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Oil, War and the Future Prospects for Peace – Our World
Oil, War and the Future Prospects for Peace – Our World.
We live in a time of amazing technological, economic and social progress where large segments of global society have attained relative prosperity and improved living conditions. We are interconnected like never before and by historical comparison the world is more peaceful than it has ever been.
At the same time, there are hundreds of millions of people still living in abject poverty and hunger. We have been making a concerted effort to try to alleviate their situation and bring more and more people out of extreme poverty under the framework of the Millennium Development Goals. As we go forward, surely we will not let this progress slip away.
But there is always that niggling doubt. How can we sustain a complex global society in a finite world with exponentially growing numbers of people and an economy that consumes vast resources just to keep running on the spot?
I worry about whether we will allow ourselves to get pushed beyond the limits to growth that Dennis and Donella Meadows warned us about back in 1972. We have done very little to alter that trajectory and my concern is that we will find ourselves fighting over a declining resource base as some like Michael Klare suggest.
Richard Heinberg is one of those rare insightful individuals with foresight and a sound understanding of contemporary affairs. His 2003 book, The Party’s Over – Oil, War and the Fate of Industrial Societies, published at the start of the Iraq War, explores the notion of a world without cheap oil and the potential for resource related wars. In response to this possibility, he recommends that the world implement a global programme of resource conservation and cooperation. The alternative is too dreadful to think about since it may represent the breakdown of modern civilization.
But how is it that oil became so strategically important and why is it linked to wars? Why is it that a world with less oil is viewed as analogous with the decline or even collapse of industrial societies? To better understand, we need to look back by around 100 years.
1914–1918 Great War
This year is the 100th anniversary of the Great War and a time that European nations in particular are commemorating those tragic events and the terrible loss of life. It is hard to imagine what the world looked like in 1914. It was a time dominated by European empires stretching across the globe connected by major shipping routes to support the trade in raw materials from the colonies and manufactured goods from the colonizers.
Britain was prosperous and London was a hub of global commerce, connected to the world via wireless telegraphy. The British had not been involved in a conflict on the European continent since the 1853–56 Crimean War, although colonial wars were frequent.
The 1814–1815 Congress of Vienna (precursor to the League of Nations or even the United Nations), where the major powers had come together to redraw national boundaries, had proved successful. The balance of power in Europe had been maintained and prolonged periods of war had been avoided (the exception being the 1870–71 Franco-Prussian War). Some at the time may have hoped that there would never be another war in Europe.
In school we were taught that it was the assassination of Austria’s Archduke Franz Ferdinand in Serbia on 28 June 1914 that ignited World War I, although we now appreciate that this assertion is too simplistic. Another possibility is that the Germans wanted and had been preparing for this war. We can certainly point to the 1905 Schlieffen Plan that illustrated how Germany could rise victorious from a war fought on two fronts: France to the west, Russia to the east.
But perhaps one of the most provocative recent analyses comes from the British historian, Niall Ferguson. In his 2000 book entitled The Pity of War, Ferguson argues that fear was a key factor in shaping European sentiments at that time. The Russians wanted to reassert themselves after their embarrassing defeat to Japan in 1905. The Germans and Austrians feared a growing Russia, and the French and British feared a powerful Germany.
He also presents another possible explanation. He argues, in an essay entitled “Complexity and Collapse — Empires on the Edge of Chaos” that the Great Powers and empires were complex systems and that they operated in a state “somewhere between order and disorder”.
“Such systems,” he continues, “can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But there comes a moment when complex systems ‘go critical’. A very small trigger can set off a ‘phase transition’ from a benign equilibrium to a crisis.” The end result can be war, revolutions, financial crashes and imperial collapse. In this context, our world today is not very different from that of 1914.
The Great Oil Game begins
It was Winston Churchill, then Britain’s First Lord of the Admiralty, who made oil the strategically important fuel that it is. Together with Lord John Fisher, he proposed in 1911 that the British Royal Navy switch from coal powered ships to oil. The change was necessary in order to keep pace with the German naval build-up, with oil being viewed as a superior fuel. The conversion took seven years to complete and resulted in the maintenance of oil supplies becoming a strategic military objective.
The first target for investment was the Anglo-Persian Oil Company (APOC) that had been set up in 1908 to explore and extract oil from what is now southern Iran. On 14 June 1908, just weeks before the commencement of hostilities in Europe, Winston Churchill succeeded in getting the British Government to invest £2.2 million in APOC, as explained by Daniel Yergin in The Prize – The Epic Quest for Oil, Money and Power.
Clearly, the British were not alone in recognizing oil’s potential and there are some who argue that Germany’s proposal to construct the Berlin to Baghdad railway as well as their close ties with the Ottoman Empire caused great concerns for the British. This could explain why, within months of the war beginning, British troops landed in Mesopotamia (now Iraq) in November 1914 to defend the APOC oilfields around Basra.
The strategic significance of oil was to remain constant throughout the Second World War. For instance, the Japanese in 1941, facing oil embargoes from the West, attacked Pearl Harbor and invaded the Dutch East Indies for the oil resources. Likewise, the Germans, having limited local oil resources, sought to capture the Baku oil fields in the former Soviet Union in 1942.
Following the Second World War, we have other examples. At the time of the first oil crisis in 1973, we see that the United States Congress, seriously concerned about the potential for oil supplies to be cut off, ordered an investigation into how it may be possible to use military force to gain access to oil supplies in the event of a supply disruption.
The report, published in 1975 and entitled “Oil Fields as Military Objectives” concluded that the risks associated with military action in the Middle East were too high, the prospects of success were poor and the consequence of failure would be disastrous. One unknown factor in this assessment was the possibility of a Soviet response to US military interventions.
The party’s over
The picture looked very different in 1991 during Operation Desert Storm and even more so in 2003 with the full invasion of Iraq, where the oil fields were occupied quickly. The Soviet Union was no longer a threat thereby reducing the risks of such operations. As former Chairman of the US Federal Reserve Alan Greenspan was to admit in 2007, the invasion of Iraq was all about oil. And that is what makes Heinberg’s 2003 book even more compelling. What Heinberg suggested in his book was that we are close to a peak in global oil production. Although this assertion has been contested, very recently there have been a number of studies that appear to confirm Heinberg’s claims.
In January 2012, for example, James Murray and David King published a paper entitled “Oil’s tipping point has passed” in which they note that global crude oil production has been capped at about 75 million barrels per day since 2005 — even in the face of continued price increases. As oil prices go up, you would normally expect that it would be profitable to produce more oil and supply should increase. For this not to happen, something must be fundamentally wrong.
More recently, in January 2014 the UK Royal Society published “The Future of Oil Supply” that looked at all the data and concluded that a “sustained decline in global conventional production appears probable before 2030 and there is a significant risk of this beginning before 2020”.
