Forecasts 2009
Jan 1st, 2009 | By James Howard Kunstler | Category: Featured, Macro Economics, Oil, Politics
There are two realities “out there” now competing for verification among those who think about national affairs and make things happen. The dominant one (let’s call it the Status Quo) is that our problems of finance and economy will self-correct and allow the project of a “consumer” economy to resume in “growth” mode. This view includes the idea that technology will rescue us from our fossil fuel predicament — through “innovation,” through the discovery of new techno rescue remedy fuels, and via “drill, baby, drill” policy. This view assumes an orderly transition through the current “rough patch” into a vibrant re-energized era of “green” Happy Motoring and resumed Blue Light Special shopping.
The minority reality (let’s call it The Long Emergency) says that it is necessary to make radically new arrangements for daily life and rather soon. It says that a campaign to sustain the unsustainable will amount to a tragic squandering of our dwindling resources. It says that the “consumer” era of economics is over, that suburbia will lose its value, that the automobile will be a diminishing presence in daily life, that the major systems we’ve come to rely on will founder, and that the transition between where we are now and where we are going is apt to be tumultuous.
My own view is obviously the one called The Long Emergency.
Since the change it proposes is so severe, it naturally generates exactly the kind of cognitive dissonance that paradoxically reinforces the Status Quo view, especially the deep wishes associated with saving all the familiar, comfortable trappings of life as we have known it. The dialectic between the two realities can’t be sorted out between the stupid and the bright, or even the altruistic and the selfish. The various tech industries are full of MIT-certified, high-achiever Status Quo techno-triumphalists who are convinced that electric cars or diesel-flavored algae excreta will save suburbia, the three thousand mile Caesar salad, and the theme park vacation. The environmental movement, especially at the elite levels found in places like Aspen, is full of Harvard graduates who believe that all the drive-in espresso stations in America can be run on a combination of solar and wind power. I quarrel with these people incessantly. It seems especially tragic to me that some of the brightest people I meet are bent on mounting the tragic campaign to sustain the unsustainable in one way or another. But I have long maintained that life is essentially tragic in the sense that history won’t care if we succeed or fail at carrying on the project of civilization.
While the public supposedly voted for “change” this fall, I maintain that they underestimate the changes really at hand. I’m far from convinced that Mr. Obama really sees the kind of change we are in for, and I fret about the measures he’ll promote to rescue the Status Quo when he moves into the White House a few weeks from now.
Where We Are Now
Without reviewing all the vertiginous particulars of the year now ending, suffice it to say that the US economy fell on its ass and that the “global economy” did a face-plant as well. The American banking sector imploded spectacularly to the degree that investment banking actually went extinct — as if a meteor landed on the corner of Madison Avenue and 51st Street. The response by our government was to shovel “loans” onto the loading dock of every organization that pretended to be something like a bank, while “bailing out” an ever-longer line of corporate claimants with a pitiable song-and-dance. The oil markets went on a roller coaster ride. The housing bubble collapse grew to avalanche velocity (taking out whole colonies of realtors, mortgage brokers, and construction contractors in its path), the commercial real estate sector developed hemorrhagic fever, retail drove off a cliff on Christmas Eve, the stock market fell in the toilet, jobs and incomes went up in a vapor, and tens of millions of ordinary citizens addicted to revolving credit found themselves in a life-and-death struggle for the means of existence. None of this is over yet.
The Year Ahead
Much of what has been lost in 2008 will not be recovered: enterprises, personal fortunes, chattels, reputations.
I expect a period of euphoria to mark the early weeks, perhaps months, of the Obama team. It will be a relief to have a president who speaks English correctly and has experienced something like real life prior to politics. Restoring credibility and legitimacy in leadership will be a big deal. If nothing else, we may recover a collective sense of consequence from a president who tells the truth, even the harsh truth. The age when it was enough to claim that “mistakes were made” might be over. A sign of this sort of change may be the commencement of prosecutions for misdeeds in banking and securities that are now destroying the entire system of deployable capital. A good place to start will be an investigation of Henry Paulson for insider trading stemming from Goldman Sachs’s shorting of its own issued mortgage-backed securities when Mr. Paulson was the company’s CEO. Beyond his case, there should be enough work at Attorney General Eric Holder’s office to employ a line of law school graduates stretching from Brattle Street to the planet Mars. It will be salutary for the nation to see those who engineered the banking collapse come to greater grief than the mere surrender of their Gulfstream jets and Hamptons villas. By the way, being allergic to conspiracy theories, I don’t believe for a minute that there is some kind of shadow elite of “Bilderburgers” standing in the background to protect these grifters — and I also believe the reason these paranoid notions persist is because it is otherwise hard to account for the extravagant irresponsibility of the Bush circle and its servelings.
