Change We’ll Get: Oil, Money and Strife
In the twilight of the Bush days, in the twilight of the twilight season, a consensus has formed that we are headed into a long, dark passage leading we know not where. Even CNBC’s Lawrence Kudlow has been reduced to searching for stray “mustard seeds” of hope on hands and knees in a bleak and tortured financial landscape. Half the enterprises in the land are lined up for some kind of relief bailout and a blizzard of pink slips has cut economic visibility to zero.
The broad American public voted for “change” but they thought that meant a “changing of the guard.” Out with the feckless Bush; in with the charismatic Obama… and may this American life now continue just as it ever was. The change actually coming will be much more than they bargained for, namely our transition from a wealthy society to a hardship society. The sharp break is a product of our years-long failure to reckon with the energy realities of our time. We’re still confused about that, but it’s hard, otherwise, to ignore the massive disappearance of capital, asset values, livelihoods, domiciles, comforts, and necessities.
The price of oil is suddenly down to an astounding $40-odd per barrel. Those of us studying the Peak Oil story have said that the “bumpy plateau” years of peak production would be expressed in tremendous price volatility, and for exactly the reasons now evident — that the high-price phase would mangle advanced economies, that they would fall back in paralysis, then respond anew to oil price collapses by straggling up again, only to be crushed again when a resumption in demand for oil drove the price back up.
What was not so generally anticipated was the wholesale destruction of global finance in the first phase of this period. This has now occurred so comprehensively that we know the banking business will never be the same again. It has also accelerated other plot-lines in the story. One affects the global oil industry itself: a lack of capital to go forward with the new oil projects that were designed to mitigate the present depletions in old oil fields. The result of this quandary is as likely to be oil shortages in 2009 as much as an extremely sharp snap-back in oil prices. The oil markets themselves are changing in the face of financial disruption. Between pirates lurking off the Horn of Africa, and a shortage in letters-of-credit that enable the shipping of anything for delivery between nations, the allocation system is impaired. This affects poorer nations the most, and when they don’t get their oil shipments, conditions in these nations get worse. People lose incomes. Ethnic strife ramps up. All this will make it harder to move oil from the places where it is produced to the importing countries.
So much artificially-generated pixel “money” is being pumped into the system now that it will eventually overtake the quantity of capital currently vanishing in the form of exposed securities swindles, unwinding bad debt, and imploded worthless counter-party contracts. The pixel money will express itself as super or hyper inflation, lagging from 6 to 18 months from the time it was actually introduced in the form of bailouts. For the moment, money is moving into the presumed safety of US Treasury paper. Personally, the safety of this is not something I would presume. But in the current deflationary stage its hard to find any other place to park cash, and when asset values are crashing everywhere, cash is king. Gold is physically unavailable in the form that non-millionaires usually buy it in, ounce and half-ounce coins.
President-elect Obama has announced his intention to kick off a massive “stimulation” program when he hits the White House “running” in January. Early indications are that it will be directed at things like highway repair. If so, we will be investing long-term in infrastructure that we probably won’t be using the same way in ten years. But I doubt there is any way around it. The American public can’t conceive of living any other way except in a car-centered society. Anyway, some parts of our highway-bridge-and-tunnel system are already so decrepit that they pose a menace right now, and the clamor to direct “stimulation” there is already very strong — backed by all the fraternities of engineers.
Stimulus aimed at perpetuating mass motoring will be a tragic waste of our dwindling resources. We’d be better off aiming it at fixing the railroads (especially electrifying them), refitting our harbors with piers and warehouses in preparation to move more stuff by boats, and in repairing the electric grid. Unfortunately, our tendency will be to try to rescue the totemic touchstones of everyday life, things familiar and comfortable, regardless of whether they have a future or not.
The ominous forces gathering out there will defeat these efforts and everyday life will reorganize itself some other way consistent with the single greatest trend: the force of contraction. Every sign we see is pointing in that direction, from the inability of the earth’s ecology to support more human beings, to the dwindling of mineral and energy resources, to the destruction of farmland, to mischief in the climate. We just don’t know how badly things will fall apart in the meantime, or how kind (or cruelly) people will act in the process.
Mr. Obama would be most successful if he could persuade the public how much more severe the required changes are than they currently realize, and inspire them to get with program of retrofitting American life to comply with these realities.