Third, Steven Kopits from Douglas-Westwood, one of the world’s top energy research groups, gave a lecture in February 2014 explaining how oil production by the major oil firms has faltered in recent years (dropping from 16 million barrels per day in 2006 to 14 million in 2012) while capital expenditure doubled (from US$109 billion to US$262 in the same period). Consequently, some high cost exploration and extraction projects are being abandoned. This led Gail Tverberg, a researcher and commentator on energy issues, to ask whether we are witnessing the beginning of the end of the oil industry as we know it.
What does this mean for the future?
Back in 2005, in his book The Long Emergency, James Howard Kunstler explored the consequences of a peak in world oil production and the fact that this would coincide with the forces of climate change, resurgent diseases, water scarcity, global economic instability and warfare. He essentially portrayed our future with less oil as a long, drawn-out and painful emergency.
More recently, international security scholar Nafeez Mosaddeq Ahmed, writing in the Guardian newspaper on 28 February 2014 explained contemporary riots as being symptomatic of a world without cheap fossil fuels. He argues that the financial crisis and food riots of 2008, the Arab Spring in 2010–11 in Tunisia, Libya and Egypt, and the 2013–14 riots in Venezuela, Bosnia, Ukraine, Iceland and Thailand are symptoms of the long emergency unfolding before our eyes.
Other commentators have come to the same conclusion. The military in different countries have been warning of tensions around the world in the face of declining oil supplies. The US Joint Forces Command’s “Joint Operating Environment Report” is a good example as well as another from the German Bundeswehr Transformation Center. Both reports were published in 2010.
But what does this mean for nation states? Jorg Friedrichs of the University of Oxford explores how countries might respond to fuel scarcity in his 2013 book The Future Is Not What It Used to Be. He argues that we should look at the past experience of Japan, North Korea and Cuba to draw lessons about what different nations may do when they have reduced access to oil supplies.
As mentioned above, in the period from 1918 to 1945, Japan faced oil and other resource embargoes from the Western Powers and was presented with two options: economic collapse or militaristic expansion to grab those resources. We know how that turned out.
In the 1990s, both North Korea and Cuba faced a situation of fuel scarcity after the collapse of the Soviet Union. In North Korea the governing class turned towards totalitarian retrenchment while in Cuba we witnessed a far more positive form of socio-economic adaptation (more local production of food, widespread adoption of permaculture, and adoption of a diet containing less meat).
Friedrich concludes the following with respect to how countries will respond to fuel scarcity. First, those with a strong military potential and the perception that force is more effective than the free market in protecting access to vital resources are more likely to adopt predatory militarism.
Second, countries with less experience of humanism, pluralism and liberal democracy, are more likely to have elites willing and able to impose a policy of totalitarian retrenchment on their population.
Finally, countries with less exposure to individualism, industrialism and mass consumerism, are more likely to pursue adaptive regression to community-based values and a subsistence lifestyle.
Avoiding collapse
But surely there is another path based on enhanced international cooperation. If we understand that we all lose when we fight over diminishing resources, then the answer is to avoid conflict at all costs and to set up mechanisms for this purpose. Today, we are living in a complex, chaotic world, and we will need to struggle to stop it from “going critical”.
The challenge we face is how best to avoid collapse in these circumstances. In this context, the writings of Dmitry Orlov in his 2008 book Reinventing Collapse – The Soviet Experience and American Prospects may be very insightful. If we can learn from the Soviet Union’s experience of collapse, might it be possible to somehow mitigate the worst impacts caused by the peaking of global oil production?
Orlav shares with us what he calls five stages of collapse. The first is financial collapse and many of us experienced this directly in 2008 such that we began to lose faith in “business as usual”. The second is commercial collapse, where we lose faith in ability of markets to provide for all our needs and this was perhaps experienced in parts of Portugal, Italy, Greece and Spain – the PIGS – from 2009 onwards.
The third stage is political collapse where faith in the government taking care of you is lost. Today this can be found in the many failed states around the world but mainly in Africa including Somalia, the Democratic Republic of the Congo and South Sudan.
The next stage is social collapse where you no longer believe that “your people” will take care of you and the sense of community is lost. The final stage is cultural collapse where you lose faith in the goodness of humanity. At that point, what we think of as civilized life has all but disappeared.
Ensuring a peaceful future
While most of us appreciate that we will face some pretty major problems going forward from here, it is also true that nobody can know for sure how things will play out. But is it inevitable that things will get worse?
Professor Steven Pinker in his 2012 book, The Better Angels of Our Nature, argues convincingly that we are living in the most peaceful times in human history. He describes the very powerful forces explaining why this is the case.
These are, first of all, the rise of the nation state and judiciary that work to reduce the individual need/temptation to use violence to resolve disputes. Second, the role of commerce and particularly the way that the exchange of goods and services interconnect people so that we care about “others”. Third, there is the feminization of the world with increased respect paid for the interests and values of women.
Fourth, there is the role of cosmopolitanism and the rise of literacy, mobility and mass media. Fifth, there is something described as the “escalator of reason”, which is the application of knowledge and rationality in human affairs forcing people to recognize the futility of violence and war as a means to solve our problems.
In his engaging 2013 lecture at the University of Edinburgh where Pinker explained his ideas in detail, he was asked by a member of the audience whether we might solve the resource/climate challenges through global cooperation, or whether violence, chaos and anarchy would result, as in the past.
He responded thoughtfully by saying “maybe (we would face violence, chaos and anarchy) but not necessarily”. The research seems to show big wars in the past have not been fought primarily over resources, but more as a result of other factors — fear, revenge and ideology.
So how can resource related wars be avoided? The answer is to invest in what works and that is clearly the five forces that have made the world more peaceful.
Now there will be those who argue that nation states have pursued violent paths in the past, that the judiciary can be corrupt, that commerce can lead to exploitation, that women leaders can be as warlike as men, or that the media can distort the truth. But it is essential to focus on the overall direction of change which has been positive, even when in some cases we have witnessed significant problems along this road.
We have to continue to invest in what works because that will increase our ability to adapt socio-economically. This is an important contribution to the energy transition debate that tends to be focused on either technological solutions or community-based responses. The basic line of thinking is that our overriding objective has to be to continue to ensure that we maintain peace and social progress. We have to focus on what makes the world a better place and in what has been historically proven to make the world more peaceful and less violent. This is naive, idealistic and simplistic I suppose, but what is the alternative?
Oil, War and the Future Prospects for Peace by Brendan Barrett is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
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Heinberg: Peak Oil And How To See The Bigger Picture | Peak Oil News and Message Boards
Heinberg: Peak Oil And How To See The Bigger Picture | Peak Oil News and Message Boards.