Apart from “cleaning up Dodge,” so to speak, and from issues of collective character-and conscience-in-office, I worry that the avalanche of troubles already ongoing will overwhelm Mr. Obama and his people. It’s also well worth worrying whether they will pursue policies similar in kind to the ones pursued by Bush, namely throwing money at everything and anything, and it sure looks like they are planning to do just that. I am especially concerned about an “infrastructure stimulus” project aimed at highway improvement at the expense of public transit. This would be the epitome of a campaign to sustain the unsustainable. We need to begin planning right away for a transition away from automobiles, not in order to be good socialists but because Happy Motoring is at the core of our unsustainability trap. The car system is going to fail in manifold ways whether we like it or not, and it will fail due to circumstances already underway. For one thing, it will cease to be democratic as the remnants of the middle class find it impossible to get car loans, or pay for fuel, or insurance, and that will set in motion a very impressive politics-of-grievance setting apart those who are still able to enjoy motoring and those who have been foreclosed from it. Contrary to what you might make of the current situation in the oil markets, we are in for a heap of trouble with both the price and supply of petroleum (more on this below). And there is no chance in hell that any techno rescue remedy to keep all the cars running by other means will materialize.
A consensus in the blogoshpere says that the stock markets will rebound strongly during the first Obama months. This is possible just on the basis of pure “animal spirits,” but the Obama Bounce will occur against a background of continued dismal business and financial news. It will appear to defy that news. By May of 2009, the stock markets will resume crashing with the ultimate destination of a Dow 4000 before the end of the year. Meanwhile, jobs will vanish by the millions and companies will go bankrupt by the thousands, especially in the so-called service sector, and in all the suppliers of such, along with the landlords in all the malls and strip malls. The desolation will mount quickly and will be obvious in the empty storefronts and trash-filled parking lagoons. In the event, two things will become increasingly clear to the nation: that the consumer economy is dead, and that there is no more available credit of the kind that Americans are in the habit of enjoying.
Regards,
Jim Kunstler
January 1, 2009
Please use another blog for your Bush bashing, democrat talking point claptrap and make your financial points here.
Back in 2002, I was telling friends that by 2010 we would be in dire straits. The country was coming to a day
of reckoning. The dotcoms vaporized and Enron was in trouble. The predictions of the sages have come to pass Things can be fixed, but it will take decades..Reinstating the Glass-Steagle banking act which was suspended during the Clinton administration. might be a place to start. Next, completely overhaul the SEC,
and put some teeth in its regulations, which would be considered quick fixes. For the long term, rein in the Fed, put the dollar back on the gold standard, and get the country out of debt to foreign creditors. The Chinese will help by controlling hard assets. Next, the government will require every able-bodied person to work for a pittance. This scenario could last a decade a la the Great Depression. Who knows, we might learn a lesson from what will befall us.
Your ideas are those of a Luddite. Please, spare us the end of the civilized world sermons. Yeah, humankind continues to screw things up as we progress by fits and starts from scratching a living from the earth to creating a plentiful world for all, and things may be really depressed for a while, but I believe, and the evidence indicates, that humans will continue to make life easier and more productive for all as we have been doing for thousands of years. It is easy to see the essential misanthropy underlying your worldview. You make a few good points along your march over the cliff. Why don’t you just build on those suggestions, like more efficient urban design, and forgo your leap onto the rocks below? By the way, better cities won’t be designed without including personal transportation vehicles, i.e. automobiles, and energy sources will be available to power cars, planes, trains, ships and spacecraft. There is more than enough energy available for billions of people to live an abundant lifestyle: oil, coal, gas, geothermal, nuclear, wave, wind, biomass, algae, etc.
“There is more than enough energy available for billions of people to live an abundant lifestyle: oil, coal, gas, geothermal, nuclear, wave, wind, biomass, algae, etc.”
Next time cut the Prozac pill in half before you post.
I just wanted to leave a quick comment to the writer. And it is a simple one…. You’re a hell of writer. A very enjoyable read.
