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Clusterfuck Nation Archives
August 27, 2007
Back to School
Bad financial paper, like rust, never sleeps.
We may be in the traditional torpor zone of late summer when the whole nation takes off on vacation, but worms are still turning in the compost heaps of securitized alphabet debt (MBSs, CDOs, CLOs, et cetera) behind the glass banking towers in places like Wall Street, London, Frankfurt, and Shanghai, and the odor from all this garbage blowing 'round the world grows stronger by the day.
Transfusions of loss-cover-loans from the Federal Reserve have enabled the The Big Fund Boyz to spend a last weekend or two rubbing elbows in the Hamptons with transcendent beings like Diddy and Kelly Ripa. The Boyz gather along the dunes at twilight, bongs in hand, to gaze at Hedge Fund Island, looming off-shore in the gray Atlantic mist, and they notice something alarming: the island, which the BFB's built themselves over the past ten years, seems to be either floating out to sea or perhaps just sinking!
The scores of billions of dollars and euros that central banks have poured into the maw of losses lately will only paper over the essential problem for another few weeks, at most. The damage to global structured finance has been done, and it can be stated rather precisely: a widespread recognition that it's not possible to get something for nothing, after all. And that when you hold a lot of paper that was gotten for nothing, and put it up for sale, nothing will be offered for it. What a surprise.
The task of people holding power now in the finance sector (which itself may be a conceit at this point) is to manage the rapid dissolution of hallucinated wealth in such a way that as few people as possible notice that x-trillions in dollar denominated pixels have vanished from the hard drives. Sooner or later, though, millions of shlubs dependent on pension checks, or annuities, or monthly payouts of one kind or another will notice that something has stopped landing in the mail box. Re-po men with bad haircuts and tattoos will be driving other peoples' cars to the auction barn. Young people accustomed to thrilling paydays will discover that their services are no longer required in the mortgage origination business, and will instead have to memorize dozens of excruciating formulas for different sorts of beverages more or less based on coffee. Millions of realtors will enter second childhoods as they move back in with Mommy and Daddy, who themselves must now change their plans, since it is no longer possible to flip the 1956-vintage raised-ranch in Hempstead to buy that half-million condo in Maui.
Reality is biting hard. As with the little marmot caught in the Gray Wolf's jaws of death, the body simply surrenders and God's grace of physical shock softens the translation from free-willed joyful creature to dead meat. That is where we are at here in the final days of August, 2007. Digestion follows. The Big Fund Boyz and all their minions will end up as mere worm castings in the aforementioned global compost heaps.
Terrible shocks are going to rip through the socioeconomic fabric of the USA as we turn the corner past these late summer doldrums. The fiasco of bad debt won't be contained. The choices for those who find themselves financially underwater in the fall of 07 will be 1.) liquidation, 2.) bankruptcy, or 3.) destroy whatever remains of confidence in the US dollar in order to erase debt by hyperinflation. People holding power don't like the first two, which translate into Depression (let's make it capital "D.") When a nation turns into a fire sale from sea to shining sea, and bankrupt citizens don't even have enough cash-on-hand to buy things desperately cheap -- well, that's a Depression. Everybody from Fed officials to news editors have favored the softer term "recession" the past half century because it implies a mere pause in the inexorable march of progress toward economic nirvana. That's not what we're heading into.
There will be so many assets up for sale across the USA in the months and years ahead that the very sun in the heavens will take on a K-Mart blue-light-special glow. Houses with miles of granite countertops, Maybach automobiles, cabin cruisers that burn thirty gallons of diesel an hour, and much much more. There will be so much slightly used (or barely "pre-owned") stuff for sale that manufacturing another unit of anything (or importing it) will seem like a sick joke. Alas, there may be very few buyers, at least here among the current natives of North America. And so you get "new pricing," and a deadly downward spiral.
Of course, all that creates a problem for the masses of human beings who theoretically support themselves by working to produce new things of value to be bought and sold . But let them watch Nascar! Let's take whatever little remains of our tax revenues (or bonding ability) and build a dozen more speedway ovals around the country, and tweak the stock car engines so those suckers can run on ethanol, and shower the fans with Little Debbie snack cakes as they count the laps. Bring on Britney Spears or Paris Hilton at half-time (do they have half-time in Nascar?) and let Justin Timberlake cut their hearts out on the hood of a Dodge Avenger. Believe me, the public will be so deliriously entranced by the spectacle, they won't notice anything else going on in the background of our nation.
This is how America enters the Long Emergency -- in a Nascar rapture, with Jesus directing the pit crews and the Holy Ghost working the barbeque concession.
I apologize for what has been a rather excessive spewage of mixed metaphors this week, but the extreme abnormality of events has just got me going. The bottom line, though, is simple and straightforward: things may appear normal for the moment, but we are heading into a shit-storm as sure as Sam Walton's descendents contracted to buy all the three-ringed loose-leaf binders made west of the international date line. America, you're about to go back to school the hard way.
August 20, 2007
The Federal Reserve seems to be manufacturing an impressive supply of "greater fools" to go along with the dribs'n'drabs of credit that it is dropping into the sucking chest wound that the economy has become for the body politic. The Fed's idea, I suppose, is that if they lend a little money to the geniuses who engineered the latest (and probably last) bubble of the cheap oil age to cover their present losses, then the US economy will "right itself." What I think they don't get is that finance has virtually become the US economy -- if you subtract it, there is nothing left besides hair-styling, fried chicken, and colonoscopies. By "righting the economy" do people mean the ability to keep running a transparently fraudulent set of rackets that have nothing whatever to do with financing real productive activity?
By "greater fools" I mean, of course, buyers willing to step up and purchase securities that other people are shedding as if they were smallpox blankets. But even the Fed's supply of greater fools may prove insufficient when it becomes evident how much bad paper really is out there, and how it has been allowed to contaminate every tradable niche in the banking and investment house of horrors. I don't think we've begun to hear the disclosures.
The destruction continued globally last week, with dark portents for this week, and indeed for the rest of the year. The much-mentioned "carry trade" -- borrowing Japanese yen in massive bales at ridiculously low interest and stashing the money in places where returns are higher -- got rocked as stock markets shuddered and currency spreads began to go this way and that way. This could not have been healthy for the derivatives geniuses, whose algorithms get the flu every time the temperature changes on a trading floor somewhere, and for whom the carry trade has been a sort of money strip-mining operation in recent years. Last week's action must have burst a lot of cell walls under those high foreheads. The Big Fund Boyz have been scrambling to paper over the damage. But sooner or later, the strength of the unwind will surpass their ability to pretend everything is okay. My guess is they will do just about everything except put their worthless MBS-and-other-crap-paper on the auction block -- and then we'll get two things: straight-up announcements of capitulation and insolvency, and addenda to the effect that, oh, by the way, our fund was incorporated in the Cayman Islands, out of reach of the US courts, for those of you credulous slobs out there who were thinking of suing our asses, so fuck you (and won't that work nicely for the US financial sector's greater legitimacy).
Speaking of the Cayman Islands, they are about to get hammered by Hurricane Dean. Those Potemkin offices where the Boyz incorporate their mystery funds may not even be standing by three o'clock. But speaking of Hurricane Dean raises some interesting parallel issues. Texas may be breathing a sigh of relief with the storm's present course calculated to take it over the Yucatan Peninsula and into Mexico. But, as you can see from this article on TheOilDrum.com, it's a real Scylla and Charybdis situation. The US Gulf oil fields and the Houston refinery universe may not get smacked, but it looks like Mexico's Cantarell oil field will get roached instead. With Mexico being our number two source of oil imports, and with oil imports being almost 75 percent of our daily oil supply, and with the Cantarell field being 60 percent of Mexico's oil production -- well, you see how that goes. Nobody really seems to know what has kept crude oil trading just barely into the $70 range at the height of the driving season, but the two main speculations are 1.) "demand destruction" among tapped-out American consumer-motorists and 2.) desperate Big Fund Boyz ditching positions in the oil futures markets to raise cash to cover their losses elsewhere. In any case, Dean does not look good for oil prices in the US slouching toward Labor Day.
These things prompt me to say that we are firmly in a zone of pronounced instability in global finance. I have to guess that the losses and imbalances in the funds are now too grave to correct. The Federal Reserve has got to chose whether to let these outfits sink, or whether to sink the US dollar trying to bail them out. The kind of penny-ante "helicopter drops" of "liquidity" they've made the past two weeks may actually accomplish both, only just a bit slower. By this, I mean that the damage may not occur all at once but be stretched out into the Fall of this year. Anyway, the massive amounts of adjustable mortgage resets coming down through Christmas, will blow out many more cell walls in the ailing body politic. And let's not forget that one Hurricane (even a Cat-5 howler) does not a whole hurricane season make.
August 13, 2007
The seas were a mite choppy off Hedge Fund Island last week after all when the Federal Reserve started tossing life preservers of ready cash to the Big Fund Boyz bobbing and thrashing in the swells. Now, about that "money" -- which is, in essence, a bunch of extended lines of credit at the Fed's artificially-low official interest rate -- what actually happens to it? The simple answer is: it disappears into the same ocean of financial woe that the Boyz are drowning in.
The mere $38 billion that the Fed tossed out Friday afternoon, as the Dow was tanking down a few hundred clicks, will be used by banks and investment houses to cover losses in the synthetic securities they themselves created, and have been trading, during this psychotic final blow off of cheap energy capitalism. In essence, the Fed is buying worthless paper. The trouble is, there is so much more worthless paper out there that all the computers at the Federal Reserve could never generate enough pixelated cash to cover them in the life of this universe or several like it.
An additional problem: there is a practically inexhaustible supply of "dead" mortgages and corporate loans washing up on the pebbled beaches of Hedge Fund Island. No matter how bad the mortgage-and-credit-derived racket looks now, it is certain to only get worse as the dead mortgages and loans fester in the sun and the tropical foliage on Hedge Fund Island starts to wilt from the toxic fumes of all that decaying matter. This summer is only the beginning of a cycle of adjustable mortgage interest rate re-sets. The numbers go way up in the fall and are scheduled to continue rising well into the winter of 2008. How long do you think the Big Fund Boys can tread water?
What you're seeing now is a simple matter of financial sector players trying desperately to evade the consequences of their own actions. The fake wealth generated by the synthetic securities they created is now being recognized for what it is: a swindle. The hallucination is over. The collective denial that supported that hallucination is dissolving. The losses are become manifest. Even worse, the losses are growing exponentially because the synthetic securities were used as collateral to leverage far greater multiples of "positions," bets, and plays in a casino-like global electronic trading arena.
This is what happens when investment gets de-coupled from real productive activity and becomes an end in itself. It has been terrifically enhanced by computer programming. But no amount of digital legerdemain --with the "sugar-on-top" of accounting trickery -- can now hide the fact that there is no "value" there. What's more, the losses are going to have to show up somewhere. If you try to suppress them in one area, they'll pop up in another. If the Federal Reserve tries to cover the losses racked up by the Big Fund Boyz by giving "cash" away, they'll only succeed in destroying the value of the cash itself, i.e. the US dollar.
Now, few reasonable people can really imagine that the Fed would blunder into hyper-inflation. But the situation is so desperate that the Fed's mission to do what's necessary to rescue drowning banks may over-ride the prudent deployment of cash life preservers. As that occurs, foreign holders of the US Dollar may detect the impending loss of value of the dollar, and there would be a stampede to the redemption windows to get rid of them. That would leave the Federal Reserve (and by extension the American Nation) in a position of stark and implacable insolvency.