Richard Heinberg explaining everything that you need to know about Peak Oil and how to prepare for it, because we are already deep in Peak Oil time
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Heinberg: Peak Oil And How To See The Bigger Picture | Peak Oil News and Message Boards
Heinberg: Peak Oil And How To See The Bigger Picture | Peak Oil News and Message Boards.
Richard Heinberg explaining everything that you need to know about Peak Oil and how to prepare for it, because we are already deep in Peak Oil time
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Richard Heinberg: Why The Oil ‘Revolution’ Story Is Dead Wrong | Peak Prosperity
Richard Heinberg: Why The Oil ‘Revolution’ Story Is Dead Wrong | Peak Prosperity.
Richard Heinberg: The Oil ‘Revolution’ Story Is Dead Wrong
With all the grandiosity of the media headlines touting our destiny as the new “Saudi America”, many pundits have been quick to pronounce Peak Oil dead.
Here at PeakProsperity.com, one of the most frequent questions we’ve received over the past two years is: will the increased production from new “tight” oil sources indeed solve our liquid fuels emergency?
Not at all, say Chris and this week’s podcast guest, Richard Heinberg. Both are fellows at the Post Carbon Institute, and you are about to hear one of the most important and most lucid deconstructions of the false promise of American energy independence:
I recently went back and reread the first edition of The Party’s Over because it was the tenth year anniversary. And I was actually a little surprised to see what it really says. My forecasts in The Party’s Over were really based on the work of two veteran petroleum geologists—Colin Campbell and Jean Laherrère. So they were saying back before 2003, because it published in 2003, so it was actually written in 2001 and 2002. So they were saying back in 2000 and 2001 that we would see a peak in conventional oil around 2005—check—that that would cause oil prices to bump higher—check—which would cause a slowdown in economic growth—check. But it would also incentivize production of unconventional oil in various forms—check—which would then peak around 2015, which is basically almost where we are right now and all the signs are suggesting that that is going to be a check-off, too. So amazing enough, these two guys got it perfectly correct fifteen years ago.
The big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.
So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.
But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. I think Gail Tverberg is saying this is the beginning of the end. I think she’s right.
If we [continue along with our current policies and dependence on petroleum] then everything will eventually change — as a result of the economy coming apart, the debt bubble bursts, you know, agriculture declines because of the expense of oil and because of depletion of topsoil and because you cannot trust the weather anymore. And we have a very dystopian future if we do not do anything.
So it has never been more important for the average person to understand energy issues than it is right now. But I doubt if there has ever been a time when energy issues have been so deliberately confused by the people who should be explaining it to us.
Click the play button below to listen to Chris’ interview with Richard Heinberg (49m:43s):
Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson, and today, I am really excited to introduce a man who needs no introduction, Richard Heinberg, author, educator, speaker, writer now of eleven books including Party’s Over, the one that got me started on the peak oil story, The End of Growth, and Snake Oil: How Fracking’s False Promise of Plenty Imperils Our Future.
Richard Heinberg: Try say that fast five times.
Chris Martenson: [Laugh] I did, and that is the best I could do [laughter]. Welcome, Richard.
Richard Heinberg: Good to be with you, … read more
ABOUT THE GUEST
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Richard Heinberg: Why The Oil 'Revolution' Story Is Dead Wrong | Peak Prosperity
Richard Heinberg: Why The Oil ‘Revolution’ Story Is Dead Wrong | Peak Prosperity.
Richard Heinberg: The Oil ‘Revolution’ Story Is Dead Wrong
With all the grandiosity of the media headlines touting our destiny as the new “Saudi America”, many pundits have been quick to pronounce Peak Oil dead.
Here at PeakProsperity.com, one of the most frequent questions we’ve received over the past two years is: will the increased production from new “tight” oil sources indeed solve our liquid fuels emergency?
Not at all, say Chris and this week’s podcast guest, Richard Heinberg. Both are fellows at the Post Carbon Institute, and you are about to hear one of the most important and most lucid deconstructions of the false promise of American energy independence:
I recently went back and reread the first edition of The Party’s Over because it was the tenth year anniversary. And I was actually a little surprised to see what it really says. My forecasts in The Party’s Over were really based on the work of two veteran petroleum geologists—Colin Campbell and Jean Laherrère. So they were saying back before 2003, because it published in 2003, so it was actually written in 2001 and 2002. So they were saying back in 2000 and 2001 that we would see a peak in conventional oil around 2005—check—that that would cause oil prices to bump higher—check—which would cause a slowdown in economic growth—check. But it would also incentivize production of unconventional oil in various forms—check—which would then peak around 2015, which is basically almost where we are right now and all the signs are suggesting that that is going to be a check-off, too. So amazing enough, these two guys got it perfectly correct fifteen years ago.
The big news right now is that the industry needs prices higher than the economy will allow, as you just outlined. So we are seeing the major oil companies cutting back on capital expenditure in upstream projects, which will undoubtedly have an impact a year or two down the line in terms of lower oil production. That is why I think that Campbell and Laherrère were right on in saying 2015, 2016 maybe, we will also start to see the rapid increase of production from the Bakken and the Eagle Ford here in the US start to flatten out. And probably within a year or two after that, we will see a commencement of a rapid decline.
So you know, on a net basis, taking all those things into account, I think we are probably pretty likely to see global oil production start to head south in the next year or two.
But this change in capital expenditure by the majors, that is a new story. You know, just a couple of years ago, they needed oil prices around $100 a barrel in order to justify upstream investments. That is no longer true. Now they need something like $120 a barrel but the economy cannot stand prices that high. So you know, if the price starts to go up a little bit, then demand just falls back. People start driving less. And so the economy is unable to deliver oil prices to the industry that the industry needs. I think Gail Tverberg is saying this is the beginning of the end. I think she’s right.
If we [continue along with our current policies and dependence on petroleum] then everything will eventually change — as a result of the economy coming apart, the debt bubble bursts, you know, agriculture declines because of the expense of oil and because of depletion of topsoil and because you cannot trust the weather anymore. And we have a very dystopian future if we do not do anything.
So it has never been more important for the average person to understand energy issues than it is right now. But I doubt if there has ever been a time when energy issues have been so deliberately confused by the people who should be explaining it to us.
Click the play button below to listen to Chris’ interview with Richard Heinberg (49m:43s):
Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson, and today, I am really excited to introduce a man who needs no introduction, Richard Heinberg, author, educator, speaker, writer now of eleven books including Party’s Over, the one that got me started on the peak oil story, The End of Growth, and Snake Oil: How Fracking’s False Promise of Plenty Imperils Our Future.
Richard Heinberg: Try say that fast five times.
Chris Martenson: [Laugh] I did, and that is the best I could do [laughter]. Welcome, Richard.
Richard Heinberg: Good to be with you, … read more
ABOUT THE GUEST
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Shale gas, peak oil and our future
Shale gas, peak oil and our future.
