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Growth is Obsolete: James Howard Kunstler | Peak Prosperity

Growth is Obsolete: James Howard Kunstler | Peak Prosperity. (source)

The word that sticks in the craw of many who cogitate over economics is growth. The condition that the word refers to has proven disturbingly problematic in recent years, especially as world’s population continues to expand exponentially and the global ecology suffers in response. In fact, Thomas Carlyle (1795 – 1881) called economics “the dismal science” in direct reference to the work of the Rev. Thomas Malthus, because the Malthusian conclusions were so unappetizing — that sooner or later rising human populations would outstrip the world’s capacity to provide for them.

Now it happened that the Reverend Malthus’s notorious Essay on the Principle of Population was first published in 1798, which was about exactly the take-off moment for the industrial revolution. That extravagant melodrama was about marshaling mechanical invention with fossil fuel. The first act ran on coal and allowed populations to expand because it extended the extractive reach for resources by colonialist nations. The second act featured exploitation of oil, which was more powerful and versatile than coal. It also lent itself much more directly than coal to being converted into food for people. The use of oil powered farming machines, oil and gas (an oil byproduct) based herbicides, insecticides, and fertilizers, and oil based long distance food transport, has allowed us to convert oil into food pretty directly. This has led to the “hockey-stick” swerve of population growth that took human numbers worldwide from under 2 billion in the year 1900 to more than 7 billion today.

We are in the third act of the industrial melodrama now where the dire sub-plot of peak oil has taken stage. Despite the wishful thinking and happy-talk propaganda lighting up the media-space, we have arrived at the problematic point of the story: the end of cheap oil. This is poorly understood by the public and, apparently, by leaders in business, politics, and the media, too. They misunderstand because they insist on thinking that peak oil was simply about running out of oil. It’s not. It’s about running out of the ability to extract it from the earth in a way that makes economic sense — that is, at a price we can afford in terms of available capital and energy invested (and also ecological destruction). That dynamic is now exerting a powerful influence on modern civilizations. We ignore it — even at the highest levels of intellectual endeavor — because we have made no alternate plans for running the complex operations of everyday life, and because the early manifestations of the dynamic present themselves in the realm of finance, which is dominated by academic viziers and money-grubbing opportunists who benefit from obfuscating reality.

The sad, stark fact is that oil is now too expensive to permit further expansion of economies and populations. Expensive oil upsets the cost structure of virtually every system we need to run modern life: transportation, commerce, food production, governance, to name a few. In particular expensive oil destroys the cost structures of banking and finance because not enough new wealth can be generated to repay previously accumulated debt, and new credit cannot be extended without a reasonable expectation that more new wealth will be generated to repay it. Through the industrial age, our money has become an increasingly abstract and complex product of debt creation. As Chris Martenson has put it so succinctly in The Crash Course, money is loaned into existence. Thus, the growth of debt (allowing the growth of money) has played a crucial role at the heart of our banking operations, and the very word “growth” has become shorthand for this process in the lingo of current economic discourse.

It is quite clear that the banking system has been thrown into great disarray as the price of oil levitated from $11-a-barrel in 1999 to the great spike of $140 in 2008, and then settled into a range between $75 and $110 since 2010. Most of this disarray is a result of attempts to offset the failure to create new real wealth with fake wealth generated by accounting fraud, “innovative” swindling, insider chicanery, high frequency front-running, naked shorting of securities, and the construction of a vast untested network of derivative counterparty wagers that give every sign of being booby-trapped. All this private monkey business has been abetted by public mischief in central bank interventions and market manipulations, fiscal irresponsibility, political payoffs for favorable legislation, statistical misreporting, and the failure to apply the rule of law in cases of blatant misconduct (e.g., the MF Global confiscation of segregated client accounts; the Goldman Sachs “Timberwolf” CDO scam… the list is very long).

In short, a society with deeply impaired capital formation has turned to crime, corruption, fakery, and subterfuge in order to pretend that “growth” — i.e. expansion of capital — is still happening. The consequences are many and profound. The chief one is that the manufacture of fake wealth is such an alluring activity that some of the smartest people in society have devoted their waking hours to making a profit off it. It absorbs all their energies and they are simply not available for other work, such as figuring out a sane and practical way to run civilization in the absence of cheap energy. Added to this is the administrative effort and the work-arounds needed to support all this corruption and dishonesty, which occupy the hours of another class of smart people who work in government, academia, public relations, and the media. The sustenance of these parasitical cohorts more and more continues at the expense of everybody else in society, who cannot find work, or cannot make enough money to pay their living expenses, and who have become deeply discouraged, disappointed, demoralized, and disengaged in their losing struggle to thrive. Hence there is little public vigor to even mount a discussion of these vexing problems and the final result is the greater wholesale failure to construct a coherent consensus about what is happening to us and what we might do about it.