One does not have to “believe” JHK; he is commenting on the readily observable. “The Long Emergency” is a book obtainable by anyone, whether they might “agree” or not, stare & compare…
Private vehicles for everyone on earth at puberty? Borrowing from an advertising phrase popular in the late1950’s, as the freeway build gained momentum: “Trains Are A Cars Best Friend” was based on rationale that the projected car-based economy needed trains, freight & passenger, to maintain Societal & Commercial Cohesion. In fact, US military transportation doctrine was very inclusive of maintaining the rail component in strategic planning, calling railways “Second Dimension Surface Transport Logistics Platform”.
Railways suffered from the fact that they did not offer the titilating return on investment seen in other transport modes. Modes like airlines, autos, & trucking benefited from subsidies, and military support for the ever-growing imported cheap oil so necessary to render the railways less dominant. We are at the downstream end of that rubber tire experiment, and we have not much time to trim down the reliance on highway commerce, while building back rail capacity, extending mains and rehab of the branchlines to protect local victuals & necessities of life. Talking down USA rail rehab & expansion is meaningless; Russia, China, the EU, South American & African countries are underway with railway engineering totaling in the $Trillions.
People anxious to move to a brave new economy based on alternative energies & highway transport will be disappointed to a deadly degree if they do not see to the railway service requisites in their respective locales. Helpful US Railway Map Atlas Sets are available: “spv.co.uk”. Rail savvy personnel can be generated from recommissioned Railway Operating & Maintenance Batallions at the State National Guard installations across the country. These units are going to be needed as the rail rehab program allows stand-alone aspects of railways to play crucial role in coming natural & man-made disasters. All should get a copy of “Rail Transport And The Winning Of Wars” by James A. Van Fleet, from Association Of American Railroads in DC> (202-639-2100). Updated to renewable energy era is “Electric Water”, by Christopher C. Swan (New Society Press, 2007). Offered also is (peakoil.net) articles 374 &1037.
Tom Friedman,s army of back-yard mechanics and inventors may (or not) eventually win the day, but their less inspired family members & neighbors will need dependable delivery of victuals, perishables, and whatever might be riding the rails as the long-haul trucker’s diesel fuel is allocated to the farms! Certainly Byron King is a believable name in this website: How stands he on railway rehab?
And you, Mr. Pickens? Natural Gas for a million trucks- but not a word about railways…. How about trucks on natural gas fuel, in a policy of transport focused on longer hauls by rail; shorter runs, pick-up & delivery role for the trucks?
When you are “supposedly” a democracy with no input being accepted by the public; “people must get a new mindset; while what they have to say is noted; THIS is the way it will be”; THIS is a dictatorship very cleverly disguised; both parties are in total agreement united to deceive the public; theatrics & charades; a “nation of law” that changes with each administration but the long term goals etc were determined long ago; & the courts call to see how they want our “administration” to RULE in each case; this runs from Supreme Courts, to Fed Appeals courts, to circuit courts; the “agencies” are SHELLS to fool the public; & launder billions & trillions of $ thru; consider this: THERE IS NO NEED FOR OIL; it has been pushed down our throats with alternatives rejected time after time; usury laws: in existance since banking began; ignored as “Congress” & others thought we can make a great deal of $; COUNTRY consists of the PEOPLE, the AIR, WATER & LAND: “paying taxes is patriotic” claims Bieden: yet the rich do not pay taxes at all per the mayor of N Y on Bill Moyers Journal; & they aren’t going to pay taxes; & now they want the criminal corps our nation set up to not have to pay them either! ????????????? Unpatriotic rich folks who don’t pay taxes & now criminal unpatriotic Corps that don’t have to pay taxes & usury laws are quite clear: 5 times the amount HAS to be repaid BACK to the original person harmed (the PEOPLE of the USA!) PERSONAL responsibility lays SQUARELY on the “so called” lawmakers of THIS nation; who obviously are UNPATRIOTIC by HARMING the people deliberately!
where’s your genetic pessimism where obama’s concerned? real-world experience? you must be kidding! here’s a graduate of harvard and crook-county democratic politics. what’s to love, let alone trust?