The following interview with Richard Heinberg was originally published in Flemish at the Belgian website De Wereld Morgen. The interview was given in conjunction with the release of the Dutch translation of Richard’s Book Snake Oil: How Fracking’s False Promise of Plenty Imperils Our Future. The Dutch title is Schaliegas, piekolie & onze toekomst.
Josh Fox, director of the Gasland documentaries, recently said that the fossil fuel industry is so powerful that “democracy in the 21st century is impossible as long as we rely on fossil fuels”. What are your thoughts?Share this:
Forecast 2014 — Burning Down the House | KUNSTLER
Forecast 2014 — Burning Down the House | KUNSTLER.
Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.
Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.
Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.
Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency and Too Much Magic (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.
At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. And then all kinds of dishonest side rackets are run around this central credit racket — shadow banking, “innovative” securities (i.e. new kinds of frauds and swindles, CDOs CDSs, etc.), flash trading, insider flimflams, pump-and-dumps, naked shorts, etc. These games give the impression of an economy that seems to work. But the reported “growth” is phony, a concoction of overcooked statistics and wishful thinking. And the net effect moves the society as a whole in the direction of more destructive ultimate failure.
Now, a number of stories have been employed lately to keep all these rackets going — or, at least, keep up the morale of the swindled masses. They issue from the corporations, government agencies, and a lazy, wishful media. Their purpose is to prop up the lie that the dying economy of yesteryear is alive and well, and can continue “normal” operation indefinitely. Here are the favorites of the past year:
- Shale oil and gas amount to an “energy renaissance” that will keep supplies of affordable fossil fuels flowing indefinitely, will make us “energy independent,” and will make us “a bigger producer than Saudi Arabia.” This is all mendacious bullshit with a wishful thinking cherry on top. Here’s how shale oil is different from conventional oil:
- A “manufacturing renaissance” is underway in the US, especially in the “central corridor” running from Texas north to Minnesota. That hoopla is all about a few chemical plants and fertilizer factories that have reopened to take advantage of cheaper natural gas. Note, the shale gas story is much like the shale oil story in terms of drilling and production. The depletion rates are quick and epic. In a very few years, shale gas won’t be cheap anymore. Otherwise, current talk of new manufacturing for hard goods is all about robots. How many Americans will be employed in these factories? And what about the existing manufacturing over-capacity everywhere else in the world? Are we making enough sneakers and Justin Beiber dolls? File under complete fucking nonsense.
- The USA is “the cleanest shirt in the laundry basket,” “the best house in a bad neighborhood,” the safest harbor for international “liquidity,” making it a sure bet that both the equity and bond markets will continue to ratchet up as money seeking lower risk floods in to the Dow and S & P from other countries with dodgier economies and sicker banks. In a currency war, with all nations competitively depreciating their currencies, gaming interest rates, manipulating markets, falsely reporting numbers, hiding liabilities, backstopping bad banks, and failing to regulate banking crime, there are no safe harbors. The USA can pretend to be for a while and then that illusion will pop, along with the “asset” bubbles that inspire it.
- The USA is enjoying huge gains from fantastic new “efficiencies of technological innovation.” The truth is not so dazzling. Computer technology, produces diminishing returns and unanticipated consequences. The server farms are huge energy sinks. Online shopping corrodes the resilience of commercial networks when only a few giant companies remain standing; and so on. Problems like these recall the central collapse theory of Joseph Tainterwhich states that heaping additional complexity on dysfunctional hyper-complex societies tends to induce their collapse. Hence, my insistence that downscaling, simplifying, re-localizing and re-setting the systems we depend on are imperative to keep the project of civilization going. That is, if you prefer civilization to its known alternatives.
Notice that all of these stories want to put over the general impression that the status quo is alive and well. They’re based on the dumb idea that the stock markets are a proxy for the economy, so if the Standard & Poor’s 500 keeps on going up, it’s all good. The master wish running through the American zeitgeist these days is that we might be able to keep driving to Wal-Mart forever.
The truth is that we still have a huge, deadly energy problem. Shale oil is not cheap oil, and it will stop seeming abundant soon. If the price of oil goes much above $100 a barrel, which you’d think would be great for the oil companies, it will crash demand for oil. If it crashes demand, the price will go down, hurting the profitability of the shale oil companies. It’s quite a predicament. Right now, in the $90-100-a-barrel range, it’s just slowly bleeding the economy while barely allowing the shale oil producers to keep up all the drilling. Two-thirds of all the dollars invested (more than $120 billion a year) goes just to keep production levels flat. Blogger Mark Anthonysummarized it nicely:
…the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report “profits”, despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out paces revenue stream by several times… shale oil and gas producers tend to over-exaggerate productivity of their wells, under-estimate the well declines…in order to pitch their investment case to banks and investors, so they can keep borrowing more money to keep drilling shale wells.
As stated in the intro, these perversities reverberate in the investment sector. Non-cheap oil upsets the mechanisms of capital formation — financial growth is stymied — in a way that ultimately affects the financing of oil production itself. Old credit cannot be repaid, scaring off new credit (because it is even more unlikely to be repaid). At ZIRP interest, nobody saves. The capital pools dry up. So the Federal Reserve has to issue ersatz credit dollars on its computers. That credit will remain stillborn and mummified in depository institutions afraid of lending it to the likes of sharpies and hypesters in the shale gas industry.
But real, functioning capital (credit that can be paid back) is vanishing, and the coming scarcity of real capital makes it much more difficult to keep the stupendous number of rigs busy drilling and fracking new shale oil wells, which you have to do incessantly to keep production up, and as the investment in new drilling declines, and the “sweet spots” yield to the less-sweet spots or the not-sweet-at-all spots… then the Ponzis of shale oil and shale gas, too will be unmasked as the jive endeavors they are. And when people stop believing these cockamamie stories, the truth will dawn on them that we are in a predicament where further growth and wealth cannot be generated and the economy is actually in the early stages of a permanent contraction, and that will trigger an unholy host of nasty consequences proceeding from the loss of faith in these fairy tales, going so far as the meltdown of the banking system, social turmoil, and political upheaval.
The bottom line is that the “shale revolution” will be short-lived. 2014 may be the peak production year in the Bakken play of North Dakota. Eagle Ford in Texas is a little younger and may lag Bakken by a couple of years. If Federal Reserve policies create more disorder in the banking system this year, investment for shale will dry up, new drilling will nosedive, and shale oil production will go down substantially. Meanwhile. conventional oil production in the USA continues to decline remorselessly.
The End of Fed Cred
It must be scary to be a Federal Reserve governor. You have to pretend that you know what you’re doing when, in fact, Fed policy appears completely divorced from any sense of consequence, or cause-and-effect, or reality — and if it turns out you’re not so smart, and your policies and interventions undermine true economic resilience, then the scuttling of the most powerful civilization in the history of the world might be your fault — even if you went to Andover and wear tortoise-shell glasses that make you appear to be smart.
