Europeans want to capture the geopolitical moral high ground once occupied by US after the collapse of communism.
And while we're at it, why is Islam in such a dark mood? Not just because the Palestinians are aggrieved at the Israelis. I think the violent intemperance of Jihad is the expression of an ecological crisis: too many people suddenly occupying a region of the world that could not support them without the artificial nutrient of oil -- plus the fact that this region has reached its point of all-time maximum oil production, with the awful prospect of having less and less oil from now on and absolutely no other resources to support these overgrown populations when that oil is gone.
I think these circumstance have driven Islam, well, nuts. Jihad is carried out almost entirely by young men and the Islamic oil nations have a vast supply of young men with no other job opportunities except service in Jihad. Their despair at the prospects of their societies must be great, and easily converted into aggressive rage. Plus, they are given huge inducements to believe that this employment is a holy mission, and fabulous promises of deferred pay in the form of early retirement to paradise and the consort of lusty virgins. As Peak Oil becomes more of a reality in the Middle East, I think these societies will only act crazier.
Where are Russia and China on this? Well, Russia benefits whenever the glare of Islam is diverted from Russia's vast, fractious southern border with dozens of Islamic states and quasi-states, like Chechnya, poised to make trouble. Since Russia is one of the world's top oil producers (though past peak itself), and is sitting on quite a bit of natural gas, too, it doesn't have to worry about a cut-off of energy supplies from elsewhere. Russia would also like to recapture the geopolitical influence it enjoyed back in the Soviet days, and anything that weakens American authority and power in the Eastern Hemisphere leaves a vacuum that Russia can reoccupy. China benefits from Islamic antipathy to the West because the less oil is available to the West, the more there will be for oil-poor China. The problem for them, of course, is that an energy-strapped, impoverished America would no longer be buying all those Chinese-made salad shooters at the WalMart.
An interesting sidelight to all this is the emergence here in the US of a virulent strain of antisemitism. A lot of it has shown up in the "Comments" section of my mirror site (Kunstler's blog on Typepad). It seems to me, that it's mostly emanating from what remains of the US political left, who have either run out of homegrown downtrodden groups to champion, or been disappointed with the results of their previous efforts. Lately, the frustrating impotence of the left to formulate a coherent opposition to Bush-style conservative Republicanism has led them into a craziness not unlike the craziness of Jihadist Islam. If all the Bush Republicans were suddenly vacuumed out of North America by a righteous cosmic force, the American left would probably start an American Jihad of their own against a host of imagined "class enemies" in the remaining population.
I hasten to add that I am myself an opponent of American culture and polity in many of their current manifestations -- everything from Nascar to US Department of Agriculture subsidies, and plenty in between -- and yet I do not regard any victory of Islamic Jihad, whether in Iraq or Jordon or the subway tunnels of London or the skyscrapers of Manhattan, to be necessarily a good thing for the world.
Nobody knows where the conflict in the Middle East is headed now. My own guess is that in the weeks to come Iran will find new ways to enlarge and aggravate the situation there. A problem at the heart of things not much discussed in the public arena is the fact that a virtually limitless supply of potent small arms and rockets is available from Iran to anyone who wants the stuff. This has implications for any effort to disarm Hezbollah or Hamas or al Qaeda or sixteen guys in a suburb of Dusseldorf. It remains to be seen whether Iran will try to produce more potent weapons. The West would be foolish to let that happen, but this dirty job, too, may be left to Israel and the US. I suspect that Iran will foment an oil crisis before that happens by shutting down the Straits of Hormuz by some means. When that happens, Mr. Ahmadinejad can put his head between his knees and kiss his ass goodbye.
July 17, 2006
With the suddenly ramped up struggle between Israel and Jihadist Islam, world geopolitical opinion has entered a dark realm of pretend. Pretend that Hezbollah is defending anything. Pretend that Israel has any choice now except to disarm Hezbollah by force, and to compel Lebanon to control what goes on within its sovereign territory. Pretend that this fight can be neatly contained.
Nobody know where this fight is going, but Israel has set clear limits on the homicidal behavior of her neighbors. The terms are unambiguous: Hezbollah can no longer deploy an arsenal of dangerous toys along Lebanon's southern border; and Lebanon will either enforce better behavior down there or will be sequentially punished for failing to. If anybody else around the neighborhood wants to jump into the fight, they can expect a hearty response from Israel.