In any case, the US now stands on the brink of an unprecedented liquidation of assets. The mortgaged title holders to over-priced McHouses will have to liquidate their positions as "home-owners." The over-leveraged holders of credit-card debt will have to sell their Ford Explorers, bass boats, sports memorabilia (good luck with that shit) and flat-screen TVs. The retired dentists will have to dump their stocks and bonds. The corporations will have to sell off subsidiary operations, buildings, and corporate jets. Some colleges will just shutter. The Big Fund Boys will have nothing of value left in their portfolios to sell. They will just drown. Their heirs and assigns will then have to dispose of the house in Sagaponak, the 10-room apartment on Central Park West, and the family fleet of SUVs. The Big Boyz will take quite a few institutions with them -- the club-like banks and investment "houses" that employed them and went along with their mendacious shenanigans.
The upshot is that we are going to find ourselves a poorer nation. There will be far fewer people with money. There will be far fewer buyers of repossessed McHouses, bass boats, etc. Even the houses in Sagaponak and the Manhattan apartments will go cheap. The effort to pretend our way out of a financial crisis will fail. Sooner or later the recognition will set in that all that "boo-yah" was dreamed up. The United States swindled itself. We became a nation of such greed-crazed clowns that we committed financial suicide in an orgy of self-deception.
Anyway, that's how I see it this morning. The equity markets open in a half hour or so. The mood out there must be dark. The hands that hold the Starbucks cups must be trembling at the trading desks. I hasten to add that I think the turmoil and destruction can go on for quite a while. This slow-motion train wreck is not going to play out in just a week or two. And in case anyone forgets, in the background looms another storm at least as potent as the one now blowing through the financial markets: the gathering permanent global energy crisis (a.k.a. "peak oil"). Just because some Big Fund Boyz liquidated their positions on the oil futures market last week to try to cover their losses elsewhere does not mean that price of oil is going to keep going down. It may rest on the ledge in the $60 -$70 range for a spell, but you can be sure it will take flight again. And if it does as the dollar is crashing for other reasons, this will become a pretty disorderly nation in a very dangerous and unforgiving world.
August 6, 2007
The Open Ocean
By now, is there anyone over twelve in the USA who has not seen Jim Cramer's tantrum recorded late Friday afternoon on CNBC as the stock market took a 280 point swan dive off the rocky cliff of Hedge Fund Island?
Cramer's histrionics were only a few clicks above his normal antics on the "Mad Money" show, but even so, they made a remarkable impression of someone in real, not mock, despair. He mentioned more than once during the tirade that he'd been on the phone all week with other interested parties who were begging him to do something about the rising bloodbath on Wall Street. And by "do something," they clearly meant that Cramer should go on his TV show and make an appeal to Federal Reserve chief Ben Bernanke to drop the prime interest rate at the Fed's meeting this coming Tuesday -- the purpose of which would be to make cheaper loan money available to the Wall Street players whose investment houses suddenly found themselves underwater in the churning straits off Hedge Fund Island, weighed down by bagfuls of worthless securitized non-performing mortgages.
Personally, I don't quite get how a financial industry based on bad loans would be helped by borrowing more money to bail out a hopelessly unwinding Ponzi loan racket of the type the industry had engineered for itself -- but maybe I'm lacking the gene for financial creativity that the Bear Stearns bonus babies were all born with.
In any case, apropos of Cramer's telephone marathon, one can only imagine the number of cell phone minutes racked up this weekend out in the Hamptons by players trying desperately to finagle their way out of the brutal fact that their firms and funds suddenly lay exposed to the cruel ravages of reality. A lot of catered crab tidbits and mini-quiches must have gone uneaten out along the dunes as weeping men in blazers realized that "marked to market" had come to mean the same thing as "holding a bundle of shit."
I'd be surprised if all these geniuses hadn't managed to rig some kind of a life raft over the weekend, but they'll still be bobbing in the dangerous waters offshore, with plenty of sharks circling, and they'll still be stuck with those wet, bags of mortgage tranches (soon swelling and reeking in the sun), and my guess is that by Tuesday or Wednesday the life raft will be listing in more heavy seas.
At the other end of the storyline are the many sad people who were the initial dupes in the racket: the poor shlubs who signed "creative" mortgage contracts to become notional home-owners and thus achieve their spot on the first landing of the American Dream staircase. I say "notional" home-owners because somebody who "buys" a "product" such as chipboard-and-vinyl McHouse with no money down is not really an owner of anything but rather a kind of glorified renter stuck with the additional burdens of paying property tax and maintenance costs for something really owned by another party (a notional landlord). And, of course, we all know by now that the payment terms for these loan contracts were slippery sliding indexes which uniformly tended to slide upward as interest rates re-set above the ludicrously low levels of 2003 - 2006.
Millions of these unfortunate people are now seeing their lives whirl down the interest rate re-set drain. If this was still the same American Dream nation of It's a Wonderful Life, these contracts might have been re-negotiated by friendly, helpful, upright local bankers who benefited directly from loans favorable to both parties that continued to perform. But the whole racket this time was designed to dissociate the loan contracts as far as possible from their company of origin, and then to slice and dice the liabilities of ownership so finely that all the lawyers theoretically ever producable in the life of this universe, or several like it, may never succeed in patching together a coherent skein of ultimate responsibility. In the meantime, a remorseless chain of mere procedure in the form of default and foreclosure notices issued by computers will be sent through the mail, and sheriff's deputies will fan out through the subdivisions with their rolls of yellow tape, tossing residents out on the street (if they haven't already mailed in their keys to some company that fired all its employees and shuttered its offices back in June). A lot of these unfortunates will prove to be members of racial minority groups -- as reported by Gretchen Morganstern in today's New York Times -- and that is liable to add some cayenne pepper to the political gumbo cooking on the nation's back burner.
In his CNBC tirade, Cramer barfed up some choice phrases such as, "[the Fed board] has no idea how bad it is out there!" and "this is armageddon for fixed income [markets]!" No doubt a lot of observers, especially in the cheerleader financial media, will discount these utterances as we enter the shark-infested waters of the open markets this week. I really have to wonder if the many little life-rafts out there, rigged desperately over the weekend, bearing the castaway crews of hedge fund boys, are not drifting into the damp winds of a perfect financial storm.
July 30, 2007
Last week's stock market meltdown suggested that a financial sector rigged for the falsification of reality eventually enters a danger zone where reality implacably reasserts itself, expectations dissolve, and all that remains is the sour odor of fraud.
This long episode of market mania, running for seven years, was based on the idea that non-performing loans could be turned into money by removing them from their point of origin and dressing them up in respectable clothes -- like taking all the winos in downtown Los Angeles, putting them in Prada suits, and passing them off as the faculty of the Harvard Business School. It was a transparently ludicrous racket and the wonder is that America proved to be so utterly bereft of regulating authority -- not to mention plain decency and self-restraint -- at every stage.
It's really hard to account for the stunning failure of responsibility. What you had was a whole industry that surrendered the standards and norms that brought it into being and enabled it to function in the first place. Mortgage lenders stopped requiring house-buyers to qualify for loans; bankers stopped caring what stood behind the paper they issued; dubious loans were bundled and resold like barrels of rotten anchovies -- in such numbers that no individual stinking minnow would stand out -- and the barrels were traded up the line, leveraged, hedged, fudged, fobbed, and fiddled until, abracadabra, they were transformed into so many Tribeca lofts, Hampton villas, Piaget wristwatches, million-dollar birthday parties, and Gulfstream jets.
It worked for the Goldman Sachs bonus babies, and the private equity scammers, and for the corporate CEOs and their board members, and for the politicians who parlayed their votes into cushy lobbying jobs, and even for the miserable quants in the federal government's termite mounds of statistical reportage. It even worked for about 18 months for millions of feckless US citizens gulled into contracts for houses they could never hope to pay for, under arrantly false and ruinous terms.
My critical auditors never tire of pointing out how consistently wrong I have been about weakness in the US economy, but I really do think we've reached the vanishing point, and that spot on the horizon is looking more and more like a black hole -- with dire gravitational powers of suckage. It first appeared a few weeks ago when two Bear Stearns hedge funds got into trouble over the barrels of rotten anchovies they had bought for their investors. The B/S boys tried desperately to sell the barrels, but nobody showed up for the auction. Word began to spread that all the other companies sitting on barrels of rotten anchovies might not be able to sell theirs either. All of a sudden there was a lot less notional "money" in the system. The "positions" held by the hedge funds (bets made on all kinds of other things leveraged by rotten anchovy collateral) have not themselves unwound quite yet. But enough nervousness ran through the system last week that the stock markets came down with irritable bowel syndrome. The blood and fecal matter whirling around the exit pipe is what remains of the "money."
By the way, I believe the stunning failure of responsibility actually can be accounted for, though my theory may not be to everyone's taste (especially the science hard-asses out there). In a word: entropy. The US has enjoyed unprecedented energy inputs and the result is unprecedented entropy outputs. The protean force of entropy then manifests as degradation in just about everything around us from the immersive ugliness of a landscape overbuilt with WalMarts, Pizza Huts, and vinyl houses, to the sexual perversion available on the Internet, to the surrender of standards and norms by executives in the financial sector. It's as simple as that. Entropy rules.
What reinforces my feeling that we are at the vanishing point is the additional simple fact that on Friday, West Texas crude oil closed one-cent short of its previous record high of $77.03 reached on July 14 last year (thanks to John William's Shadowstats.com for the date). Apart from turmoil in the financial markets, there is nothing especially traumatic going on out there for the moment -- no hurricanes, no terror bombings in Europe or America, no guerilla action against Nigerian oil platforms and pipelines. Of course, any of those problems could spring up tomorrow, but right now things are kind of quiet, by current standards. And yet there was oil closing at $77.02 on Friday.
The reason for that high price, I believe, is that we really have entered the zone of the permanent oil export crisis, meaning that the oil exporting nations (Saudi Arabia, Mexico, Russia, Iran, Venezuela, etc) are using ever more of their own depleting product and are able to send less and less along to the places that import their oil (the US, Europe, China, India, and Japan). There is just enough of an export bottleneck now to put upward pressure of a-dollar-here-and-there on the oil in the futures markets . It is certain to get worse. A lot worse.
The launching of this new oil export crisis is coinciding with the crisis in confidence in the financial sector. In fact, the oil export crisis is the un-recognized reality test that is challenging the habitual falsification of reality in finance. This oil export crisis will also have a palpable effect on the reality of everyday life in America. It will bring our system of extreme car dependency closer to failure every day, with each upward one-penny click. Whether the public ever comes to recognize what this means, it will still affect millions of individual decisions. Among these decisions will be a refusal to consider buying a new house 27 miles outside Minneapolis (or Dallas, or Atlanta....). At the same time this is occurring, and the anchovy barrels stashed around Wall Street start exploding from the gases of putrefaction within, there will be no more mortgages available for new houses anyway. And so the only real activity still driving the US economy -- the building of ever more suburban sprawl -- will come closer to a complete shut-down. I don't think the financial markets will survive that.
July 23, 2007
Go anywhere in America, among any class of people -- from the Nascar morons to the Ivy League -- and one expectation is pretty universal: that technology will only bring us more wonders and miracles, and it will certainly save-the-day where our energy problems are concerned. This would seem natural for people living in an age when a simple cassette SONY Walkman is superceded by an 80-gigabyte iPod in one generation. But what if this assumption is off? What if peak technology occurs roughly in the same wave as peak energy?
Of course, another nearly universal expectation is that we will go through an orderly transition between the end of the oil fiesta and whatever comes next -- implying, naturally, that some new sovereign energy resource is out there in destiny's green room, getting prepped up, waiting to be sent on-stage. The confusion about this, induced by strenuous wishing, is such that most people expect the next energy resource to consist of technology itself.