Another consequence to these disorders of capital is the massive malinvestment directed into things with no future in themselves or, much worse, things that actively undermine the future of everything needed to support any civilized future. For instance, the “innovation” in securitizing and repackaging mortgages — which continues to be a boon for the giant banks in concert with the thoroughly dishonest and technically bankrupt “government sponsored enterprises” Fannie Mae and Freddie Mac — expresses itself in the activity we call “housing starts.” Economists overwhelmingly agree that a higher number of housing starts is a good thing for the economy and hence for society. But what do housing starts actually represent? These days they mostly take the form of new suburban housing subdivisions, which are inevitably joined by the kit of the strip mall, the big box store, and all the other furnishings of the highway strip. In short, all that glorious “innovation” by the banks produces more suburban sprawl and destruction of rural land, which is about the last thing this society needs when faced with the realities of peak cheap oil, since it is absolutely certain to make these things obsolete, and very soon. It is not any better, either, if the nominal capital — nominal because it is sure to someday represent a loss for some bond-holder or stockholder — gets invested in a 30-story high rise apartment because, contrary to a lot of current delusional thinking, skyscrapers also have no practical future for reasons I have explained in other essays here.

Similarly, the public investments going into “shovel-ready” highway projects, although the fiscal outlays are more transparently based on money that doesn’t really exist. The public, as well as leaders all across society, serenely believe that the Happy Motoring matrix will find a way to go on forever, and that therefore we must make provision for it, not to mention the beneficial side of effect of “job creation” for all the additional workers. Yet the dynamic at work must be obvious: oil will never be cheap again; it will impair future capital formation; there will be far fewer car loans; there will dwindling public funds to maintain the roads; and there is no practical substitute for gasoline that scales to the existing system, nor any prospect of one within a time frame that makes sense — not to mention the gigantic background problem of pouring evermore carbon into the sky.

If these things I mention — highways, tract houses, condo towers, strip malls — represent our current idea of “growth,” and if they are self-evidently bad investments, then we can infer that our current concept of “growth” no longer applies to a reality-based model of our economic prospects. We ought to junk the term and what it implies about the daily business of mankind, and come up with a new way of understanding the place we’re at.

 

Creepily Close | KUNSTLER

Creepily Close | KUNSTLER. (FULL ARTICLE)

Things that can’t go on, the prophet Herb Stein once observed, go on until they can’t. Criticality eventually bushwhacks credulity. The aggregation of rackets that American life has become is rolling over like a great groaning wounded leviathan and the rest of the world is starting to freak out at the spectacle. Instead of a revolution, we’re having a suicide party.

But don’t worry, a revolution would not be far behind. My guess is that it would kick off as generational rather than regional or factional, but it would eventually incorporate all three. A generation already swindled by the college loan racket must be chafing at the bureaucratic nightmare that ObamaCare instantly turned into at its roll-out, with a website that wouldn’t let anyone log in. Isn’t technology wonderful? I wonder when the “magic moment” will come when all those unemployed millennials join a Twitter injunction to just stop paying back their loans. If that particular message went out during this month’s government food fight, it would do more than just get the attention of a few politicians. It would crash the banks and snap the links in every chain of obligation holding the fiasco of globalism together….

 

Paradigm Blindness | KUNSTLER

Paradigm Blindness | KUNSTLER. (FULL ARTICLE)

Something is sucking the air out of the humid terrarium that is US politics, making the lizards, tarantulas, and scorpions within hyperventilate. That something is the vacuum of disappearing wealth. All the accounting fraud, statistical mis-reporting, price manipulations, naked-short beat-downs, high-speed arbitrage hijinks, and carry trade rackets can’t conceal the reality that the nation is going broke – at least 99 percent of the nation. The remaining 1 percenters, outside the terrarium, are swimming in a pool of notional wealth that is primed to go down the drain and leave them at the bottom, desiccated little husks of animal matter that the crows will feed on.

The reason nobody seems to know what to do is because they know anything they do will make them look bad, so the only thing to do is nothing, with a sound track of lizard squawks and much darting of forked tongues. Nature is now in charge, not personalities, and nature is now leading a purblind humanity to the place it has to go, which is smaller, simpler, and local. The flailings and squawking of politicians can only avail to make the journey more painful and disorderly, but the march is on….

 

Nowhere to Run, Nowhere to Hide | KUNSTLER

Nowhere to Run, Nowhere to Hide | KUNSTLER.

 

James Howard Kunstler Describes the Social Changes to Expect in the Long Emergency | Peak Prosperity

James Howard Kunstler Describes the Social Changes to Expect in the Long Emergency | Peak Prosperity.

 

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