Except for the US, the rest of the world wants to pretend that Jihad is a legitimate extension of foreign policy, because the oil-producing region of the world is now under the sway of Jihad, and the West especially is under the sway of oil addiction. Germany, Italy, the UK, the Netherlands, Spain -- none of these players want to disrupt their supplies of oil coming up through Suez. France goes further in deploring Israel's self-defense, to get brownie points from its own large and restive Islamic minority. Russia has enough oil and gas for the moment to enjoy playing the West off against Jihadist Islam, which has the beneficial side-effect of taking the focus of Jihad's wrath off Russia's southern borders.
The US wants to pretend that perhaps Israel alone can take this opportunity to deal with an increasingly adventurous and crazy Iran, and Iran may provide just that opportunity if it tries to ride to Hezbollah's rescue.
Jihad is not a program that a civilized world can tolerate indefinitely because it is essentially a form of genocidal hubris. My own guess is that it has risen as a consequence of runaway population growth in a part of the world that has grossly exceeded its carrying capacity by artificial means, namely oil wealth. It is a geopolitical psychotic reaction to an ecological crisis. But that is just an explanation, not an excuse.
The great fear in the background of the current struggle is that it will permanently disable the oil markets that the advanced nations depend on -- that we will reach a point in a few days or a few weeks where a lot of things will be smashed up in that part of the world and life will not be so comfortable again. That is a valid fear, but it is not an excuse to let Jihad run roughshod through the Middle East. The truth is, somebody has to kick Jihad's crazy ass, and that unpleasant task is being left to Israel. What we seem to forget is that it is in the exact nature of heroism to act where others are too frightened and timid.
July 10, 2006
Readers all around the the blogosphere have been twanging on me this week on two counts: one, that seven years ago I took the Y2K computer scare seriously, and two, that I have so far failed to correctly predict the end of the world.
For those of you too young to remember, the Y2K scare was about an esoteric little programming glitch that existed almost universally in older "legacy" computer systems around the world. The glitch in essence would have prevented older systems from recognizing the date beyond 12/31/99, and this, it was widely believed, would have pranged the interdependent complex institutions and public services that ran on these computers. There was fear that everything from municipal sewage treatment plants, to international banks, to big electric grids, to government agencies would stumble, that equipment for running these things would be badly damaged in the process, and that financial records would be lost on a broad basis.
As it turned out, very little happened on New Years Day, 2000. Scoffers exulted in their righteous rightness. The truth, though, was that immense sums of money had been spent -- hundreds of billions worldwide -- and countless work hours put in by programmers to avert the problem. It was a problem with a very definite deadline, and they made the deadline.
The Y2K event would have been a harsh lesson in the diminishing returns of technology and especially over-investments in complexity. Ironically, the work done, and the new equipment purchased by companies, institutions, and agencies may have played a major role in the tech boom of the late 1990s -- which, of course, eventuated in the tech bust that immediately followed.
My own involvement in Y2K in the early days of blogging derived from my observation that a lot of knowledgeable tech people were taking the Y2K problem seriously, and yakking about it on the Net, and so I concluded the issue deserved attention. In retrospect, I also suppose that the one thing nobody really knew was how the programmers working on their own individual projects around the world were coming along, because a lot of that work and expenditure was going on in secret -- big government agencies, big companies, and big utilities did not want to scare the public, queer their stock values, or let on about the difficulties involved in fixing the problem. And of course, the inter-connectivity of many of these complex systems -- banks especially -- was precisely the scariest part of the problem, meaning that it would not be okay for some of them to fix their problems and some of them to fail. As it happened, enough of them fixed their problems -- at great cost -- and their were no cascading failures. Score one for advanced civilization.
Now that I have written a book titled The Long Emergency, there is a new wave of disappointment gathering that life as we know it has not come to an immediate end, and I am being reproached for suggesting that we have some problems. Of course, that was never the point, as a reflection on the book's title ought to suggest. One funny element of this is that the reproach reached a crescendo the very week that crude oil prices reached record levels above $75 a barrel.