This has been the heart of my beef with the rosy future crowd. Energy and technology are not the same thing, not interchangeable or substitutable. If you run out of one (energy), you can't just plug in the other (technology). I certainly believe other energy resources exist besides oil and methane gas, but I maintain that we will be grossly disappointed by what they can do for us, given what we are currently running in society. Nor am I categorically against the idea of using these other things: solar, wind, bio-fuels, what-have-you. I can even be persuaded on nuclear with its many hazards, if that's the only way to keep the lights on. But all of these things will not preclude the extreme necessity to make severe changes in our manner of daily living -- and to do so rather quickly.
Far from evolving triumphantly to yet-higher realms of technological nirvana, I'd expect a raw struggle to preserve much of the knowledge and applied technique that has already been acquired. I do happen to believe that the petroleum twilight will bring quite a bit of disorder to our society, which almost certainly means that the institutional context for research and development will suffer. Most particularly, I doubt that the big universities will be able to carry on in an energy-and-capital-starved future. Exactly how they might disintegrate is an open question. Last year, for example, I was shown the new bio-medical research "facility" at the University of Michigan, a building at least the size of a Cunard ocean liner, and wondered as I beheld it exactly how they were going to heat the goddam thing ten years down the line. But one might as well ask how the U might fund the paychecks of the building's occupants as Michigan's economy falls into an ever-larger crater. Such is the hubris-induced weakness of mind among those in charge of things that these mundane questions are not even asked.
The same pretty much goes for the big corporations. Their world is going to change pretty rudely, too. Far from expecting them to take over our lives even more comprehensively than is the current case, I expect them to wobble, fall to their knees, and expire as the tonic of globalism vanishes down the drain of economic history. Just as most people expect technology to save-the-day for energy, the same people expect the world to keep becoming an ever-smaller place of more intricately co-wired parts. Not me. I expect the world to become a larger place. I expect the wiring to unravel in a contest over the world's remaining oil. I expect that the nations of the world will eventually retreat back into their own continental regions (while that retreat may be violent and messy). I expect our energy problems to limit any organization's ability to project power and influence -- whether it is a government or a corporation. I expect that anything now running at the giant scale will either have to downsize real fast or go out of business.
Few of the rosy futurists foresee anything but ever-greater peaks of affluence among an ever-larger pool of players. I think they have been watching too many installments of "Richistan" on cable TV. My own notion is that capital will dry up quicker than rain on a Scottsdale patio as our energy predicament becomes apparent, since expectations of future growth (of economies and the capital representing them) are keyed to an assumption of unlimited energy resources. When the truth finally hits -- that there are real limits to the things of this world -- it will knock the capital markets on their asses. We will see large numbers of men wearing Rolex watches weep into crumpled certificates as the tranches of hallucinated wealth dissolve in the mists of their hopes and dreams. This means, at least, that investment in technology R and D on the grand scale will probably not meet our current expectations.
In any case, it is getting pretty late in the day for us to just kick back and nurture fantasies about the future of technology while the prospect of an oil export shock resolves more vividly before us -- the first symptom of an industry that will shortly fly to pieces. Of course the very last thing we should be doing -- which everyone from the Nascar morons to the Ivy League "greenies" is doing -- is focus all effort on how to keep the American automobile fleet running by some magic means other than gasoline. I say, just as a mental jump-start, let's put at least some of that effort into getting the choo-choo trains running again -- but this is too silly for the boys at MIT or even the Pentagon.
A few years ago, I went to the famous TED conference in Monterrey, where the mandarins of computer tech gather every year to hear talks about the neat things happening in the world beyond Silicon Valley. (I was part of the "entertainment.") By far the most popular presentation of the whole conference was the one on flying cars. Yeah, I know. It was straight out of a 1937 edition of Popular Science Magazine. But that's where their heads were at. All those twenty billion dollar heads, and that was what really lit their wicks. In case you wonder why I'm skeptical about where we're going in this country.
July 16, 2007
A curious phenomenon worth attention from pathologists in the financial press is the now nearly complete de-coupling of the finance sector from the salient ominous trend in the oil sector: the fast-developing permanent oil export shock. By that I mean a severe decline in export ability by those nations currently supplying the US, Europe, China, and Japan -- an export decline that will far exceed actual production decline rates in Saudi Arabia, Russia, Venezuela, the North Sea, Mexico, and Iran.
This story or scenario developed by Jeffrey Brown and statisticians at The Oil Drum.com, is pretty easy to understand: production declines in these nations will combine with greater internal oil consumption to severely curtail exports in a shockingly brief time frame. The populations of Saudi Arabia, Venezuela, and Iran are growing; car sales in Russia are up 50 percent this year; even Norway is using more of its own oil every year. These nations are consuming about 25 percent of their total liquids (regular crude plus natural gas liquids and condensates). Basically, the picture shows that net exports from these nations will run to zero in nine years. And they will be low enough within five years to throw the importing nations into complete economic paralysis.
The situation is even darker for the US because our number three source of imports, Mexico, is showing production declines far worse than the other exporting nations, suggesting not only that the US will receive no oil from Mexico in only two or three years, but also that the Mexican economy is likely to collapse and plunge that nation into political turmoil -- just what we need along our 2000-mile border.
It's against this background that the stock market melt-up of 2007 presents a virtually psychotic picture of disconnection from reality, because the oil story says, essentially, that the global economy as we know it can't possibly continue to operate, and that therefore investment in its future operations is certain to go up in a vapor.
The standard argument against this is that a combination of new "technology" and "new oil" (coming on-line from recent discoveries) will save everyone's ass. Well, the "new oil" is mostly hypothetical (e.g. Chevron's "Jack" discovery in the deep-water Gulf of Mexico). The little real new oil (Russia's Kashagan field) will A.) not come into full production for a decade and B.) not offset Russia's imminent steep overall production decline. The US is hoping (wishing really) that the Alberta tar sands will save our ass, but it is a pathetically delusional hope, since we already import more than 13 million barrels-a-day and the Canadians project maximum tar sands oil production not to exceed 5 million b/d after 2010 -- not to mention the fact that they have already signed long-term contracts with China for substantial amounts of that production, and apart from the issues entailed by the depletion of Canada's natural gas supply, which is crucial to the production of oil from tar sands.
As for new technology saving the day -- apparently even the science jocks in the US have not figured out that technology and energy are not the same thing. Someone should inform them.
The psychosis in the stock markets might be explained by the fact that we are at a peculiar point in history: just coming off the absolute peak of the energy supply wave, which has allowed for a fabulous accumulation of surplus wealth, now sloshing through the markets. This may be so, but unfortunately the surplus wealth comes in the form of "money," and the "money" that is out there is subject to equally fabulous distortions and perversions, due to the fact that it is all leveraged into hallucinated multiples via credit rackets, and, perhaps more fundamentally, pegged to the unreal expectation that industrial economies will continue to grow and thus continue to multiply the value of invested "money."
These two conditions -- the gathering oil export storm and the gathering crisis of capital -- are the reasons why I think 2007 will be a pivotal year. We're at the halfway point. Oil production (all liquids) has not exceeded the all-time peak of a year ago (or the crude-only peak of December 2005). Every day thousands of new driver's licenses are issued to Saudi Arabian men. Every day, thousands of new cars are sold in Russia (and China and India). Every day the price of crude oil on the futures markets creeps a few cents higher. Every day the US version of "money" (the dollar) loses a few clicks of value against other world currencies. The markets and the American public are headed for a collision with reality. When it happens, perhaps this fall, it is not going to be pretty.
July 9, 2007
Live Earth is a 24-hour, 7-continent concert series taking place on 7/7/07 that will bring together more than 100 music artists and 2 billion people to trigger a global movement to solve the climate crisis.
-- The Live Earth Web site
Am I the only one who wonders whether rock and roll extravaganzas in the service of Great Causes might be exercises in grandiosity and futility? What I wonder especially: is this the only way we know how to respond to the difficulties that life on earth presents -- to engage a corps of professional narcissists to strut and pose in stadiums, affecting to wave their magic wands (or Fender Stratocasters) and make everybody feel better about a given problem (distress on the farm, disease in Africa, global warming....)? Can't we think of other, more meaningful things to do? Or are we stuck in a perpetually delusional rut of Woodstock-style symbolism, out doing a global rain dance instead of really changing our behavior?
I'm not convinced that these big public service rock shows do much harm -- other than perhaps inflating our expectations and using too much electricity -- but this particular one galled me a little.
For one thing, even though global warming is by definition a global problem, the notion of a global community as a permanent fixture of human history is, I think, a mirage. If there is any salient macro implication to the problems I term the long emergency, it is that the world will soon become a bigger place again; the great nations will soon retreat to their own corners of the world as they powerdown by necessity; and all the trade relations, cultural exchanges, and geopolitical conceits that have lately made the Earth seem like a big international hotel give way to much more local issues of sheer survival.
There was so much about the Live Earth show that actually expressed what is worst about the current state of American culture: the obscene posturing of zillionaire celebrities, awarding themselves brownie points for the largeness of their concern -- even while, like Mr. Sting of the band called the Police, they buy-and-sell $20 million Manhattan condos, and burn god-knows-how many tons of Wyoming coal amplifying the bass runs to "Roxanne." And the flip-side of these celebrity pretensions, of course, is the disturbing fealty paid to them by the fans, as members of the public caught up in celebrity-worship are called. Obviously, the whole thing is a kind of self-reinforcing feedback loop spiraling up to ever worse grandiosity on the part of the celebs and ever more pathetic groveling worship of these fake gods by the fans -- until it becomes little more than an object lesson in the tragic limitations of the human condition.
Looming behind the spectacle like some Macy's Thanksgiving Day balloon, is the puffy figure of Al Gore, who has managed to turn his journalistic accomplishment into something uncomfortably like a Nuremberg rally. I say this perhaps incautiously, not because I believe that Al Gore is a bad person, but because it could get to the point here in America, not far down the line, when a desperate public will beg some political leader to push them around, to tell them what to do, to direct their behavior in some purposeful way to save their asses. And these prancing, preening rock and roll celebrities may be paving the way, so to speak, for some corn pone American fascist to strut his stuff for an American audience worried about the growing darkness, and the falling needle on their car's gas gauge.
The last thing we need now is the carefully packaged postures of concern from "stars." Al Gore could do a lot more good militating to get regular hourly passenger train service running between Nashville and Atlanta, or stomping his state, from Memphis to Chattanooga for swapping sales tax on regular merchandise for a higher tax on gasoline. Or, he could just put aside his pretensions for being a kind of global Wizard of Oz and just cut the shit and run for president of the US, where he might actually make a difference.
July 2, 2007
Thuggo and Sluggo
As someone who spends a fair amount of time in airports, I marvel at the way my fellow citizens present themselves in public. I see middle-aged women who appear to have left home in their pajamas. But it's the costume and demeanor of American young men especially that raises interesting questions about who we have become.
The fashion and body language of male youth in 2007 comes from three sources: prison, the nursery, and the pimpmobile. It's an old story now that many conventions of gangster fashion come out of the jail experience, where they take away your belt and shoelaces so you won't hang yourself. Apparently, at some point in US history, they stopped giving the belts and shoelaces back on release, and it became stylish to wear your trousers falling down below the top of your underpants (or butt crack as the case may be). Jail being a kind of accreditation device these days, the message may be: I passed the entrance exam.
Less obvious is the contribution of the nursery. Pants that are ambiguously neither long or short, worn with XX-large T shirts, tend to make grown men look like babies. Babies have short legs and large torsos compared to grown men. They also make big awkward gestures and touch their sex organs a lot. Add a sideways hat and unlaced sneakers and you have the complete kindergarten rig. Why a 20-year-old male would want to look five years old is another interesting question, but it may have a lot to do with the developmental failures of boys raised in households without fathers. They simply don't know how to be men. They only know how to behave like five year old boys. They even give themselves nursery school nicknames. But they are men, and what could be more menacing than the paradox of a child bent on homicide.