Regards,
Jim Kunstler
www.kunstler.com
James Howard Kunstler
James Howard Kunstler is perhaps best known for The Long Emergency, which predicted the financial meltdown and the implications of the peak oil problem. The Geography of Nowhere , about the fiasco of suburbia, is a campus cult classic among the architecture and urban planning students. It was followed by a sequel, Home From Nowhere and The City in Mind: Notes on the Urban Condition . Mr. Kunstler has also authored 10 novels including World Made By Hand, a story set in America's post-oil future. His articles have appeared in The New York Times, The Washington Post, Rolling Stone and The Atlantic Monthly.
ShareThis
I am glad Jim cares about passenger rail. The federal government, state governments, and businesses need to spend a lot more money on passenger rail, freight rail, buses within cities, and buses between cities. Many businesses may want to advertise inside of passenger rail and inside of buses. If people have an easier time getting to jobs and from jobs, we may be able to spend less money on food stamps and Medicaid. If we are less dependent upon foreign oil, we may be able to reduce military spending.
Our country has a great deal of coal. I hope we are able to use coal in a way that pollutes less.
Governments and businesses should be encouraging the production of automobiles that run on electricity as well as automobiles that run on electricity with fuel as a backup power source.
Governments and businesses should be encouraging the production of solar/wind towers and the usage of more solar panels on buildings.
Restaurants and other businesses should care more about local farms.
The least that should be done to grow the economy and create jobs is the indexing for inflation of capital gains, interest from savings accounts, and dividends. If the capital gains tax is not indexed for inflation, people may pay the capital gains tax when they have actually lost money because of inflation.
If the federal government is serious about growing the economy and creating jobs, it should stop taxing capital gains, interest from savings accounts, dividends, and estates. People will have an easier time saving for college tuitions and retirements. Businesses will have an easier time obtaining loans and investments.
Congress should eliminate the Federal Reserve or veto many of its decisions.
Congress should consider backing our currency with gold, silver, and other commodities.
I graduated from the University of New Hampshire in 1992 with a BA Degree in Political Science and a minor in Economics.
I ran for United States Senate from New Hampshire in 2002. My website is http://www.myspace.com/kennethstremsky
Mr Kunstler has long endorsed devolution toward mass transit. He may well prove right and yet, implicit in his argument is more government decisions in the market place. We are to be “persuaded” to give up our cars and autobahns for the economic good of the nation. Unfortunately, we have strayed from free markets as the Austrian School has pointed out, markets that will by their very nature point us in the direction of maximal use of assets, As we hurtle toward an ever more planned economy Kunstler may indeed get his wish but for all the wrong reasons; if government continues to decide whom shall be the winners and losers, we shall all suffer. Liberty and freedom do not fare well in planned economies. We have learned little from history.
I can’t believe that Gary Gibson just equated the Nazi Gestapo with American Soldiers fight communism in Vietnam. I have noticed other hyper liberal remarks from him before. Ask the 40+ million people communism has killed in the 20th century if communism is worth fighting. Liberals dislike the Vietnam war because in their hearts they like communism. He needs to keep his Liberal BS to himself.
Hyper-liberal comments? You mean like “government get out of our lives” and “end all government regulation”? What you’re hearing, David, is something you don’t agree with or like. Interventionism and war are interventionism and war. Doesn’t matter what goverment spin you choose to swallow.
By the way, my comments in the sent mail at the end of each article will not be appearing on the website. Thus your comment appears to come out of the blue.
Edit:
And anudda ting:
Liberals may dislike the Viet Nam war because they love communism. Old school conservatives (such as yours truly) dislike the police action in Indochina because we don’t believe in using military force to make people outside our borders do as we would like. I thought my hatred of communism was clear.