So this might just be a good point to step back and ask where are we now at mid-year, 2006. In January, I predicted that the US economy would get into a lot of trouble, specifically that the Dow would melt down to around 4000 and that we would see carnage on the real estate scene. When you figure in inflation, the Dow has just gone sideways for six months. What is propping it up? Last week I referred to Doug Noland's theory that investments in alt.fuels and technology are starting a new boom. I doubt this can work as a prop to support the huge losses in previous misinvestments. For instance, sooner or later General Motors will go up in a vapor for its failure to sell cars, pure and simple.
In any case, we are faced with the essential problem of ever-increasing prices for far less net energy. That is a recipe, perhaps, for an American peristroika, but not for continuing to benefit from the old arrangements. And so far, America at all levels, in leadership and the public, resists the sort restructuring we require. For example, we are still systematically starving and dismantling the railroad system instead of rebuilding it. There is still plenty of time left in 2006 for the stock market to start reflecting the true character of our phony-baloney economy -- namely that it is based on consuming goods and resources without producing things of value.
It is my observation that the housing market is tanking broadly and steeply around the nation. In my own town, a mini "hot market," there have never been so many "for sale" signs planted in so many yards (and remaining there month after month). Some even have "price reduced" shingles added to them. But there remains mutual reinforcement between the sellers and their realtor agents to keep a happy face on the situation (to avoid panic selling).
Since house prices here, in a tourist town, are falling when the tourist season has hardly gotten underway, I have to surmise that the local market is in deep shit. A few months from now when the tourists depart, and the last golden leaves flutter down from the maples, I expect we'll see psychological capitulation among the sellers and their realtor cheerleaders.
The energy picture, as alluded to above, is certainly cause for concern. Oil prices are creeping up relentlessly into territory that will, at least, stall the consumption orgy among the WalMart shoppers. We are one hurricane or one geopolitical incident away from an energy trauma. The natural gas supply situation is another storm lurking on the far horizon.
So, here at high noon of 2006, I'll stand pat with what I have said more than once: we have already entered the zone of The Long Emergency.
July 3, 2006
Doug Noland's Credit Bubble Bulletin column, published every Friday on the Prudent Bear website, is about the most comprehensive and regularly intelligent view of the financial scene going. Noland ran an especially interesting piece this past week and it deserves some discussion (Note: you have to scroll way down to the end of his column under the sub-head Realty Check for this.)
In it, Noland says:
. . . it appears certain that we are in the early stages of an enormous spending boom necessary to deal with the rapidly changing energy and climate backdrop. The scope of the required research and development could be unprecedented. The investment boom throughout the energy and alternative energy sectors appears poised to rival (and likely exceed) the technology boom. The auto companies will need to gear up to develop and sell smaller, more fuel efficient and cleaner automobiles. There will be rising demand for smaller, more energy efficient homes likely in milder climates, as well as demand for efficient appliances and heating and cooling systems. Across the board, businesses will be forced to be more energy efficient.
It is certainly plausible that our society's efforts will have to take a very sharp turn into different areas of endeavor than, say, suburban house-building, theme park promotion, celebutante infotainment services, casino management, and RV sales. And it would make sense that a lot of investment money would start heading to different destinations. Noland himself indicates that this shift could be disruptive. But he seems to come down on the side of an incipient transformative boom.
For now, it is safe to assume that the current investment boom in ethanol, biodiesel, solar, geothermal, solar, nanotechnologies, oil and gas exploration, and myriad other energy, environmental and conservation technologies create an almost endless source of demand for financial, human and natural resources. And, importantly, for now the Credit system is able and willing to finance this boom.
I think Noland leaves out two crucial parts of the story. While much investment and the work of many people will go into re-shaping and retrofitting the infrastructure of daily life, the bottom line will be a society that has to make do on substantially less net energy than has been the case for the past hundred years. And any way that you cut it, less net energy means less net productive capacity and ultimately less net wealth generated. Since financial instruments are based on the hope and expectation that society will generate more wealth, then this is a predicament for finance generally.
Perhaps Noland posits some kind of superior lean-and-mean machine of a re-tooled economy that will actually generated more wealth using less energy, but personally I doubt this will be the outcome -- especially when you start adding up the externalities of climate change, geo-political conflict over remaining world energy resources, and domestic sociopolitical strife incurred as Americans fight over the table scraps of the 20th century. The model of an economy that produces more wealth as its basic energy inputs contract is a contradiction in terms, in essence just another perpetual motion device.