Tattoos used to be pretty much the sole fashion statement of merchant seamen or people who have served in the armed forces (or people who live in jungles). Now they are common among career girls. The tattooed guys I see down at the gym are ordinary young men who work in cubicles. Tattoos on sailors used to celebrate places they had been or people they had loved. The tattoos I see now are meant to convey fierce and barbaric statements of superhuman power: look at me, I'm a Power Ranger! It's understandable that someone who spends most of his waking hours in a cubicle wearing a telephone headset in order to swindle old people out of their savings might fantasize about rising above all that. But the tragic thing, of course, is that getting tattooed is not quite the same as accomplishing something with your life. In the end, you're just another loser with a grandiose and ridiculous tattoo.
The pimp connection is too obvious to belabor -- meant to mock normal executive attire while signifying an existence of total leisure and the enjoyment of unearned riches. The trouble is that the worship of unearned riches -- based on the belief that it truly is possible to get something for nothing -- has now become normal at all levels in American life. Everybody from the lowest whoremonger on Hollywood Boulevard to the Wall Street hedge fund managers believes in unearned riches plucked from "suckers." The catch is that men who live by this code almost always come to a bad end. They get their throats cut with razors, or go to prison, or manage to lose all their unearned riches (and the investments of many strangers, too).
The portrait of the young American male in 2007, therefore, is of an impotent, infantalized being lost in grandiose fantasies of power and importance. It's a picture of men without real confidence, and no idea how to achieve it, who wish to project a transcendently ferocious image complete with odds-and-ends of manner taken from comic books and movies based on comic books, in order to be taken seriously.
The rest of the world must tremble to contemplate the picture we present. The Nazi soldiers of 1944 were glamour boys compared to the riff-raff that American young men have become. As for those who actually do make it into the army, you wonder how they appear to the locals overseas -- they're probably taken seriously as exactly what the present themselves to be: manifestly evil beings who really need to be blown up. Back home, I look around at the thugs and sluggos at my gym, and I'm ashamed to be a citizen of the same country they live in.
June 25, 2007
I get lots of letters from people in various corners of the nation who are hysterically disturbed by the continuing spectacle of suburban development. But instead of joining in their hand-wringing, I reply by stating my serene conviction that we are at the end of the cycle -- and by that I mean the grand meta-cycle of the suburban project as a whole. It's over. Whatever you see out there now is pretty much what we're going to be stuck with. The remaining things under construction are the last twitchings of a dying organism.
It is not an accident that the housing bubble coincided with the phenomenon of Peak Oil. First of all, the housing bubble should more properly be called the suburban bubble, because most of the activity came in the form of "greenfield" housing subdivisions, and included all the additional crap-o-la accessories required by them -- strip malls, power centers, Outback steak houses, car washes, et cetera. The suburban expansion has been based entirely on cheap-and-abundant supplies of oil. Similarly, it was not an accident that the suburban project faltered briefly in the 1970s, when America's oil production entered its long decline, OPEC seized the moment, and oil prices shot up. Notice that the final suburban blowout occurred after 1990, when the North Sea and Prudhoe Bay oil strikes came into full production, disabling OPEC, and a world oil glut finally drove prices as low as ten dollars a barrel in 1999. That ushered in the climactic phase of suburbia, as represented by things like the standard 4000-square-foot Toll Brother's McMansion and the heyday of the super-gigantic SUV to go with it.
The American public has no idea how over all that is. The bottom is falling out under not only the housing market (as in houses up for sale) but on the whole apparatus for delivering future houses, and the car-oriented crap associated with it. The production home-builders, such as Toll Brothers, Hovanian, Pulte, et cetera are going down and they will not be coming back. There will be a great deal of wishing that they might come back, but they won't. Likewise, the commercial builders of all the various forms of suburban retail will be waiting to "turn the corner." But they will discover that the wall they have hit has no corner. It's just a wall. For anyone who wonders how much we do not need anymore retail space in America, have a look at this chart showing the comparative amount of retail square-footage allotted for citizens of each nation:
Those of you considering the purchase of more WalMart stock, take note.
Some years back, when those watching the oil scene began to coalesce in their recognition that a worldwide production peak was imminent and hugely significant, the concept developed that this peak would take the form of a "bumpy plateau," meaning that supply-and-demand would teeter in an uncomfortable relationship for a period of time as markets and economies adjusted to the new reality by oscillating from higher prices to "demand destruction" to recession to recovery to higher prices, and so forth. This was expected to go on for quite a while before the world really headed into a slow permanent decline.
The latest statistical work by Dallas geologist Jeffrey Brown over at The Oil Drum.com, suggests that something else is happening, something that was not anticipated: an imminent oil export crisis. This Export Land Theory states that exporting nations will have far less oil available for export than was previously assumed under older models. (Story Here.) The theory states that export rates will drop by a far greater percentage than net production decline rates in any given exporting country. For example, The UK's portion of the North Sea oil fields may be showing a nine percent annual decline for the past couple of years. But it's export capacity has declined 60 percent. Something similar is in store for Saudi Arabia, Russia, Mexico, Venezuela -- in short, the whole cast of characters in the export world. They are all producing less and they are all using more of their own oil, and have less to send elsewhere.
Brown's math suggests that world oil exports will drop by 50 percent within the next five years, certainly enough to trigger a systemic breakdown in market allocation, meaning serious supply shortages among the importing nations. That's us. We import two-thirds of all the oil we use.
The implication in all this is that the activities that have become "normal" for us during the post World War Two era will very shortly become untenable. An economy based on suburban expansion and incessant motoring is on the top of the list of supposedly "normal" activities that will not be able to continue. I would maintain that even if we had 20 years, no combination of bio-fuels and other alternatives would enable us to keep suburbia running. But this latest work indicates that we have much less time to adjust.
This new information is consistent with my view that we had better prepare to make other arrangements for living in this country, by which I mean specifically re-localizing, de-globalizing, with an emphasis on local agriculture wherever possible, the emergency restoration of passenger railroad service and related modes of public transit, the rebuilding of local commercial infrastructures, and a radical rethinking of how we inhabit the landscape under New Urbanist lines.
Perhaps the most imminent danger is that the financial markets, which have been driving our insane, hollowed-out economy, will soon recognize what's in store and implode, creating a crisis of capital that will leave us with no ability to make any emergency investments, such as would be required to rebuild the railroad system. The equity markets sure blinked last week when two hedge funds based on phony-baloney collateralized debt obligations tanked. The collateral underlying this load of hallucinated "wealth" is comprised of contracts made by the insolvent for suburban houses worth far less than the value stated on the contracts -- with every indication that the real value will keep dropping.
In any case, those who keep wringing their hands over the bulldozers leveling the plots of prairie, or cornfield, or desert -- those distressed folks can direct their anxiety elsewhere. Worry less whether one final strip mall will tilt up out in gloaming, and think harder about how you are going to feed yourself and your family in a couple of years when the stupendous motorized moloch of American life begins to sputter, and the Cheez Doodle shipments can no longer make it to your supermarket shelves, and all that is "normal" melts into air.
June 18, 2007
It seems to me you can call the situation in Iraq a lot of things, but it's not a war. Not at this point, anyway. Call it an unsuccessful nation-building project, a failed occupation, a botched policing job, a monkey-in-the-middle clusterfuck. All the US political factions, from left to right, do the public a disservice by calling it a war, because it misrepresents what we're doing there.
We're involved in Iraq because we don't want to begin thinking about modifying our behavior at home. We are desperate to preserve our access to Middle East oil because that is the only way we can keep running our society the way we're used to running it. Mostly, we don't want to face the tragic misinvestments we've made in the infrastructure of happy motoring, and we don't want to face the inconvenient truth that there really isn't any combination of alt.fuels that will permit us to keep running all the cars the way we like to run them. Either we keep getting the oil or say goodbye to the American Dream Version 2.K.
The public has now decided that this nation's primary mission is to find some magic way to keep the cars running on a fuel other than gasoline. Everyone from the greenest greenies to the most medieval-minded Kansas Republican senator has joined in this collective wish. They are certain to be disappointed. All the Priuses in the world will not avail to save the Drive-In Utopia. The public will learn painfully what Iraq is all about.
Every time somebody blames the politicians for this predicament, I'm reminded that the politicians are actually doing a fine job of representing what their constituents want. What they want is to not change their behavior. Not even the science and technology folks want to think about changing our behavior. They just want to find new ways to continue the old behavior. They're invested in the triumphal effort to come up with a happy motoring rescue remedy. Their techno-cred is on the line. They all want to be the first kid in their housing subdivision to run a car on dark matter.
So, we've gone to Iraq on the quixotic mission to stabilize-and-pacify this key territory in the greater region of the Middle East, so we can keep getting oil imports out of there in a reliable and orderly way, so we can keep on driving all our cars. And the whole thing has turned out rather badly.
Now there is another consensus forming. Across the political spectrum, from the far left to the far right, elected officials are now clamoring to "stop the war in Iraq." By this they mean get US troops out. What cracks me up is their juvenile belief that being there is somehow optional for us, that we can keep on running Wal Mart and Walt Disney World without paying any price for it in the costs of policing the Middle East.
If we don't maintain a military presence in Iraq, it is perfectly plain what will happen: Iran will instantly gain control of the southern Iraq oil fields. Iraq doesn't have an army anymore. It is incapable of preventing Iran from acquiring control of its territory. From that vantage, Iran would also effectively threaten the sovereign existence of Kuwait. Then there is the question of how much instability Iran could generate next door in the Shia-dominated Persian Gulf shoreline region of Saudi Arabia, where most of that nation's oil lies. (Meanwhile, there will be plenty more Iran-inspired mayhem in Lebanon and the Palestinian territories.)
It seems to me the answer to all this is clear: the first thing the US has to do is reach a different consensus about our behavior here at home, starting with the proposition that the happy motoring era must end. If we're not willing to do that, we're eventually going to lose both at home and in our struggles abroad. You can be sure that coming disturbances in the oil markets will make suburban life untenable while exhaustion and bankruptcy breaks our military.
The air waves and internet sites are full of blather now about ending the "war" and bringing the troops home. The presidential candidates are agonizing over their various positions on the Iraq adventure. I'd like to hear one of them tell me how Atlanta is going to function without Middle Eastern oil, or how Wal Mart will move its merchandise from San Pedro to Lansing without a "warehouse on wheels," or how the thousands of yellow school bus fleets will carry on next September.
Actually, instead, I'd like to hear talk about drastically reforming our zoning laws to discourage any more suburban development or a pitch to allow some of our tax money to fund a US passenger rail revival. I'd like to see a candidate refuse to attend a Nascar race on the grounds that it's an unconscionably stupid fucking waste of energy resources. I'm waiting for one of these birds to tell the American people the truth: you can't have it both ways. you can't get our military out of the Middle East without changing the way we live.
June 11, 2007
Is the jailing, un-jailing, and re-jailing of Paris Hilton a harbinger of anything? Has America's Love/Hate-o-meter for wealthy celebrities swung in the negative direction? And does that swing portend something more ominous for our society at large? I've been saying for a while that the time would come when the moiling masses of the un-rich would turn on their pantheon of media-conjured demigods, and that this would be a symptom of mechanical trouble in the giant gas-sucking Hummer limousine that the US economy has become. Are the wheels about to come off?
I had an eerie thought a couple of weeks back while sojourning in Telluride, Colorado. This refuge in a box canyon, 8000-plus feet above sea level, at the end of a sixty-mile road from the nearest small-town airport, is pretty much entirely a creation of media celebrity money. Ralph Lauren's 30,000-acre spread is the town's welcome mat. The little main street is mostly occupied by realtor's offices. The mountainsides are dotted with the peeled-log palaces of Hollywood playahs. In short, what you see is a whole lot of conspicuously-displayed wealth. My eerie thought was this: what if a time came in America when the conspicuous display of wealth was not such a healthy thing for the displayer? What if these displays only made them conspicuous targets for the hordes of economic losers that the Long Emergency will shake loose? What if wealth is actually forced into hiding instead of displaying itself for all to see?