Divided we fall: & they have been very good at SAYING: you are REP, or you are DEM; you are LEFT, RIGHT, conservative or liberal; WRONG! This is a dictatorship who uses theatricals etc to control PEOPLES PERCEPTIONS: all are lies; THIS nation was set up for ALL TAXES, all roads, schools, etc to be paid for from the PROFITS from big businesses; there was a 1 x tax after the war: then the SAME FOLKS who ran the huge plantations went to our political parties & said “let me grease your palm with money: hey hey hey let’s do it THIS WAY instead”; thus, they put in that IF people so chose to do, they could pay taxes voluntarily; & LOOK where we are today! Supposedly WE are paying Corps taxes: & anyone who’s name is on a huge Corps payroll does NOT have to pay taxes! Why do you THINK it took so long to “produce” Clinton’s tax records? LOOK to the “contractors” esp connected to the Pentagon: & see how they syphon trillions of trillions of $ out of the country: in Iraq: blackwater small guys get $20,000 a MONTH: & other contractors of whom there are hundreds of them get $7,000; military get $1400???? Because Americans are like Sara Palin: powerful stupid in thinking “our nation is broke”; Perception Management: folks: military term: publishing FALSE REPORTS to “appear real”; huge #s make normal folks shudder; consider this: each med is 600,000 xs it’s cost & the Feds get their fair share! GETTING THE PICTURE? again: they are NOT losing $ at generic $4; and yet again: they agressively allow the use of chemicals inside everything: to get you ill; including clothing, carpeting, paint, furniture, & also in food: Don Rumsfeld, FDA passed FORMALDEHYDE one of the most deadly toxins on earth in asparteme: originally in sodas, passed to every processed food on market; SALT is chemically treated: & used in processed foods to the degree now as it is escalating to cause kidney stones in adults & kids: agonizing, excrutiating pain in children: for the pharmas to get more $; it is NOT THIS or communism; THIS is diabolically evil; & should not be tolerated & only is because folks do NOT REALIZE: that many countires DID have Gov that TRULY RAN & DID WHAT THEY WERE SAID TO DO! Like Sweden, Denmark, Iceland, Germany, etc; Model T 1st automobile built to last 100 years: NO emmissions, ran 26 MPG, no chemicals, no formaldehyde, ran on grain alcohol; do you STILL think that “oil” HAS TO BE PUSHED ON US? only to make certain folks wealthier;
THIS is the change that is to “rebuild & renew” “supposedly” the USA: courtesy of your dictatorship whom prefers to be called dysfunctional: dysfunctional failure perhaps; they are NOT for the people nor ever even done the will of the people; laws are put on books for looks only & not enforced & THIS is the reason 3000 species of frogs have been lost & much much more; BLM “supposedly” in charge of PROTECTING the forests & lands insteads clear cuts them inside of areas clearly visible by air; but “makes it appear” as keeping the trees near highways etc that “they are doing their job”; deception, far better than democracy; writing a law at peoples request to be able to correct things incorrect on credit report: Congress: we have to pass this for the people: HOWEVER, all you have to do is have a tel # ; NO ONE needs to be at the end of the line. YOU decide Americans: aren’t you fed up with corruption & being abused by Corp’s working with USA Gov AGAINST the people & the land? NEWS: change is agressively attacking all fresh water supplies in the USA; you nave a NEED for water but not a RIGHT for water; if you do NOT pay what THEY DEMAND you will die in 3 days. Gosh, sounds like a “force for good” to me huh? better check YOUR city, YOUR county, YOUR state: they have deleted old laws, amended laws, & back dated laws; corruption to the core is the name of the game; EVEN THE COURTS are in on this; CHANGE YOU need a “new mindset” as they discussed for;
incredibly amazingly watching Elizabeth Warren on C span: “new Congress economics” she states one day that the usury laws “went away” in the 70′s; just up & disappeared kinda like the old laws have to be deleted once new ones are written in, but don’t implicate the Govenor in Oregon. Amazing, how they don’t even hide what they do anymore when being televised isn’t it? Day later or so she THEN explains usury laws PREDATE the Constitution; been around since banking began! THEN she precedes to state that the Supreme Court “reinterpreted them”; then that Congress with no imput just out of the blue lightning struck & they ALL AGREED to immeditately put a law thru: that ‘TA DA” something re housing; where prepayment penalties arose & ARMS: see, SOMEONE got the bright idea that they could make a GREAT DEAL more $ by CHANGING the 30 year fixed mortgage; so they started hidden traps & tricks (gosh, got them from Congress didn’t they!) & since hey hey hey do it our way, all this $ , do whatever you want & never have to pay for it! Gotten away with it in the USA for years! as they pay billions to the heads of other countries to “do it their way”; this “supposedly” broke USA; who has so much money it doesn’t even know what to do with it all; but thats in your PERSPECTIVE which is carefully managed now isn’t it? Usury laws state that ANYONE charging exorbinant amount of interest has to pay 5 or 6 times the amount of the original borrowed amount. My my my. Looks like a whole LOT of folks gonna be collecting a whole LOT of $; no one trying so hard to cover up their criminal & fraud tracks! The PEOPLE in the “new loans” were qualified & could easily have been put into the far better, less interest, etc; all with full knowledge & consent of course: of USA Gov & their “responsibility to loan to lenders” ooops am I letting the cat out of the bag???? Rico laws: everything involved in criminal activities can be consfiscated. My my my. No wonder they are anticipating strife~!