The Fed painted itself into a corner the last few years by making Quantitative Easing a permanent feature of the financial landscape. QE backstops everything now. Tragically, additional backdoor backstopping extends beyond the QE official figures (as of December 2013) of $85 billion a month. American money (or credit) is being shoveled into anything and everything, including foreign banks and probably foreign treasuries. It’s just another facet of the prevailing pervasive dishonesty infecting the system that we have no idea, really, how much money is being shoveled and sprinkled around. Anything goes and nothing matters. However, since there is an official consensus that you can’t keep QE money-pumping up forever, the Fed officially made a big show of seeking to begin ending it. So in the Spring of 2013 they announced their intention to “taper” their purchases of US Treasury paper and mortgage paper, possibly in the fall.
Well, it turned out they didn’t or couldn’t taper. As the fall equinox approached, with everyone keenly anticipating the first dose of taper, the equity markets wobbled and the interest rate on the 10-year treasury — the index for mortgage loans and car loans — climbed to 3.00 percent from its May low of 1.63 — well over 100 basis points — and the Fed chickened out. No September taper. Fake out. So, the markets relaxed, the interest rate on the 10-year went back down, and the equity markets resumed their grand ramp into the Christmas climax. However, the Fed’s credibility took a hit, especially after all their confabulating bullshit “forward guidance” in the spring and summer when they couldn’t get their taper story straight. And in the meantime, the Larry-Summers-for-Fed-Chair float unfloated, and Janet Yellen was officially picked to succeed Ben Bernanke, with her reputation as an extreme easy money softie (more QE, more ZIRP), and a bunch of hearings were staged to make the Bernanke-Yellen transition look more reassuring.
And then on December 18, outgoing chair Bernanke announced, with much fanfare, that the taper would happen after all, early in the first quarter of 2014 — after he is safely out of his office in the Eccles building and back in his bomb shelter on the Princeton campus. The Fed meant it this time, the public was given to understand.
The only catch here, as I write, after the latest taper announcement, is that interest on the 10-year treasury note has crept stealthily back up over 3 percent. Wuh-oh. Not a good sign, since it means more expensive mortgages and car loans, which happen to represent the two things that the current economy relies on to appear “normal.” (House sales and car sales = normal in a suburban sprawl economy.)
I think the truth is the Fed just did too darn much QE and ZIRP and they waited way too long to cut it out, and now they can’t end it without scuttling both the stock and bond markets. But they can’t really go forward with the taper, either. A rock and a hard place. So, my guess is that they’ll pretend to taper in March, and then they’ll just as quickly un-taper. Note the curious report out of the American Enterprise Institute ten days ago by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion. Which would pretty much negate the proposed taper of $5 billion + $5 billion (Treasury paper + Mortgage paper).
And in so faking and so doing they may succeed in completely destroying the credibility of the Federal Reserve. When that happens, capital will be disappearing so efficiently that the USA will find itself in a compressive deflationary spiral — because that’s what happens when faith in the authority behind credit is destroyed, and new loans to cover the interest on old loans are no longer offered in the non-government banking system, and old loans can’t be serviced. At which point the Federal Reserve freaks out and announces new extra-special QE way above the former 2013 level of $85 billion a month, and the government chips in with currency controls. And that sets in motion the awful prospect of the dreaded “crack-up boom” into extraordinary inflation, when dollars turn into hot potatoes and people can’t get rid of them fast enough. Well, is that going to happen this year? It depends on how spooked the Fed gets. In any case, there is a difference between high inflation and hyper-inflation. High inflation is bad enough to provoke socio-political convulsion. I don’t really see how the Fed gets around this March taper bid without falling into the trap I’ve just outlined. It wouldn’t be a pretty situation for poor Ms. Janet Yellen, but nobody forced her to take the job, and she’s had the look all along of a chump, the perfect sucker to be left holding a big honking bag of flop.
We’re long overdue for a return to realistic pricing in all markets. The Government and its handmaiden, the Fed, have tweaked the machinery so strenuously for so long that these efforts have entered the wilderness of diminishing returns. Instead of propping up the markets, all they can accomplish now is further erosion of the credibility of the equity markets and the Fed itself — and that bodes darkly for a money system that is essentially run on faith. I think the indexes have topped. The “margin” (money borrowed to buy stock) in the system is at dangerous, historically unprecedented highs. There may be one final reach upward in the first quarter. Then the equities crater, if not sooner. I still think the Dow and S &P could oversell by 90 percent of their value if the falsehoods of the post-2008 interventions stopped working their hoodoo on the collective wishful consciousness.
The worldwide rise in interest rates holds every possibility for igniting a shitstorm in interest rate swaps and upsetting the whole apple-cart of shadow banking and derivatives. That would be a bullet in the head to the TBTF banks, and would therefore lead to a worldwide crisis. In that event, the eventual winners would be the largest holders of gold, who could claim to offer the world a trustworthy gold-backed currency, especially for transactions in vital resources like oil. That would, of course, be China. The process would be awfully disorderly and fraught with political animus. Given the fact that China’s own balance sheet is hopelessly non-transparent and part-and-parcel of a dishonest crony banking system, China would have to use some powerful smoke-and-mirrors to assume that kind of dominant authority. But in the end, it comes down to who has the real goods, and who screwed up (the USA, Europe, Japan) and China, for all its faults and perversities, has the gold.
The wholesale transfer of gold tonnage from the West to the East was one of the salient events of 2013. There were lots of conspiracy theories as to what drove the price of gold down by 28 percent. I do think the painful move was partly a cyclical correction following the decade-long run up to $1900 an ounce. Within that cyclical correction, there was a lot of room for the so-called “bullion banks” to pound the gold and silver prices down with their shorting orgy. Numerous times the past year, somebody had laid a fat finger on the “sell” key, like, at four o’clock in the morning New York time when no traders were in their offices, and the record of those weird transactions is plain to see in the daily charts. My own theory is that an effort was made — in effect, a policy — to suppress the gold price via collusion between the Fed, the US Treasury, the bullion banks, and China, as a way to allow China to accumulate gold to offset the anticipated loss of value in the US Treasury paper held by them, throwing China a big golden bone, so to speak — in other words, to keep China from getting hugely pissed off. The gold crash had the happy effect for the US Treasury of making the dollar appear strong at a time when many other nations were getting sick of US dollar domination, especially in the oil markets, and were threatening to instigate a new currency regime by hook or by crook. Throwing China the golden bone is also consistent with the USA’s official position that gold is a meaningless barbaric relic where national currencies are concerned, and therefore nobody but the barbaric yellow hordes of Asia would care about it.