I admit it was not a big deep thought, just an eerie one. Of course, one would have to begin by asking what kind of society would worship clowns like Donald Trump in the first place -- and the answer would be: a society of envious slobs deluded into thinking that they could become the next Trump if only the Baby Jeezus would whack them over the head with a sock-full of silver dollars. This is, after all, a culture currently fueled by two dangerously childish ideas: that it's possible to get something for nothing, and that when you wish upon a star your dreams come true.
People who believe that it's possible to get something for nothing can be persuaded easily that those who have gotten a lot have gotten it unfairly. And the flip side of wishing upon stars is that when your dreams don't come true you can only blame it on the stars.
It's hard to locate in history another society so devilishly rigged for implosion than the empire that runs from sea to shining sea. Every structural element in our financial sector is a jackstraw groaning under a load of false expectation. The hedge funds are only the most elaborate pieces, with their intertwined webs of exponentially unreckoned risk. The equity markets are a three-ringed circus of "greater fools." The mortgage clusterfuck has barely begun, with a tidal wave of ARM re-sets about to kick in that will not only shatter the aspirations of the formerly-middle-class, but will also put the entire suburban sprawl-building juggernaut out-of-business -- just as the imminent global oil crisis makes that way-of-life obsolete. The undercarriage of the vehicle -- medical and retirement entitlements, plus the social safety net -- is rotting away as the massive debt obligations of the federal government are suddenly denied an easy re-fi rollover by the foreign central banks who no longer see the point in buying the trash paper of a nation that manufactures little more than celebrity envy fantasies.
It was sad to see Paris crying for mommy in the moments before she was limoed back to the LA lock-up. But it was surely a milder fate than the denizens of Versailles met back in the 1790s -- perhaps the last time in historical memory that such a class of feckless parasites was so cruelly, comprehensively, and theatrically disposed of. Personally, I don't hate Paris Hilton and Donald Trump, but I'm mighty sick of them cluttering up the collective head-space of my culture. I'm afraid that the moiling masses will adopt a more punitive attitude. They usually do when gods fail. Temples tend to come down.
You wonder who the new gods will be. In France, after the bloodbath of the 1790s, the new gods were abstract virtues rather than personalities: justice, brotherhood, equality, et cetera. The mob soon tired of abstractions, though, and turned to the appealing figure of General Bonaparte. Why? because he displayed the prime signature of charisma -- the aura that he actually knew what he was doing. In a nation that has lost its head, this is a striking attribute.
June 4, 2007
CNN is frantically advertising a set of "live" debates between the presidential candidates this week -- Democrats Sunday and Republicans Tuesday, with loads of "color commentary" before and after. This big media show is being staged in New Hampshire, whose once-significant early primary election has been reduced -- like so much else in our national life -- to merely symbolic status now that fifteen other states have crammed theirs into the super-duper primary day of February 5, 2008. Since I believe that a collective unconscious operates among groups at all levels of the social hierarchy, including the national level, this extraordinarily early staged contest says a lot about how insecure we must be about our leadership, about our place in the world, and about where we are headed.
US election campaign periods have never been regulated in terms of a set number of weeks or months, the way some other nations do. But the 2008 US election is the first in my lifetime that ramped up to such an intense and formal level of activity so far in advance. If nothing else, the amount of money that the candidates need to raise -- and burn through in airplane charters, staff salaries, and staged events -- puts them all in jeopardy of corrupting themselves to the various donors desperate to preserve their prerogatives under the status quo.
What everybody seems to sense semi-consciously is that the status quo is dragging the US into an abyss. But so far, no one among the declared candidates has been able or willing to express a coherent view of what it is in the status quo, exactly, that is doing the dragging. One undeclared figure, Al Gore, has presented the climate change part of the story and pretty much stopped there -- perhaps sensing that if he ventured to offer views on anything else, he'd start sounding like an actual candidate. But my guess is that the really important issues will never be articulated in the course of this campaign because they are too painful for the public to hear. And so all the premature debating and posturing will amount to a smokescreen of words meant to conceal the fact that we are a nation without confidence that any leadership can guide us into a plausible future.
In the background of all this sits the pathetic figure of President George W. Bush. He's pathetic because he has been in a position -- not facing reelection -- to tell the American people the truth, but he's shown no capacity for apprehending it. If he represents anything, it's the idea that the truth is optional, that if reality is disappointing, just create your own reality.
Here are the some of truths that we seem unable to face:
Very soon we won't have the fossil fuel energy supplies to run the USA as it is currently set up, and no combination of wished-for alternative energy schemes based on so-called "renewables" will allow us to keep running it, either. Meaning, that we'd better start making other arrangements immediately for how we occupy the landscape, how we grow our food, how we move people and things from place to place, and how we reconstruct an economy consistent with these new arrangements.
The longer we put off making these new arrangements, the harder we're going to slam into a wall of reality, and when it occurs a lot of things will shake loose in this country. It will become self-evident that the things we've invested all our wealth in will not retain value -- especially suburban real estate and all the activities related to car dependency, from the interstate highway system to national chain retail. It will also become obvious that we can't base our economy on building more of this stuff.
Our current military adventures in the Middle East, are predicated largely on keeping the old arrangements going. We're in Iraq because we built Dallas, Atlanta, Orlando, Houston, Phoenix, Los Angeles, and Long Island the way we did, and the only way we can hope to keep these organisms going even a little while longer is to keep open our oil supply line to the Persian Gulf. The truth is, these organisms will not survive the oil-scarcer future in the form they're in. The American people need to come to grips with this. No amount of chest-thumping around the globe will change it. In any case, sooner or later we'll exhaust our military and bankrupt ourselves trying to project our influence into these places overseas -- meaning, sooner or later we will withdraw back into our own hemisphere. I wonder if Wolf Blitzer of CNN will ask any of the candidates, what happens then?
A basic rule of reality is that you can't get something for nothing. Sooner or later the financial sector will have to come to grips with this rule, meaning that that debt is not wealth and the revolving reallocation of debt in the form of credit does not amount to wealth creation. The US will arrive at a magic moment when the full force of this reality reasserts itself, and it is likely to make itself manifest in the collapse of the entity most closely associated the idea of wealth: the dollar. Assets vested in the dollar's legitimacy will follow its fate. The implication is that an awful lot of the presumed wealth held by Americans could vanish into thin air. Do any of the candidates for president recognize how this works, or have any idea how much disorder this phase change will send thundering through our sociopolitical infrastructure?
With the election campaign revving up so prematurely, it is very possible that all the candidates now in the arena will exhaust, bankrupt, and even disgrace their campaigns as they desperately pirouette around these painful truths, and that none of them will survive the process with their political legitimacy intact. In the meantime, unsettling events on the outside will intrude on the protective bubble in which the public has taken shelter -- more bloody disturbances around the Middle East, dangerous shenanigans in the financial markets, untoward weather events in vulnerable places.
The premature election campaign, with all its reassuring televised ceremonies of pre-cooked debate and formal posturing, may end up having the opposite of its intended effect. It may expose the more frightening reality that our political system is not up to the challenges before us. And then what will we do?
May 28, 2007
We Want Solutions!
Wherever the environmentally-informed gather these days (i.e., the clusterfuck-aware), a nervous impatience often mounts, and ends up expressing itself as an outcry for "solutions." For example, at the Telluride Mountain Film Festival, where I happened to be this past weekend, along with a couple of hundred other people who spewed airplane exhaust across the stratosphere to get there. This year's twin themes were the Castor-and-Pollux of Clusterfuck Nation, Global Warming and Peak Oil.
Many frightening documentary films and Powerpoint talks were served up in the opening symposium (including ones by Dennis Dimick, the editor of National Geographic, Daniel Nocera of MIT, and yours truly) and, as the morning wore on, the audience grew visibly impatient, until one speaker dropped the word "solutions," and the audience gave out a big whoop of approbation.
It only made me more nervous, because this longing for "solutions," strikes me as a free-floating wish for magical rescue remedies, for techno-fixes that will allow us to make a hassle-free switch from fossil hydrocarbon power to something less likely to destroy the Earth's ecosystems (and human civilization with it). And I think such a wish is, in itself, at the root of our problem -- certainly at the bottom of our incapacity to think clearly about these things.
I said so, of course, which seemed to piss off a substantial number of my fellow festival attendees.
My position on this can be easily misunderstood. I don't want civilization to collapse (I like Mozart and access to root canal). I don't want Homo sapiens to go extinct, or the planet to parboil. I certainly don't believe in doing nothing in the face of this emergency. But I also don't believe we are going to make any hassle-free switch in the way we run things -- or that we should want to. Would the USA be a better place if we could run Wal-Mart and Las Vegas on wind power? I don't think so. Would the public benefit from another hundred years of suburban living -- and an economy based largely on creating ever more of it? All the Prozac in the universe would not avail to offset the diminishing returns of that bullshit.
In my travels, I have noticed a disturbing theme among the educated minority of eco-advocates: they are every bit as dedicated to the status quo (in their own way) as the NASCAR morons and shopping mall developers. The eco-advocates want cars, too, and all the prerogatives (like free parking and country living) that go with them, just like the WalMart shoppers. If this were not so, then why do the eco-advocates cream in their jeans whenever somebody presents a snazzy new vehicle that runs on a fuel other than gasoline? Indeed, why are some of the eco-friendly pouring all their efforts into the invention of such things instead of into walkable communities and the reform of our stupid land-use laws?
I encountered this ethos most strikingly a few years back at Middlebury College in Vermont, where angry biodiesel advocates assailed my lack of enthusiasm for their particular "solution" -- which seemed geared mainly to allow them to continue to drive their dad's old cast-off SUVs to the snowboarding venues of that progressive little state. But the wish to keep running all our cars permeates what little public discussion there is of the global warming / energy crisis issues at all levels. Even the elder statesmen of the eco-movement talk it up incessantly. The first great victory will come when they shut up about it and put their minds to other tasks.
The eco-advocate community is still hooked into the Faustian bargain of technology with little consciousness of its diminishing returns, and to some extent have made themselves unwitting tools of the truly clueless and wicked who run business and politics in our land. With this particular group in Telluride, which was composed heavily of Boomer eco-adventurers (mountain climbers, trekkers, kayakers), the infatuation with ever-cooler adventuring techno-gear extended naturally, it seemed, to their uncritical view of magical techno-fixes aimed at "solving" the climate / oil mess.
And the setting of the festival -- the Rocky Mountain ski resort town of Telluride -- itself induced some eerie moments of reflex nausea as one contemplated the many 10,000 square-foot peeled-log dream palaces built by Hollywood producers, who derive their fortunes by selling violent masturbation fantasies to fourteen-year-olds. One couldn't fail to notice that three-quarters of the storefronts along the little main street were occupied by real estate sales offices.
But I don't want to be doubly or triply misunderstood as appearing to twang on the kind people who invited me there, or to evade the obvious fact that I went (by airplane and shuttle van). I thought it was worth going to carry this one little message: let's stop talking about making better cars and start talking about occupying the landscape differently -- which we're going to have to do anyway.
May 21, 2007
New Urbanists from all over the land -- and as far away as Australia -- converged in Philadelphia this past weekend to sort out their gains and losses for the year against the background of a nation punch drunk on "liquidity" and free-floating dread. The city of Philadelphia looked perkier than anyone could remember -- at least the square mile emanating in a quadrant roughly southeast from William Penn's statue atop city hall to the burnished alleys of 18th century Society Hill. At lunch hour Rittenhouse Square was full of young cubicle critters seeking air and light, and six hours later the bars were doing a brisk business in twelve-dollar martinis.
