We have been treated to the first sharp oil shock and that popped the sagging credit balloon. The second shock is inevitable although it can be postponed possibly until the first major field fails. We are past the peak and are waiting for the rapid decline that is inevitable.
Until we are able to begin to build out oil’s replacement, credit expansion must be hesitant. The reason is simple. When you evaluate a loan, you will now factor in the impact of $145 oil.
When you lend a million dollars to the local pig farm, you ask how the loan is going to fare if oil is $145. We already know the answer. Everyone is trying to recapture loses while oil is presently around $40.
Read my lips. The party has been halted for a time out to allow us to get our energy act together.
If the solution is EEStor based electric cars, then Kunsler’s concerns about suburbia are misplaced. If the solution is truly solar, then there is a massive job creation program cutting loose that must surely employ several millions directly in the build out. The energy crisis is so large that every technology able to meet a price point equivalent of $100 per barrel will be riding on government guarantees until the problem is fully solved.
Oil as a solution is contracting now and we must run full out just to stay even. July of 2008 was the first shot in that war for modern economic survival and it rang as loud as the shot at fort Sumter.
Obama must organize a response to this threat as soon as possible. The answers are there in my blog. But we must lead the charge because we are on the oil horse and it is beginning to buck. We have only two choices and the worst by far is to let nature run its course. You did not like round one. The next round will be a lock on $100 oil and ferocious rationing been screamed for. All the cars will be forcibly parked. It is coming anyway because we cannot add fresh supply fast enough. Then the real declines will hit.
Freeing up all the alternatives with price guarantees is a good start. Providing guarantees for a national power corridor is necessary. The moment electric cars are really feasible the demand for power on demand will sky rocket. That could be as early as next year if EEStor is right.
The big megawatts are just a matter of building plants already ready to be built. Wind, solar and geothermal are surely the most stable solutions with no fuel pricing vulnerabilities whatsoever. All these can be financed with debt instruments that will get paid of.
This article by jim kunsler
Hope and Fear
Tomorrow at noon, Barack Obama steps into the shoes of Lincoln, FDR, Millard Fillmore and forty other predecessors -- this time as the wished-for Mr. Fix-it of a nation run into a ditch. Surely over the months of transition, someone with a clear head and a fact-laden portfolio has clued-in the new President about the reality-based state-of-the-Union -- as opposed, say, to the Las Vegas version, where Santa Clause presides over a whoredom of something-for-nothing economics, and all behaviors are equally okay, and consequence has been sliced-and-diced out of the game. . . where, in the immortal words of Milan Kundera, anything goes and nothing matters.
Mr. Obama deserves credit for a lot of things, but perhaps most amazingly his ability to see "hope" in a public so demoralized by their own bad choices that the USA scene has devolved to a non-stop Special Olympics of everyday life, where absolutely everybody is debilitated, deluded, challenged, or needs a leg up, or an extra buck, or a pallet on the floor, or a gastric bypass, or a week in detox, or a head-start, or a fourth strike, or a $150-billion bailout. There's a lot of raw material from sea to shining sea, admittedly, but how do you re-shape it into a population guided by a sense of earnest purpose, with reality-based expectations, with habits of delayed gratification and impulse control, and a sense of their own history? That will be quite a trick. Many of us -- myself included -- will be pulling for Barack. Maybe the power of his rhetoric and his sheer buff physical presence can whip this republic of overfed clowns into shape.
He inherits a government of superficially gleaming marble edifices -- all gloriously on view tomorrow -- but full of broken machinery within, infested with weevils, termites, and rats. The USA is functionally bankrupt. We have no money. The pixel "money" being emailed over to the insolvent banks has no basis in reality beyond the quiver in Ben Bernanke's voice as he announces each new injection. Yet all reports so far indicate that President Obama is bent on continuing the process one way or another.
Mr. Obama's first task taking stage in the lonely Oval Office should be to get right with his own credo of "change," meaning he'll have to persuade the broad American public that the "change" required to salvage this society runs much deeper, colder, and thicker than they'd imagine in their initial transports over hallelujah-Bush-is-Gone. Many of the familiar touchstones of the recent American experience have got to go.
Say goodbye to the "consumer society." We're done with that. No more fast money and no more credit. The next stop is "yard-sale nation," in which all the plastic crapola accumulated over the past fifty years is sorted out for residual value and, if still working, sold for a fraction of its original sticker price. This includes everything from Humvees to Hello Kitty charm bracelets.