montyzuma, “genetic pessimism sure is Kunstler’s malady. gary gibson, Kunstler’s the one who needs Prozac. How can a thinking person accept the repeated pessimistic exaggerations found in Mr. Kunstler’s writing? For instance, “there is no chance in hell that any techno rescue remedy to keep all the cars running by other means will materialize [Kunstler is not a scientist though he purports to know the limits of technology] ” or “the consumer economy is dead [what consumers? Chinese? Indian? They have barely begun to live.]” or “the remnants of the middle class [will] find it impossible to get car loans [ impossible? I loaned money for a car purchase to one of his remnants today.. 8% interest]“
Exaggerations? Have you paid attention to the news or looked outside your window? Credit is disappearing and all the disappearance of that pretend wealth means we can’t pretend to be a wealthy society anymore. People ARE having trouble getting credit for anything, including autos. in fact, Hyundai is running an ad wherein they promise to take back any car you “purchase” should you lose your income and not be able to make any further payments (we used to call this “repossession”). If that isn’t a sign of the times, I really don’t know what is. People have been losing their suburban shacks to foreclosure in droves for a couple of years now.
Those who expect a “scientific rescue” tend to be those who believe that a perpetual motion machine really is possilbe; that is to say, the people who expect this kind of fix know nothing about science at all.
Let’s see how things pan out. I run Kunstler articles because I think he’s entirely right on why things shaped up the way they have and we’re they’re likely to go next. I do not, however, share any optimism about how any elected official–including Mr. O–will handle anything.
Okay, Let’s imagine Kuntsler’s world. We all will depend on food from our backyard gardens for survival. We won’t drive. We will have to wait for trains. Energy will be expensive. Human energy will be cheap. Robots will gather dust, pining away on mothballed factory floors. Suburbia will decay, rife with crime. Don’t count on it.
On the other hand, back to reality, look at the long sweep of history instead of this serious, but short term downturn we are in. We all will continue to depend on large-scale agriculture for survival, and food will continue to become cheaper, and we will have more leisure to putter in our backyard gardens growing fresh, quality produce. More and more individuals will get behind steering wheels driving vehicles that get incredible mileage, as energy and transportation continue to get cheaper and cheaper. Trains will improve in their capacity to deliver goods and people more efficiently than highway transport, but still and always less conveniently. The cost of energy will continue in its long and steady downward trajectory, becoming more and more affordable to more and more people. The cost of human labor and intelligence will continue in the opposite direction. Robotic labor and artificial intelligence will continue to proliferate. Suburbia will expand, fill in and merge with urban areas becoming more acceptable to JHK.
John,
Judging by the amount techno optimists who responded you should have included an intro to Energy Returned on Energy Invested. For all of you who think this is about a short term correction do your self a favour and read about ERoEI. It will help turn the lights on in your collective worlds. There will still be billions of barrels of oil in the ground when we stop recovering it because the amount of energy (drills, platforms, pumping stations, site trucks, etc, etc.) required to get it will equal the energy we get back from it. This is basic economics that all should be able to understand. do you selves another favour and look around the world reserve sites and look at the ERoEI for various fields. They have all been diminishing for years. This is also why ethanol will not work. Very poor ERoEI if you believe the optimists it is just above break even but then of course they still take for granted that the crops are all grown with fossil fuels. Once these are either in terminal decline or diminished the yields on all crops will plummet making ethanol a losing game.
The party is over, get used to it.
E
the party has barely begun. the future will continue to astound party-poopers and fuddy-duddy kill joys as it always has. human intelligence has expansive limits. energy will always have costs, but will always be inexhaustible. humans first used human energy, then solar, fire, animals, wind, hydropower, hydrocarbons, nuclear, geothermal, photovoltaics, hydrogen. next will be microbial fuel sourcing, algal fuel sourcing, lowtemp geothermal, outerspace-based microwave transmitted solar, etc., etc. Much remaining coal and low grade oil will be recovered with newly developed methods that deliver far more ER than EI. Coal can be utilized cleanly.
Problems are one thing. Solutions are another. Do you want humanity to fail? or do you just believe we should all live lives restricted by puritanical codes of needless anxiety caused by can’t-do attitudes.
Ethanol can work, but it will be a function of good growing conditions and if we expect to be able to sustain our current American lifestyle on just alternative energy, we are in for a rude awakening.
Ethanol production per se does not result in energy loss, provided that bagasse and biomass from the locality of production, and not petroleum from somewhere else, is used as the energy source in the process. The energy loss begins when we have to transport the finished product away from the centers of production. The longer the distance, the more energy needed. Thus, while I support ethanol production, such initiatives are most effective when carried out on a local, not national level. Transporting ethanol fuel from Nebraska, not to mention the environmental damage that would result from intensive large-scale agriculture.