The Congress for the New Urbanism (CNU) was formed in 1993 by a cadre of revolutionary architects who had decided that enough was enough with a nation bent on committing suicide by strip mall. From the start, their mission was bold, coherent, and heroic: to present a clear alternative to the mindless devouring juggernaut of suburbia.
Also from the start, they were accused of being "elitists," "un-American," "enemies-of-art-and-free-expression," "snooty enablers of white yuppie separatists," "footlings of the Neo-cons," and "sentimental saps" -- all for suggesting that perhaps human beings might benefit from living in places worth caring about.
The New Urbanists became known mostly for the real estate ventures that were produced in their name -- first the iconic "new town" Seaside, Florida, and then scores of other projects based on what they called the Traditional Neighborhood Development (TND). Some of these projects were badly compromised by the zoning boards who ruled on their details. Some were wannabes and co-opted rip-offs. Some, like Vincent Graham's I'On project in Mt. Pleasant, South Carolina, achieved high levels of artistry despite the obstacles thrown up by the mental defectives who opposed them.
The New Urbanists were equally active in the existing cities, leading in the adaptive re-use of industrial ruins, brownfields, and whole districts that had been written off as hopeless beyond the pale. Figures like Mark Nikita and Dorian Moore, who worked in the rough context of downtown Detroit, and Ray Gindroz of Pittsburgh who pioneered the conversion of reviled and decrepit public housing all over the country into places where a human spirit might rediscover itself.
The greatest achievement of the New Urbanists in these years was not the long list of TNDs or the urban interventions that saved whole districts, but in the retrieval of knowledge and principle that had been thrown away by a hapless and craven officialdom of planning -- abetted by the mandarin ideologues who ruled the university architecture schools, and who were dedicated above all to defending the antisocial prerogatives of their jive-narcissism. Despite all that, the New Urbanists worked doggedly to reconstruct a body of culture (i.e. urban design). They processed it in a series of brilliantly clear manuals like the Transect and the Smart Code, and gave everyone from the carpenters to the bankers a lexicon for understanding the difference between plain crap and stuff with a plausible future.
The New Urbanists came on the scene just as the final exuberant phase of the cheap oil fiesta was getting underway -- meaning the climactic phase of American suburban expansion. They positioned themselves as a minority opposition to the "conventional" developers who utterly dominated the landscape. The things that were built under the New Urbanist name represented probably less than two percent of everything built since 1990. The work they did occurred as a valiant swimming against the tide -- or, more specifically, against a huge blast of reeking, toxic entropy.
The final blowout of cheap oil is now ending, and the suburban juggernaut is entering its death throes. It wasn't slain by the New Urbanists, but they will be the last ones standing -- just as the little warm-blooded mammals were the last creatures standing when the dinosaurs expired in the warm Cretaceous mud. The focus of their work will certainly have to change. There will be no more suburban subdivisions (or the accessories and furnishings of them -- the strip malls, Big Box pods, and fried-food out-parcels), and the TND will emerge not as a counterpoint to all that crap, but as the template for a redefined type of village or town scaled to the new realities of available energy.
We will be inhabiting the terrain differently from now on. Whatever intact farmland remains will have to be reserved for feeding ourselves, and the "countryside" that has been regarded as having only scenic or recreational value for so many decades, will have to be both productive and carefully tended by human hands. Our big cities will certainly shrink, contract, and the fortunate ones will redevelop and re-densify at their old cores and around their waterfronts. The part of Philadelphia that we were in last weekend may be about as big as a sustainable city can get -- minus the skyscrapers, which, alas, will be obsolete.
The demographic shift to come will be a shocking reversal of what has been going on since the start of the industrial revolution. The small towns and small cities of America -- the places that have moldered in desolation and squalor for decades -- will be coming back to life, surrounded by an agricultural landscape shaped by human attention.
What we'll need in this process will be the most valuable things that the New Urbanists recovered along the way: the knowledge required to create a human dwelling place with a future. That was really the extent of their ambitions all along. But it was too straightforward for a twisted culture to understand. In a few years, even the mental defectives and the professional jive-narcissists will understand where we've been and where we are going.
May 14, 2007
Rigged to Blow
It's hard to venture around this land and not feel like you are living in something like an obsolete Las Vegas hotel exquisitely rigged for implosion. The massive system that we've poured all our national wealth into, and elaborated to the last limits of refinement over half a century, is poised for failure. The prospect is so dreadful that no legitimate authority in politics, business, the news media, or even those cultural outlands of the arts and religion, can bring themselves to express a plausibly coherent view of what happens next to a living arrangement with no future and an economy of no purpose.
The system I refer to, of course, is the car-crazy infrastructure for everyday life, and all the activities supporting it, that most Americans now living regard as the natural and normal medium for human existence, as salt water is the natural and normal medium for squid. The public brings no critical reflection to being in it, and so its failure will eventually come as a deadly surprise -- as a red tide surprises the denizens of a tropical sea. When it occurs, the public will not be able to escape from their investments in this way of life. Some may feel swindled, but they will not lose their sense of having been entitled to a happier destiny, so the chances for the acting-out of massive political grievance are high.
It's a tragic irony that we got so good at the advertising game the past half-century, because in doing so we rigged a sub-system dedicated to reinforcing all our false entitlements. So when the dreadful moment of recognition comes that we can't possibly continue being a nation of happy motorists shuttling between the strip malls and subdivisions, the bewilderment will be monumental. Nobody will believe that it is happening, or have a clue how we got ourselves into such a fix.
For the moment, America is being subjected to the slow squeeze on gasoline prices, rather than a sudden sharp shock, with the pumps now averaging $3.09 nationwide. But there's a lot tension accumulating in the process. Gasoline prices are going up remorselessly now mainly because of bottlenecks in the refinery sector. Demand has gotten so high -- we are driving so much, regardless of up-or-downticks in measured economic activity, because the way things are laid out we have no choice -- that our existing refineries are operating at over 90 percent capacity (when they are running). This has led to the deferral of a lot of routine maintenance, so the refineries are either running flat-out or they're not running at all.
Most of our oil refineries are more than fifty years old. The metal in their pipes and retort vessels is fatigued. Things break. The companies that sell gasoline, like Exxon-Mobil, realize that they are in a "sunset" industry, so they are not interested in investing any fraction of their currently enormous profits in new refineries (especially when they can use that money to buy back their own stock and jack up the share price). Besides, the public regards oil refineries as obnoxious, and if a new one were even proposed somewhere, an army of NIMBYs would arise and march on the local zoning board to oppose it -- so why bother?
Last week, a reader sent me an elaborate Powerpoint show put together by a Peak Oil "optimist," someone who believes that there are vast recoverable reserves of oil waiting to be be tapped out there -- as opposed to those like myself who don't think new supply will offset declines in the known oil fields of the world. It seemed to me that most of this optimist's case was based on the fantasy that the tar sands of Alberta and the oil sands of the Venezuelan jungle will make up for what we no longer get out of places like Ghawar in Saudi Arabia, Cantarell in Mexico, West Texas, and the other old standbys.
The Alberta tar sands are big, but even the Canadian government does not project them paying out much more than three million barrels a day when they reach maximum production in five or ten years, and the process will probably poison all the groundwater east of the Canadian Rockies. Meanwhile, world demand has reached about 85 million barrels a day. The project in Venezuela I regard as even less likely to ever reach production. Hugo Chavez has just chased out the foreign oil companies who have any technical expertise, but I think the jungle itself would defeat even them, and it will certainly prevent Chavez's lame crew from getting any product out -- he's having technical problems out in the old familiar Maracaibo Basin.
The current sense of stalemate or stasis in Middle East politics the past year is certainly promoting an air of unreality. The civil war in Iraq grinds on no matter what the US police force does there, or what Congress and the White House do here. We bluster about Iran, but we don't do anything about them, and they bluster back at us. The Saudis bust a hundred Islamic revolutionaries every few months and keep their operation rolling. The Holy Land is tense but quiet for now.
Events in geopolitics -- things that happen "above the ground," as they say in oil circles -- seem kind of stuck for the moment. We forget that these things become unstuck rather suddenly, through slippage, or a process like phase change in physics, where conditions persist -- until suddenly they don't. This is pretty much what happens to a fifty-year-old Las Vegas hotel. It stands there out on the Strip year after year, perhaps with decreasing decorum, but it persists until the day comes when somebody throws a switch and the whole edifice comes down, reeking carpets and all.
May 7, 2007
I got a letter last week from a reader complaining bitterly that the stock market hasn't crashed and blaming me for predicting that it would. He didn't say, but I hope he hadn't been out there on a shorting spree. In case any of you haven't noticed, 2007 is not over yet.
The markets have been on an extraordinary spring run. The Dow finished 23 out of the last 26 days on the upside -- some of them pretty way on the upside. This is the biggest US stock market up-streak since a 19 for 21 streak in July of 1929, prior to the October crash. Bill Fleckenstein points out a similar run on the Tokyo exchange -- 32 upside trading days out of 38 -- just prior to its 1989 tanking.
While this kind of behavior seems ominous, I'm not claiming it necessarily has predictive value. One can say that the financial markets per se are running in an impressive state of structural distortion and imbalance and that systems way out of balance do not stay that way forever. But I risk more opprobrium by stating the obvious.
I think the persistence of this gross imbalance can be accounted for in large part by the current global energy situation. The world is at peak energy, peak oil especially, and the world runs on oil. Peak is peak. The most. There are about 84 million barrels of oil a day flowing around the industrial economies of the world. It is running a lot of activity.
Now, I happen to think that oil production probably peaked about a year ago, but we are still so close to it that the net available energy remains immense. Even if 2007 averages out to 83.5 million barrels a day instead of 84 million, it will still seem like a lot. Markets may be dumber than we think. All they see is a vast amount of cheap energy for manufacturing plastic salad shooters, for powering tourist jet charters to Cancun, for running WalMart, Walt Disney World, and Taco Bell. All that energy is here right now.
Among the many tragic elements in the human condition is this tendency toward short-term thinking, the inability to imagine how our arrangements will work in a time that is not right now.
Interestingly, the main effect of post-peak oil on markets and economies is that it will produce shocking instabilities in complex systems dependent not just on the energy itself, but on the expectation for continuity of the energy. Financial markets are especially sensitive because they operate on sheer expectations. The Dow Jones doesn't manufacture salad shooters, or haul tourists to the Mexican beaches, or build suburban houses. It just relays a dumb signal that says "we expect more" and investors respond. The trouble will start when the signal changes to "we don't expect more." That moment will be when the recognition of peak oil galvanizes the public's attention. It will manifest as a simple societal binary switching mechanism. When that happens, the markets will exhibit the dumb herd behavior that they are famous for.
Of course, I have argued previously that the stupendous run-ups of market indexes themselves represent a kind of instability (those distortions and imbalances), as do also the supernatural flows of "liquidity" -- notional money extended to investors for harvesting future notional profits -- and I would stick to that observation. After all, if the world is "high" on oil -- and I would argue that it is zonked out of its mind -- then it would naturally spring way up off the diving board before swan-diving into the empty pool below.
Me, I'm keeping my eye on things like the production figures coming out of Mexico, the North Sea, and the Kingdom of Saudi Arabia. They're all sliding down. Mexico is especially interesting because it is our Number 3 source of oil imports and its production is crashing so hard that a couple of years from now it may not be able to send us a single drop of oil. What do you think of that? Maybe the Walton family will buy Iowa so they can keep WalMart running on ethanol.