It will be a very salutary thing if we stop even referring to ourselves as "consumers." This degrading moniker, used for decades unthinkingly by everyone from The New York Times Nobel Prize pundits to the Econ 101 section men of the land-grant diploma mills has been such a drag on our collective development that it has extinguished the last latent flickers of duty, obligation, and responsibility for the greater good in a republic of broken communities shattered by WalMarts.
The government will not have to do a thing to bring down the chain-stores. History and inertia is already on that case, with the easy credit racket terminated and new frictions arising over global trade, and even Peak Oil waiting to work its hoodoo behind the scrim of deceptively temporarily low pump prices. The larger question for President Obama is: how can we collectively promote the reconstruction of Main Street, including all the fine-grained layers of retail and wholesale trade. High tech "solutions" are not likely to avail in this.
In fact, techno-grandiosity and techno-triumphalism must be be sedulously monitored and guarded-against. They jointly amount to the great mass psychosis of our time and culture. This array of traps -- from proposed flying cars to "renewable" motor fuels -- is the ultimate Faustian "bargain." It will be at the heart of any campaign to sustain the unsustainable, sucking us ever more deeply into the diminishing returns of over-investments in complexity. Hence, the last thing this nation needs now is a stimulus plan aimed at the development of non-gasoline-powered automobiles -- married with extensive rehabilitation of the highway system. What I incessantly refer to as the Happy Motoring fiesta is drawing to a close as we have known it, whether we like it or not. Cars will be around for a while, of course, but as an increasingly elite activity. The owners of cars will be increasingly beset by grievance and resentment on the part of those foreclosed from the Happy Motoring life -- and it could easily degenerate to vandalism and violence, since the "right" to endless motoring was surreptitiously made an entitlement somewhere around 1957.
The "change" we face in agriculture dwarfs even the death throes of Happy Motoring (and is not unrelated to it either). A lot of people are likely to starve in America if we don't get our act together pronto in terms of how we produce the food we eat. Petro-agribusiness faces a set of disturbances that are certain to induce food shortages. Again, the Peak Oil specter looms in the background, for soil "inputs" and diesel power to run that system. But all of a sudden even that problem appears a lesser danger than the gross failure of capital finance now underway -- and petro-agriculture's chief external input is credit. Credit may be in extremely short supply this year, and hence crops may be in short supply as we turn the corner into spring and summer. Just as in the case of WalMart versus Main Street, the reform of farming in America is one of those "changes" much larger than most of us imagine. I'd go so far to say that a large proportion of young people now in college will find themselves not working in office cubicles, but in some way or other in farming or the "value-added" activities connected to it.
I don't see how America can confront the "change" represented by the stark fact that suburbia-is-toast. It is the sorest spot of all in the corpus of a culture beset by disease and debility. The salient manifestation of suburbia's demise is the remorseless drop of housing values in the places most representative of that development pattern. The worst thing the Obama team could do about this would be to attempt to prevent the fall of inflated house prices. Their real value needs to be clearly established before a picture emerges of which places have a plausible future, and which places are destined to be mere ruins or salvage yards.
Americans will have to live somewhere, of course, but the terrain of North America faces a very comprehensive reformation. The biggest cities will contract; the small cities and small towns will be reactivated, the agricultural landscape will be inhabited differently, and the suburbs will undergo an agonizing decades-long work-out of bad debt and true asset re-valuation. Since the loss of so much vested "wealth" is implied by the crash of suburbia, this may be a source of revolutionary political violence moving deeper into the Obama administration.
There's been plenty of buzz in the blogosphere about the imminent failure of the US "social safety net," including especially the social security program. Retirees are the biggest block of voters. They're not liable to foment riots -- that is best left to the youthful high-testosterone cohort -- but the older folks -- with Baby Boomers now coming aboard -- could be so distressed by the loss of their presumed entitlements that they will elect any maniac promising to bring back something that looked like the 1980s. We haven't begun to hear their war cries, and I hope they do not beat a path straight into some sort of crypto corporate fascism -- as, finally, every last failing scrap of American life is nationalized.
Some natural processes hide in the thickets ahead. A hyper-inflation could take this country in any weird and unappetizing direction, from scapegoating and persecution to a new kind of corporate fascism. But I'm inclined to see our tribulations governed more by weakness in high places than by real power. In a world of declining capital and depleting energy resources, the key to any successful venture will be smaller scale. I'm not convinced that any emergency could make the US government more effective at getting anything done. Our hopes really ought to be vested locally, since that is where the most effective action is likely to be in the years just ahead.