Other nations don’t feel that way. Russia and Switzerland have been accumulating gold like crazy at bargain prices this year. Lat year, Germany requested its sovereign gold cache (300 tons) to be returned from the vaults in America, where it was stored through all the decades of the cold war, safe from the reach of the Soviets. But American officials told the Germans it would take seven years to accomplish the return. Seven years ! ! ! WTF? Is there a shortage of banana boats? The sentiment in goldville is that the USA long ago “leased” or sold off or rehypothecated or lost that gold. Anyway, Germany’s 300 tons was a small fraction of the 6,700 tons supposedly held in the Fed’s vaults. Who knows? No auditors have been allowed into the Fed vaults to actually see what’s up with the collateral. This in and of itself ought to make the prudent nervous.
I think we’re near the end of these reindeer games with gold, largely because so many vaults in the West have been emptied. That places constraints on further shenanigans in the paper gold (and silver) markets. In an environment where both the destructive forces of deflation and inflation can be unleashed in sequence, uncertainty is the greatest motivator, trumping the usual greed and fear seen in markets that can be fairly measured against stable currencies. In 2014, the public has become aware of the bank “bail-in” phenomenon which, along with rehypothication schemes, just amounts to the seizure of customer and client accounts — a really new wrinkle in contemporary banking relations. Nobody knows if it’s safe to park cash money anywhere except inside the mattress. The precedent set in Cyprus, and the MF Global affair, and other confiscation events, would tend to support an interest in precious metals held outside the institutional framework. Uncertainty rules.
Miscellany
I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.
Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.
Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office. It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.
Elsewhere in the World
Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.
The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.
I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.
The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.
The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.
That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.” They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.
By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.
As it happens, the third in the series of my World Made By Hand novels, set in upstate New York in the post-collapse economy, will be published in September by the Atlantic Monthly Press. It’s a ripping yarn. Whether anyone will have enough money to buy a copy, I can’t predict. Happy 2014, Everybody!
New Features this week at kunstler.com:
Jim’s Garden Report, 2013
Jim’s New Paintings, 2011-2013
Published as an E-book for the first time!
The 20th Anniversary edition
With an entertaining new introduction by the author
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The Sky Is Falling: Chicken Little Was Right All Along, By Don Wilkin « Speaking Truth to Power
The Sky Is Falling: Chicken Little Was Right All Along, By Don Wilkin « Speaking Truth to Power.
My obsession with sustainability dates back to 1969, the year I started my doctoral dissertation on human carrying capacity. I became aware that there was real danger of overshooting that capacity and that if we consumed enough of our ecological capital, we risked a population crash and even possible human extinction. In the meantime, I warned, we could expect a long, bumpy slide into poverty as resources were used up. Colleagues accused me of sounding like Chicken Little.
Since then, our exploding consumption, while causing a modest (but temporary) reduction in poverty, has been confused with real prosperity despite global resources having been ravaged and inequality having ballooned to record heights. I was guilty of underestimating our greed and overestimating the time we had left. It wasn’t until this last decade that ecological footprint analysis confirmed we had already overshot Earth’s carrying capacity back in the early ‘70s.
The overshoot is now in its fifth decade and continues to gather momentum as the ultimate human ecological disaster: mass extinction, fisheries depletion, aquifer overpumping, nonrenewable natural resource depletion, soil erosion, glacial melting, ocean acidification, nuclear waste accumulation, more violent storms, rising sea levels, skyrocketing food prices, plummeting energy return on energy invested, growing numbers of permanently displaced environmental refugees, and growing global financial instability. Regrettably, 79 million net new people join the global mayhem each year, yet we don’t seem particularly concerned about it, assuming, I suppose, it will take care of itself. It will. No one will want to be around when that happens, though.
I am well aware, after nearly a half century of trying, that my sense of impending doom is not widely shared. The sun still shines, gas tanks are full of ethanol, fridges are fully stocked with thousand-mile salads and 3000-mile bananas, and we are warm and cozy. Few can even conceive of the possibility of an impending collapse of human civilization, but there are notable exceptions. My angst is shared by those who, like myself, have studied critical resources in detail and have come to similarly dark conclusions about our future possibilities: James Hansen, climate; Lester Brown, food production; Craig Dilworth, technology; Chris Clugston, nonrenewable natural resources; Paul Ehrlich, population; Richard Heinberg, fossil fuels; Julian Cribb, agriculture; Paul Farrell, global capital; and Jared Diamond, eco-social collapse, to name a few. Regrettably, putting lipstick on the pig, their warnings are too often couched in false hope – or as a friend of mine calls it – hopium. “We can avoid the breakdown of human civilization if only we will work together to (fill in the blank,) if we do it quickly enough.” One or two of them have likened our situation to being of the same urgency with which we mobilized for World War II. I’m afraid it is at least that compelling and even that may not prove enough.
In a recent analysis of the world’s nonrenewable natural resources (NNRs), author Chris Clugston found that, as of the economic collapse of 2008, 63 of our 89 most critical NNRs were globally scarce. In a private conversation, he believed that 2008 was the peak of human material well-being and he expected, after plateauing for maybe a decade, it would be sharply downhill from there. In 2012, he stated his belief that global economic/societal collapse was “possible within the next 5 years, probable within 15, and all but certain within 25.” The year 2017 struck an ominous note because that was the deadline the International Energy Agency gave us for substantially reducing carbon emissions or risking runaway global climate change. We’ve made virtually no progress since their warning. Quite the contrary. A highly fracked economy (no pun intended) has more than fully “recovered” from its 2008 meltdown and we’re off to the GDP races once again, setting new records for energy consumption every year. Though economists rejoice, climate scientists and ecologists shudder.
The Global Footprint Network has been refining their methods for several decades now. Their analyses are solid. When they say we are consuming 50% more than Earth’s annual ecological restorative capacity, you can be sure it’s at least that, and such profligacy has to have consequences. Their analysis shows that, since 1970, Earth’s overall restorative capacity has declined by almost half while the human population has more than doubled and overall resource consumption has increased even more. This suggests that, by 2060, it could all be over – no more reserve bio-capacity left anywhere. That’s when human death rates must necessarily skyrocket, if they haven’t already.
Deny-ers insist we’re doing just fine. As technologically gifted as we are and with God on our side wanting us all to be rich, we will work it out with little personal discomfort or sacrifice. The world’s plummeting ecological capacity puts the lie to such Pollyannish delusions. By the time reality sets in, our global ecological accounts will be all but empty and there won’t be anything left to restore.