Meanwhile, US oil refineries are running above 90 percent production capacity to keep up with the gasoline demand for Happy Motoring. The stress on these complex operations is unprecedented. It gives them no slack time for routine repairs. The results are liable to interesting, too, between the Fourth of July and Labor Day.
April 30, 2007
At the urging of an editor, I took an anecdote out of my 1993 book, The Geography of Nowhere. It concerned my visit to interview the husband-and-wife "star" architects (starchitects, we now say) Robert Venturi and Denise Scott-Brown. I was in the early information-gathering stage of the book and was unsure which authorities in this-our-nation-under-God might help me understand why America had become such a nightmarish panorama of highway strips and cartoon housing subdivisions. I really wanted to know.
I knew a tiny bit about Venturi and Scott Brown. They had put out a trendy monograph in 1972 titled Learning From Las Vegas that had earned them much esteem on the campuses as architectural metaphysicians. It purported to inform America that the highway strip was here to stay, that it was the new Main Street USA, they said, and that it was pretty much okay. Venturi, solo, was the author of previous book (Complexity and Contradiction) that pretended to thumb its nose at Modernist orthodoxy. So, I figured that a talk with these birds might, at least, begin to shed some light on my subject.
It was a very bad day in the Venturi / Scott Brown office in Philadelphia when I showed up, representing The New York Times Sunday Magazine (for whom I was also cooking up an article along these lines). Not bad because of me, necessarily, but because a bunch of "suits" from the Walt Disney Corporation had dropped in earlier that morning unannounced ( ! ) -- one of the little tricks that Disney liked to pull on its subcontractors. Some months earlier, Venturi and Scott Brown's office had been hired to design the grand monumental entrance boulevard to Euro-Disney, and now the Seven Dwarfs in neckties were in the office all of a sudden to see how the work was coming. Oy vey.
So it was hardly me that they were disturbed about, really, but I had complicated matters by showing up, and I suppose they felt they had to take a writer from the NY Times Magazine seriously because they liked getting into its pages -- being very shrewd self-publicists. The upshot was that Venturi and Scott Brown were running split shifts between me in a conference room downstairs, and the Seven Dwarfs up on the production floor of the 80-person architectural office. And I was kind of maundering through a laundry list of questions that I'd cobbled together to get their opinion on how come America was so, well, so fucking ugly, to put it as unceremoniously as possible. Venturi, a teddy-bear of a man, would kind of blink at me and try to explain that architecture was no longer about heroic, self-aggrandizing monuments but about the tastes and values of the masses. . . and then he'd roll his eyes and scoot out of the room and go try to mollify the Seven Dwarfs. Scott Brown would then come in and attempt to entertain my pain-in-the-ass questions, but her irritation mounted visibly as the minutes ticked by, and finally she exploded at me, hollering, "If this country isn't tidy enough for you, move to Switzerland!"
Incidentally, that's not the part of the anecdote that the editor considered "unkind." I will save that part for some other blog or memoir. But it brings me to my theme for today, which is how I traveled yesterday to Saratoga's neighboring town to south, Ballston Spa (the county seat), one of a hundred decrepitating little Main Street burgs in upstate New York, and how it seemed to be visibly rotting into the ground to an extent that even I, after decades of laborious landscape pathology studies, found rather shocking.
Spring comes late up here. I was down in Georgia back in February and the daffodils there were already gone by, for goodness sake. But up here, they had barely sprouted as of the last week in April. The landscape (and townscape) had a horrible sort of laid bare look -- like an old person in the intensive care unit getting a sponge bath in bed. The ground itself looked scrofulous, with vast quantities of plastic flotsam littering the roadside swales, and tatters of windblown plastic supermarket bags hanging off the sumac bushes, and no foliage yet to hide any of it.
But it was the buildings that really got me. You have to wonder: have Americans forgotten how to build dignified houses, or are we simply not dignified people anymore? Virtually every building put up after 1950 looked terrible and many of them were rotting into the ground. Most of them are little more than elaborate packing crates with a few doo-dads screwed on -- exactly the kind of buildings, by the way, that Venturi and Scott Brown celebrated in their writings. They called them "decorated sheds," the vernacular expression of the mainstream American soul.
The design failures of these things might be attributed to a loss of knowledge and a lack of attention to details, but I think a deeper explanation has to do with the diminishing returns of technology. We've never had more awesome power tools for workers in the building trades. We have compound miter saws, electric spline joiners, laser-guided tape measures, and many other nifty innovations, and we've never seen, in the aggregate, worse work done by so many carpenters. For most of them, apparently, getting a plain one-by-four door-surround to meet at a 45-degree miter without a quarter-inch gap is asking too much. In other words, we now have amazing tools and no skill. What you wonder is whether the latter is a function of the former. Is the work so bad because we expect the tools to have all the skill?
Another issue is the choice of materials. As you march down the decades from the 1950s, the materials-of-choice for finishing the exterior are more and more materials not found in nature. Aluminum siding was a big favorite for a while -- and you can always spot it because of the dents below the three-foot high level, where the lawnmower has shot stones at the panels for decades. After the 1980s, there is a distinct acceleration in the use of vinyl for practically everything. The vinyl clapboards, soffits, window-surrounds, et cetera, are often little more than stapled onto the house. And naturally they begin to sag and pull apart instantly. After twenty-odd years of that you end up with a house that looks like a birthday present wrapped by a five-year-old.
Another thing you get is a fantastic accumulation of automobile exhaust in the zone starting about four feet under the eves. The pathetic slobs who live in these buildings never wash this patina of grime off their houses -- because the vinyl cladding was sold to them as being "maintenance-free."
At this time of year, before the shrubs leaf out, you can see that each house is surrounded by an asteroid belt of discarded effluvia -- plastic children's toys, broken appliances, odds-and-ends of sporting equipment, all oxidizing, polymerizing, and delaminating under the remorseless ultraviolet light. Likewise, the things that have come to be attached to the houses -- the entrance porticoes and decks built out of chemicalized lumber (which has not been painted in twenty-seven years) -- these things are also, finally, coming apart, torquing out of plumb, disintegrating, in short yielding to all the disordering forces of entropy.
Paradoxically, the buildings which tend to be in better condition are the historic ones, the ones built before modular-snap-together materials existed, the ones made of materials found in nature, the ones built with non-electric hand tools. They manage to resist the natural ravages of time. Their roofs were designed to bear snow loads and to shed water in a way that protected the rest of the structure. The materials never promised to be maintenance-free, so the owners and caretakers naturally perform the required routine repairs. They stand there as reminders that our notion of progress-through-technology is a slippery thing.
Poor little Ballston Spa. The whole town is rotting into the ground and the folks who live there are either too poor, too addled on methadrine, too busy buying plasma TVs, too greedy strip-mining their buildings for Section-8 rentals, or too conditioned by failure and disappointment to take care of their property. It's a self-reinforcing feedback loop, of course, and it's happening all over the nation. We've succeeded in building too many things that aren't worth caring about, and the end result is that we now live in a land where nothing is taken care of.
April 23, 2007
Whenever somebody complains about "the lies that George Bush & Co. told to get us into the Iraq war" (as Frank Rich did in The New York Times on Sunday), I wonder how those lies compare to the lies that the American public tells itself every day -- for example, that we could run America without oil from the Middle East, or that hybrid cars will save Happy Motoring, or that we can have an economy without producing anything of value.
Meanwhile, the Dow Jones index went up over a hundred points the same day that 32 people were massacred on a university campus. And bear in mind that the massacre did not occur late in the day but literally around the same time that the New York Stock Exchange rang its opening bell -- so that as the body counts mounted through mid-day, the stock markets only went higher! They must have liked what they saw. Then, the rest of the week, while the cable news Mommy-Daddies went through the familiar rituals of bewildered hand-wringing, and NBC released the trove of farewell videos sent in by shooter Seung-Hui Cho between killings, the Dow piled on another 250 points to close at an all-time record high just under 13,000.
Could the financial markets be more detached from reality, from life on the ground (or in a free-fire-zone classroom) in this nation?
Doug Noland over at Prudent Bear.com is right: we've entered a euphoric phase of financial arbitrage capitalism with extreme Ponzi overtones, a pyramid scheme of revolving credit rackets and percentage spread plays completely abstracted from any reality of fruitful activity. The reason we don't even call "money" by its former name anymore is precisely because we realize at some semi-conscious level that "liquidity" is not really money. Liquidity is a flow of hallucinated surplus wealth. As long as it flows in one direction, into financial markets, valve-keepers along the pipeline, like Goldman Sachs, Citibank, or the hedge funds, can siphon off billions of buckets of liquidity. The trouble will come when the flow stops -- or reverses! That will be the point where we will rediscover that liquidity really is different from money, and if we are really unlucky we'll discover that our money (the US dollar) is actually different from real wealth.
Noland and others recognize the severe distortions in the finance sector, and they are surely correct to flag the implied dangers. But even these clear-eyed observers survey the disturbing finance scene without factoring the global energy situation. In a nutshell: world oil production seems to have peaked about 10 months ago. Being just past peak, there is still a huge amount of oil going into world economies. But being just past peak we are now seeing how complex systems proceed toward instability and breakdown when the underlying energy flow turns toward contraction.
The situation in finance is particularly sensitive and acute because an overall contraction in available energy means the end of industrial expansion (a.k.a. "growth") at "normal" rates of three to seven percent annually. More to the point, it means that certificates, contracts, deals, plays, and rackets pegged to the expectation of growth will lose their legitimacy. Meaning, stocks, bonds, collateralized debt obligations, hedges -- anything that represents the hope and expectation for more-of-anything -- will no longer be understood to represent real value.
The current euphoric hysteria should therefore be viewed as a form of disorder in its own right. The players in the markets are making their moves based on misunderstood signals. They think the world is awash in energy and prosperity. They believe Cambridge Energy Research Associates (CERA) and the Chairman of the Federal Reserve. They believe that the mortgage fiasco and the associated imploding housing bubble are just a couple of temporary zits on the handsome WASPy face that Wall Street presents to the world. In the background, though, feedback loops are aligning to rock the systems we depend on for daily life in the real world. Capital will become unavailable. Food will grow scarce. Trade will be interrupted. Mobility will be constrained. And an awful lot of pissed-off people will be poised to fight over the table scraps of industrial civilization.
April 16, 2007
Blowing Green Smoke
Tom Friedman, celebrated New York Times columnist and author of The World is Flat, riffed on (or around) the issues of climate change and energy in that newspaper's Sunday Magazine this week ("The Power of Green"), and managed, in the process, to misunderstand just about every implication these conjoined problems present. Friedman's specious thinking is symptomatic of exactly what is wrong with our public discussion of these matters generally, and their presentation in mainstream media in particular.
I'm fond of saying that if America could harness the power it wastes blowing smoke up its own ass, we could magically escape our energy-and-climate-change predicament. I say this repeatedly to counter the increasing volume of lies we tell ourselves in order to maintain the illusion that we can continue living the way we do. Like so many other commentators suffering from cranial-rectosis, Friedman believes that we can keep on running our Happy Motoring utopia if we just switch fuels.
Friedman gives no indication that he understands the fundamentals of the global oil situation. He writes:
People change when they have to -- not when we tell them -- and falling oil prices make them have to. That is why if we are looking for a Plan B for Iraq -- a way of pressing for political reform in the Middle East without going to war again -- there is no better tool than bringing down the price of oil.
This is a fascinating statement. It's predicated on the idea that the US can achieve "energy independence," which is itself predicated on the further idea that we can accomplish this by switching out gasoline for ethanol. This is such an elementary error in thinking that it would be funny if it wasn't the lead story in the flagship of the mainstream media. As a Pennsylvania farmer put it to me in February: "It looks like we're going to burn up the last remaining six inches of Midwest topsoil in our gas-tanks." Friedman's statement also ignores the facts that running cars on ethanol would make no material difference in the amount of carbon dioxide released into the atmosphere, or that ethanol is 20 percent less efficient than gasoline, meaning we would have to produce and use that much more of the stuff just to stay where we are.