Which reminds me, plowing the soil is a good way to kill soil fertility. In the future, no-till farming may become very popular in America as people study ways to grow their own food.
And, yes, we will need comprehensive railway service in the years to come. (Surprising that GM has not gotten on the bandwagon with this one
They’d be getting out of their rut in a short time.) With the current national deficit, everyone across three generations will have to pay a high amount of taxes just so Washington can pay off its debt. Which means that most people will not want to drive cars because the increased taxes will make gasoline very expensive. Diesel may also shoot up through the roof as well, making long-distance transport of goods unfeasible. (And, if bicycles and their accessories are subject to high taxes as well, even so modest a form of transportation will become untenable as well. Guess we’ll have to go back to horse buggies and carts.) Every major city will have to establish agricultural capacity in nearby areas. USA is a big country, so there are different climates as well as different demographic compositions. This means that, in due time, places like the South, the Mid-Atlantic, and even the Mountain West will develop distinctive cuisines ^-^ With the reduction in cultural exchanges between regions, each region will digest the cultural inputs received prior to contraction and develop distinct regional identities.
Currently the US debt is about 77% of GDP. That is, out of the $14.3 trillion total of American GDP, $10.9 trillion is how much we owe to foreign banks and every other creditor. Since there is no longer much taxable production remaining Stateside, the government has resorted to a printing binge at the central banks. Assuming that the Feds do not borrow even one cent until the last cent of debt is paid off, if they take 20 years to pay it all off, we are looking at $545 billion per annum. Not to mention that, on top of that, there are things like Social Security, upkeep of airports and roadways, budgets for all the Federal agencies, and other expenses. Running a big country takes big money and even bigger self-discipline.
Until we can find a source of cheap energy with which to run our automated heavy factories and such, or until the advent and establishment of an infrastructure that can supply the required energy to people that need it, we are pretty much down to using coolie power. Slavery might make a comeback in the future, especially since “basic human rights” such as a living wage and safe worlplace conditions will be seen as untenable in the face of great economic and financial misery.
I wonder if anyone has thought of producing power stations for every 100 square miles of territory, using locally sourced materials as fuel. With its redendancy it certainly beats massive power grids like the ones we have currently in operation. For instance, in the Southern States methane gas from biodigesters, hooked up to a few toilets, would be a feasible source of energy. In the North windmills and solar cells would be better than biodigesters, since the cool temperatures there can slow down the fermentation process inside a biodigester tank enough to render production nil.
And to Mr. Simmons, I have the following to say. As your detractors have said, the party is over, indeed. The only thing that can be done is to reduce the scale of consumption per capita and find other ways to maintain a comfortable lifestyle. Of course we may not have DirecTV and other such services easily available, but there are other ways the American people can entertain themselves. Even if the scenario turns out as you mentioned in your last post, it will take a while before alternative fuel sources go mainstream. In the interim the people will have to resort to growing their own food, using things from their locality, and – if they want electricity – producing it themselves, although this last option would require the installation of a supply chain to insure parts needed to keep electricity generating devices in working condition.
I strongly recommend to all of you blogs like anthropik.com . Very elucidating for those contemplating a post-collapse scenario where caveman skills may become the key to survival. Also, a website like journeytoforever.org is stronlgy recommended, with its myriad of books and articles on agriculture and alternative energy. A profound rethink of how we run our economy is long overdue, IMHO. Our lives depend on it.
It is possible to run a society without electricity or petroleum. The people simply need to have imagination and the gumption to live a different lifestyle, as well as the skills. Eisuke Ishikawa has a few books on life during Japan’s Edo Period. One of them is titled “Sustainability in Japan’s Edo Period.” You can read a few exceprts here:
http://www.japanfs.org/en_/column/ishikawa.html
I feel a bit sorry for the consumers in China and India. If they all expect to enjoy our current (American) lifestyle without the attendant social consequences that lie a little farther down the road (e.g., lack of socialization, overconsumption, a crass sense of entitlement), they are in for a rude awakening, whether it comes 20 years or 200 years from now. (100 million cars on the road in America is a lot; imagine 700 milion on the road in China and India!) I’d like to see how they deal with the environmental damage in these countries. This will soon become more important than Hubbert’s Peak.