The physical impossibility of continuing as we presently are for more than another few decades seems lost on the vast majority, despite the clarity and preponderance of all monitored trends now. If only a handful of us and practically no public officials really believe such a meltdown is coming, what can realistically be done to prepare for it? Can we avoid having to reduce our population? Couldn’t we all just live more sustainably? Fat chance. It isn’t reasonable to expect the third-world, now experiencing for the first time the goodies they have watched middle class Americans enjoy for generations, to voluntarily cut back on their newly acquired tastes for personal vehicles, computers, cell phones, meat, milk, and eggs. Nor, in truth, are formerly-middle-class Americans likely to give up too much more than they already have. People don’t commonly volunteer to live in deeper poverty, no matter how worthy the cause, having once experienced the benefits of wealth, privilege, and relative immunity from disease, crime, and violence. Typical half-hearted attempts at sustainable lifestyles in the western world won’t forestall global economic collapse anyway and they could even trigger it. The optimum time for funding alternative energy with a good stiff carbon tax was about twenty years ago.
Despite well-meaning attempts by many of my friends to live more sustainably, I am convinced the only equitable, humane, and effective way to pull our fat out of the fire at this late date, if it could be done at all, would be to immediately and dramatically reduce human fertility worldwide to half of replacement for the next three to four generations, somewhere between “one or none” and “one will do, stop at two.” All other attempts to live more sustainably would be – in fact are being – entirely undone by our huge and growing numbers. Such restraint would have to continue until we got our numbers WAY down, certainly below a billion, and possibly below half a billion depending on how long it took. That level of voluntary reproductive restraint, I don’t need to tell you, would be unprecedented in human history. Economic collapse is a far more probable resolution to our overshoot problem.
Realistically, most of us won’t survive global economic collapse. The vast majority of us have neither the skills nor the resources to survive in a purely local economy. Despite the earnest efforts of groups like Sierra Club and the Transitions network, it is unlikely that anything can now stop the global economy – and human civilization with it – from collapsing around our heads sometime in the next two to four decades. Most will apparently blithely continue to enjoy our final faux prosperity while it lasts. By the time the meltdown gets their full and undivided attention, it will be too late. The only question then will be how many, if any, will survive to start the insanity all over again? God forbid.
I take little comfort in being old enough to be cashing in my chips before the most serious stages of civilization’s decline and collapse. That doesn’t make it any better for my kids and grandkids. I feel we owe them a realistic assessment of the predicament we have left them. My heartfelt warning to them is that children born today are probably being sentenced, should they survive to adulthood, to living through the darkest period of human history. The decision to bring a child into the world today is – or should be – an excruciating one, a choice between small hope for a survivable future with starkly limited opportunities versus a far higher probability of a much more debased, dispiriting one.
I personally would choose not to reproduce now even if I could (my vasectomy has sealed that path.) If this past century represents the pinnacle of human ability to sustainably manage and equitably share our global commons, and if, despite our (apparently benumbed) big brains and digital libraries overflowing with the accumulated wisdom of all human history, we can aspire to no higher economic goals than ever-greater material consumption, constant growth, and perpetual crowding at the expense of all other species on this planet, including other humans, it might be better if human reproduction were put on the evolutionary back burner for a very long while. Only a radical pruning provides any hope for a post-human “founder” population sometime in the future with substantially more reverent attitudes toward Earth and more caring and social responsibility toward one another.
A final point – one can guarantee an argument merely by suggesting the need to stabilize, let alone reduce, human numbers. After worshiping at the altar of perpetual growth for 200 years, that’s pure sacrilege. One can elicit even greater anger by pointing out that what evolutionary success we have had to this point has been a result of inborn proto-socialist tendencies in all human beings. We are a modestly evolved social mammal, and socialist (small “s”) – or mutualistic – or cooperative – communities have been central to whatever evolutionary success we have enjoyed as a species. This fact suggests the best and possibly only way forward from here, at least for an insightful few. To wit:
If we do manage to pull back from the abyss, or if enough of us survive the plunge, it will surely be because small groups of us have formed mutualistic communities for the express purpose of helping one another eke out a largely local living from a depleted planet Earth. We will be painfully aware, by then, that a sustainable lifestyle must involve subordinating our reproductive inclinations to the long-term well-being, not just of our own community, but of the larger ecological community on which our well-being depends. We will certainly understand that a global ecosystem is a sacred trust that demands our respect and, yes, our reverence. Finally, we will need the humility to understand that we need a healthy global ecosystem far more than it needs us, and that we need to invest at least as much of our treasure in husbanding that priceless natural legacy as in pursuing our own material well-being.
Don Wilkin is a Human Ecologist and may be contacted at: wilkin@olympus.net
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Museletter 257: Fingers in the Dike | Richard Heinberg
Museletter 257: Fingers in the Dike | Richard Heinberg. (source)
While the mainstream media has been focused on the immediate crisis of the US government shutdown the bigger issues behind the current economic crisis are still largely ignored. This month’s Museletter explores what is really going on in two essays.
Fingers in the dike
The 19th century novel Hans Brinker, or The Silver Skates by American author Mary Mapes Dodge features a brief story-within-the-story that has become better known in popular culture than the book itself. It’s the tale of a Dutch boy (in the novel he’s called simply “The Hero of Haarlem”) who saves his community by jamming his finger into a leaking levee. The boy stays all night, despite the cold, until village adults find him and repair the leak. His courageous action in holding back potential floodwaters has become celebrated in children’s literature and art, to the point where it serves as a convenient metaphor.
Here in early 21st century there are three dams about to break, and in each case a calamity is being postponed—though not, in these cases, by the heroic digits of fictitious Dutch children.
A grasp of the status of these three delayed disasters, and what’s putting them off, can be helpful in navigating waters that now rise slowly, though soon perhaps in torrents.
1. Unconventional fuels and production methods
I’ve written so much on the subject of peak oil, and some of it so recently, that it would be redundant to go into much detail here on that score. Suffice it to say that world conventional crude oil production has been flat-to-declining for eight years now. Declines of the world’s supergiant oilfields will steepen in the years ahead. Petroleum is essential to the world economy and there is no ready and sufficient substitute. The potential consequences of peak oil include prolonged economic crisis and resource wars.
Producers of unconventional liquid fuels—tar sands, tight oil, and deepwater oil—are playing the role of Dutch boy in the energy world, though their motives may not be quite so altruistic. With unconventional sources included in the total, world petroleum production has grown somewhat in recent years, but oil prices are hovering at near-record levels (that’s because unconventionals are expensive to produce). The oil industry has successfully used this meager success as a public relations tool, arguing that it can continue pulling rabbits out of hats for as long as needed and that policy makers therefore need do nothing to prepare society for a peak-oil future. In fact, world oil markets are depending almost entirely on continued increasing production from the US—all of which must come from fracked, horizontally drilled wells that decline rapidly—to keep supplies steady.
Even the US Energy Information Administration recognizes that the US tight oil boom will be history by the end of the current decade—though the official forecast shows production levels gently drifting thereafter when in all likelihood they will plummet, given the spectacular per-well decline rates of the Bakken and Eagle Ford formations. Is there another Dutch boy waiting, finger ready? Tight oil deposits in other countries will take longer to develop and will present more technical challenges. Other unconventionals, like extra-heavy oil in Venezuela and kerogen deposits in the American West, will be even slower and more expensive to produce—if they’re ever tapped to any significant extent (Shell just abandoned its kerogen research operations without any prospect of eventual profitability).