Where climate change is concerned, this is a variation of the "Red Queen syndrome" (from Alice in Wonderland) in which one has to run faster and faster to stay in place. It also fails to take into account the tragic ramifications of setting up competition between food for humans and crops for motor fuels just at the point when a growing scarcity of oil-and-gas-based soil "inputs" (as well increasing climate problems in the grain belt) will drastically lower American crop yields. The symptoms of this unintended consequence have already begun to present themselves -- for instance, January's food riots in Mexico, which resulted from Mexican corn being sold to American ethanol distillers rather than Mexican cornmeal millers, who couldn't match their bids.
Friedman goes on to tout Wal-Mart's mendacious campaign to "green" up its operations by, among other things, improving the mileage of its truck fleet from 6-mpg to 12-mpg. He writes:
Take Wal-Mart. The world's biggest retailer woke up several years ago, its CEO Lee Scott told me, and realized with regard to the environment its customers "had higher expectations for us than we had for ourselves." So Scott hired a sustainability expert, Jib Ellison, to tutor his company. The first lesson Ellison preached was that going green was a whole new way for Wal-Mart to cut costs and drive its profits.
The smoke Mr. Scott blew up Friedman's ass is leaking out of the columnist's pie-hole here. I've been to dozens of permitting battles over Wal-Mart in the planning boards of America, writing on suburban sprawl, and I can assure you that the the pro Wal-Mart factions in these fights uniformly couldn't give a fuck about anything except saving five bucks on a plastic salad shooter ("we want bargain shopping!!!"). Not to put too fine a point on it, but these are precisely the members of the American public who sold their own local economies down the river, who led their towns into destitution, and who believe with all their hearts that it is possible to get something for nothing (which is why this large cohort of citizens spends so much of its meager income on lottery tickets, trips to Las Vegas, and gets suckered into ruinous "miracle" mortgages).
Friedman's invocation of Wal-Mart here offers another layer of misunderstanding from the work he is best-known for, his best-selling book, The World is Flat, which asserts that globalism is now a permanent feature of the human condition. I demur from this view. I think we will discover (probably painfully) that globalism was a set of transient economic relations made possible by a half century of cheap oil and relative peace between the great powers, and that enterprises that rely on these transient mechanisms -- such Wal-Mart, with its 12,000-mile merchandise supply chain to China, and its "warehouse on wheels" of tractor-trailor trucks circulating incessantly on America's interstate highways -- will be on their knees in a few years as we enter the export crisis phase of post-peak terminal oil depletion and the great powers of the world act with increasing desperation to compete over the remaining supplies.
For someone operating at the top of journalism's food chain, Friedman is astoundingly ignorant. He asserts at another point in this article that climate change will require us to "[r]eplace 1,400 large coal-fired plants with gas-fired plants." Earth to Tom: America's natural gas supply is arguably more tenuous and problematic than its oil supply. To put it bluntly, over the next five years, we will fall off a cliff with natural gas. Apparently Friedman hasn't heard. Nor are we going to make up for this loss by importing liquid natural gas from distant lands. Nor would it make any sense to burn expensive imported methane gas to run power generation turbines. So, you see, there is no chance whatsoever that we will do what Friedman suggests. In fact, the 17 percent of all electric power that we currently get from gas will be lost to us in the near future, which could leave us with Third World style electric service. (Incidentally, the terminal decline of our natural gas supply also means we will lose control of the crucial resource used for making nitrogenous fertilizers, with self-evident further implications for our crop yields and our ability to feed ourselves or manufacture alternative motor fuels.)
Friedman's equations regarding continued industrial expansion in China and India are based on the assumption that they somehow will be immune to the global energy crisis and to the ecological catastrophes entailed by climate change. More likely: both nations will be overwhelmed by these things and the only question will be how desperate their political convulsions will be in response (or how rapidly they devolve back to twelfth century living standards).
At the heart of Friedman's thesis is his notion that the current incarnation of "the American Dream" is a good thing and can continue. By American Dream he apparently means membership in the Happy Motoring Utopia, with all its accessories, furnishings, and usufructs -- the system broadly known as suburban sprawl. Here's the truth, Tom: suburban sprawl is a living arrangement with no future. It was a tragic mistake to squander the post World War Two wealth of our society to build it. It will come to represent an immense liability for this country's future, as it loses both monetary and practical value. And we will have to make comprehensive arrangements for living differently, if we want to continue this project of American civilization.
A telling omission in this article, by the way, is any mention of public transit. It's especially significant because the one thing we really could do right away to reduce our oil consumption would be to get passenger rail going again in this country. But this blind spot in Friedman's vision is only the flip side to his stupid belief that we can just keep all the cars running by other means.
Tom Friedman has no idea what the implications are of all these things. His fatuous advice to the nation -- served up by a confused and cowardly Times editorial staff -- will only spur more delusional thinking, which is, of course, the last thing we need. The showcasing of Friedman's article may represent an inflection point in the fate of the mainstream media -- the moment when it demonstrates most clearly its failure to make current events comprehensible, the moment when its lost legitimacy is finally recognized. That legitimacy has been passing to the Internet, where commentators have no advertisers to pander to and no need to defend any status quo.
April 9, 2007
Last week, I was in Illinois walking the majestic Beaux Arts-vintage main quad of the State U in Champaign-Urbana. The flowering trees were in full bloom, the grass was green and speckled with dandelions, and the leaves on the privet hedges were unfurling. Then I came home to upstate New York where everything is brown, gray, and dead-looking, and humps of snow still remain on the north side of every building. I called the heating oil man to get 100 gallons because our tank was close to running on fumes and the daily high temperature lingered in the 30s.
This is the flip side of the abnormally warm early winter we had. The jet stream, for whatever reason, has pulled a flag of frigid air over the northeast US, the region which proportionately uses the most oil for home heating, as opposed to natural gas. The weather forecast says they see frigid days and nights as far ahead as they dare to look.
Gasoline use typically shoots up around this time of year as spring breakers hit the road. Meanwhile, US Department of Energy's EIA reports that US refinery inputs are115,000-barrels-a-day short of their 15-million-barrel-a-day "threshold" (which I take to mean their required capacity to keep things humming), while imported gasoline supplies (we get some of that, too) also fell short. The EIA's monthly report concludes: "...consequently, as gasoline demand began to grow in earnest in April, gasoline supply has failed to keep pace, resulting in continued significant stock declines and sharp upward pressure on gasoline prices in recent weeks." Gasoline prices are now 11.9 cents per gallon higher than at this time last year.
The EIA has to be more reality-based about current activity than their future projections, because the current import-export and refinery figures are out there for other people and other data-gathering organizations to see. The EIA's future projections are a joke. They are based on the fantasy that everything will be okay despite what we see happening now. The EIA projects that all the world's oil producers will increase their oil production hugely by 2030. They see Saudi Arabia shooting up to 17.1 million barrels a day when, in fact, Saudi production fell 7 percent just over the past year alone to 8.4 mm/b/d. They see Mexico shooting way up, despite the announcement last year by Pemex that the Cantarell field (60 percent of Mexico's total production) is crashing at a minimum rate of 15 percent a year. They see Russia zooming way up, despite the fact that Russia is probably past the 70 percent mark of its original total reserves. If you go to this EIA chart, you'll see practically everybody's production shooting way up in the decades ahead, even the US, which, in reality, has seen nothing but steady annual decline for more than thirty years (we produce half now of what we did in 1970).
The EIA is a perfect reflection of the public it serves. It appears to conduct daily business in a responsible way while it resolutely refuses to face the obvious realities of the future. My own town is a good example of non-reality-based planning. Our mayor announced last week that we are going to construct a 1500-space parking structure to go along with an expansion of our minor-league convention center, all based on money raised through bonds. I can't imagine a worse investment. The last thing this town will see in the years ahead is an increase in motor-oriented tourism. And the last thing that business organizations will spend their money on in a future of energy scarcity and diminished revenues will be trade shows.
The price of gasoline seems to be the only signal that the American public receives on its collective walkie-talkie. It looks to me as though gasoline prices will head close to the $4-a-gallon range in some parts of the country this summer. When that happens, the US government, as represented by the DOE's reporting agency (EIA) will not have a coherent story for the public. I imagine as this occurs, the new Democratic-controlled congress will call for hearings to investigate US oil companies. They'll haul in the executives from Exxon-Mobil and the rest of the bunch and threaten them with a punishing windfall profits tax. I wonder if the oil company chieftains will tell the politicians the truth: that peak oil is for real and it's here.
April 2, 2007
In the Zone
The fiasco in real estate and mortgage lending seems finally to be breaking through the reality shield of the mainstream media. Last week, for example, NPR's nightly Marketplace show actually ran a segment saying that the production homebuilders were choking on unsold houses and that (as if NPR had just discovered this) the mortgage industry was rife with irregularities in lending standards! And that this seems to have led to a lot of mischief! And that it may actually have repercussions throughout the financial sector and maybe even the economy in general! Golly!
It's been a long slog for the dullards at NPR, and elsewhere in the mainstream media.
Meanwhile, also last week, the General Accounting Office came out with a report last week that acknowledges some problems ahead on the world energy scene -- oil in particular -- with possible adverse implications for the US. It's the first time that any responsible party in the executive branch has acknowledged the situation, but the tenor of the report was -- how shall I say -- fucking unbelievably stupid and craven -- insofar as it suggested global oil could top out somewhere around the year 2030 (possibly sooner!). The poor grinds in the GAO didn't want to stick their necks out too far on that one.
Independent researchers studying the global oil situation -- including retired geologists for major oil companies -- have established a pretty firm consensus that we are already in the zone of the global oil production peak -- meaning that whether we are just past, passing now, or passing imminently, the effects are already thundering through the complex systems we depend on to maintain advanced industrial societies. For instance, the crashing of Mexico's Cantarell oil field (60 percent of Mexico's production) means that inside of five years the US will receive no more imports from what has been its third leading source. Being in the zone means that the world's oil exporters in the aggregate will see their exports drop seven to eight percent this year -- because nations like Saudi Arabia, Iran, Venezuela, and even Norway are using more of their own oil and have less to send out. Being in the zone means that new pricing arrangements will be made, taking the power away from the spot futures markets in New York and London, and shifting that power to long-term deals made by nationalized producers like Russia and Iran, who may decide to embargo consuming nations who don't dance to their tune. Being in the zone means that people in poorer nations will starve because so much of the corn grown in North America will go to ethanol distilleries instead of the dirt-floor kitchens in the Third World.
The more interesting point in all this, for the moment, is that the media has still not put together the collapse of the housing bubble and the permanent oil crisis. These events will be happening simultaneously. The housing industry, so-called, will never recover because the oil crisis spells the end of the suburban build out. The cycle is over. The big production homebuilders will go down and never come back. We won't need any more retail, either. We won't be building anymore WalMarts and Target stores, and the thousands now running will die off just as the giant Baluchitherium of the Asian steppes crapped out in the early Miocene epoch.
The end of the suburban build-out will be a stupendous trauma for the United States because, unfortunately, we have made it the basis of our economy for a generation, as well as our living arrangement. Not only will incomes and livelihoods be lost on the grand scale, and never come back, but, as the global oil predicament deepens, the existing fabric of our vast suburbs will become increasingly useless and worthless. The people stuck in them will lose whatever wealth they have accumulated and our arrangements for daily life will become increasingly nightmarish.
This is the part of the story that the mainstream media still can't put together. Peak oil and the housing bust are a mutually-reinforcing clusterfuck.
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