Which leads to the second thing Noland leaves out: the consequences of the massive mis-investments we have already incurred in the crap that is already out there, namely the gigantic easy-motoring utopia of suburbia. Wind, solar, bio-fuels, tar sands, coal-derived-liquids, used french-fry oil, nuclear fission -- none of these things will rescue American suburbia from the twilight of oil and natural gas. There is a great wish abroad in the land that these alt fuels would come to the rescue, but I believe it will never get beyond the wish stage. I think most of this mis-investment will end up simply written off as a dead loss. And the sheer loss of wealth incurred in this process would take us back to the previous point: socio-political turbulance. As suburbia hemorrhages value, the formerly middle classes will freak out over their personal losses.
Finally, it is interesting to see that Doug Noland has fallen into what has become a widespread delusion among people who ought to know better -- that energy and technology are virtually the same thing, mutually substitutable, that if you run out of energy just bring in new technology. This is really becoming the central misunderstanding of our time.
We have invented a lot of nifty things in the past hundred years, but it has all been made possible by cheap fossil fuels and cheap electricity, which depends on the cheap fossil fuels. Even nuclear power, which was once (but no longer) heralded as "too cheap to meter," owes its existence to the fossil fuels that make all the mining, construction, and maintenance possible. The truth is, we have nothing better to plug into except the fossil fuels, and all the substitutes and schemes currently known will not even make up for a fraction of our losses as we enter the era of energy resource scarcity.
So, getting back to Noland's original point: might we enter a fabulous boom based on "a transformation of the global energy infrastructure?" We'll certainly try, but we'd better prepare ourselves to be disappointed, and to make other arrangements as that happens.
June 26, 2006
The energy debate around the US has taken a definite turn this spring, since oil prices stepped back up to the $70 zone, but the thinking around these issues has only gotten worse. That's because there is only one idea dominating the public discussion: how to keep our cars running by other means, at all costs.
We're certainly hearing more about energy from government and business. President Bush made the "addicted to oil" confession in January. Chevron and British Petroleum (or Beyond Petroleum, as BP wishfully styles itself) have both run ad campaigns acknowledging the oil-and-gas crunch, and the mainstream media has joined the campaign to pimp for bio-fuels. But all the talk is driven by the assumption that we will keep running WalMart, Disney World, and the interstate highway system just like we do now, only with other "alternative" liquid fuels.
The more naive members of the environmental sector have been suckered into this line of thinking, too -- especially the college kids, who imagine we can just divert x-amount of acreage from Cheez Doodle production and re-direct it to crops devoted to making liquid fuels for Honda Elements. They need to get some alt.brains.
Nobody is talking about the much more likely prospect that we'll have to reduce motoring drastically, and make other arrangements for virtually every aspect of daily life, from how we get food, to how we do business, to how we inhabit the landscape. The more we resist thinking about the larger agenda for comprehensively changing daily life, beyond our obsession with cars, the more likely we will veer into hardship, political trouble, and violence.
The reason for this collective failure of imagination seems pretty obvious: the older generations are hopelessly vested and invested in the hard "assets" of suburbia, which they feel they cannot walk away from; and the younger generation is too demoralized by the fear that they will never be vested in any assets (while many seek refuge from thinking at all in the electronic sensory distractions of video games and Ipods, or else in irony and other forms of manufactured alienation).
If I was a kid now, I'd find a lot more to rebel against than what we faced in the 1960s: the draft and the insipid program of Levittown. I'd rebel against a generation of adults selling the future for obscene pay packages. I'd rebel against everything from the mendacious nonsense of Rem Koolhaas to the profligate stupidity of Nascar. I'd want to eat Donald Trump for lunch (and set free the wolverine that lives on his head.) I'd utterly reject the false commoditized reality and set out to discover the world. I'd get busy building a society with a plausible future (and be real excited about it).
Sometimes I wonder if we just enjoy lying to ourselves. Sometimes I think: if this nation could somehow harness the energy in all the smoke it blows up its own ass, we'd all be able to drive to heaven in Cadillac Escalades.