Bottom line: the recent, ongoing “new normal” of high but stable oil prices may last another few years; after that, oil supplies will become much more problematic, and prices are anybody’s guess. The dam is weakening. Have your hip boots and waders ready.
2. Quantitative easing
The crash of 2008, bad as it was, should really be thought of as merely a symptom of a more pervasive, profound, and ongoing shift in the entire global economy. Our growth-based, fossil-fueled economic system is colliding with foreseeable energy and debt limits. We constructed our existing financial system during a historic period of anomalous rapid growth; without further growth in manufacturing, transport, and trade, the pyramid of credit and leverage built by investors during recent decades is likely to implode. We got just a taste of what might be in store with the Lehman and AIG failures.
Some who understood the system’s vulnerability early on, and who warned that a crash was imminent, forecast a rapid collapse of the entire economy. Each year from 2008 up to the present, these commentators have insisted that in a matter of months we’ll see bread lines, shuttered banks, and riots in the streets. Riots and bank failures have indeed shown up in Greece, but here in the US (and Britain, Germany, China, Canada, Australia . . . the list continues) economic life goes on. In the US, pre-crash norms in employment, household income, and house values have not returned, but neither has the sky fallen. Most economists say the nation is in the midst of a “fragile recovery.”
Why no collapse? Governments and central banks have inserted fingers in financial levees. Most notably, the Federal Reserve keeps crisis at bay by purchasing $85 billion in US Treasury bonds each month, using money created out of thin air at the moment of purchase. This enables the Federal government to borrow at low interest rates, and also props up the American financial industry. Virtually all of the Fed’s money stays within financial circles—mostly the “shadow banking system”; that’s a big reason why the richest Americans have gotten much richer in the past few years, while most regular folks are treading water at best.
Quantitative easing is poorly understood by the general public and provokes strong reactions from many economists. Some think QE must lead to hyperinflation (it hasn’t so far, and it’s been going on for nearly five years). Others think that, in principle, it could be used (if differently organized and applied) to solve all our debt problems.
Be that as it may, what has the too-big-to-fail, too-greedy-not-to shadow banking system done with the Fed’s trillions in free money? Blown another asset bubble and piled up more leveraged bets. No one knows when the latest bubble will pop, but when it does the ensuing crisis will likely be worse than that of 2008. Will central banks then be able to jam more fingers into the leaky levee? Will they have enough fingers?
3. Global warming “pause”
The threat of climate change needs no introduction—it’s the mother of all impending environmental crises. And we are already seeing serious impacts, including superstorms, droughts, and the melting of the north polar ice cap. Nevertheless, it’s all not as bad as it might be, were it not for the fact that the warming of Earth’s surface air temperatures has slowed since 1998 (which was an anomalously hot year).
Climate change deniers have seized upon evidence of this “pause” to argue that global warming has essentially stopped. After all, if the greenhouse-gas-laden atmosphere were in fact trapping more heat, where could all that heat be hiding?
Turns out, very little of Earth’s trapped heat warms the atmosphere and land surface; most of it (over 90 percent) is absorbed by the oceans. Part of the explanation for the slowdown in surface warming lies in the heating of deep ocean waters. Global warming hasn’t really “paused”; it’s just gone to the depths. At the same time, there has been a downswing in the Pacific Ocean’s natural temperature cycle, which has also correlated with a cluster of La Nina years (usually associated with a cooling of ocean surface waters). This temperature cycle masks the underlying warming trend. So it appears that, for now at least, Mother Earth herself is playing “The Hero of Haarlem.”
There’s no way to know how long this current cool cycle will last, though the previous Pacific cool phase, which started in the 1940s, continued for about 30 years. If the present cycle is of the same duration, then in about 15 years much of the heat currently being dumped in deep oceans may begin instead to remain in the atmosphere. At that point we will likely seeunprecedented rates of climate warming, and far worse episodes of extreme weather.
The fact that climate change is complex and non-linear makes it hard to communicate the urgency of the problem even to scientifically literate audiences. Prof. Arthur Petersen, chief scientist at the Netherlands Environmental Assessment Agency and part of the Dutch delegation that reviewed the latest IPCC report was quoted by BBC as saying: “It is a major feat that we have been able to produce such a document which is such an adequate assessment of the science. That being said, it is virtually unreadable!”
Making the most of borrowed time
In the story of the Dutch boy, adults in the village eventually find the brave child and make necessary repairs to the dike. But for the three leaky systems discussed above, necessary repairs aren’t being made. Most governments aren’t rapidly developing renewable energy and public transport infrastructure; instead, they’re spending their money on building more roads. The shadow banking system is not being downsized and regulated; it’s being propped up and inflated. Fossil fuel use is not being discouraged with meaningful carbon taxes (except in a very few countries); instead, oil and gas industries are subsidized.
The folks in charge will probably continue to buy as much time as they can, for as long as they can, even if doing so makes the situation worse in the long run. Nature is less predictable: humans cannot control the duration of the global warming “pause.”
The phrase “living on borrowed time” inevitably comes to mind, with its implication of impending doom. Yet we simply don’t know how serious the impacts of these delayed crises will be within a humanly meaningful timeframe—say, the next ten or twenty years. Doom is possible, but it may be that nature, central banks, and crafty drillers conspire to maintain the appearance of normalcy in the eyes of at least a substantial portion of the population even as the waters rise around our ankles. No collapse here, folks; just keep shopping.
It’s hard to know what attitude to adopt with regard to these things. Given that delays will likely make matters worse when the dam does break, and that repairs aren’t being undertaken, should we therefore say, “Bring on the crisis, let’s get it over with?” If that is our stance, then what might be done to accelerate events? Our oil-supply situation could be hastened slightly toward crisis by a decision against the Keystone XL pipeline, which would discourage further expansion of tar sands mining (there’s no “bring-on-the-crisis” upside to a decision in favor of the pipeline—that would worsen the climate dilemma without doing anything to end the global warming “pause”). Maybe causing a US government default would usher in the next chapter of global financial Armageddon: that’s entirely within the capabilities of at least a few people, and they seem to be doing a very good job of marching us toward the brink. Perhaps we’ll all be over the edge in just a few weeks.
Or shall we simply enjoy our remaining days of “normal” life? Spend time at the beach. Learn to play a musical instrument. See friends and family. Those are perfectly understandable and legitimate ways of whiling away borrowed time.
Here’s a thought: How about using whatever interval we have—whether it turns out to be weeks or decades—to build community resilience? Get to know your neighbors. Plan next season’s garden. Join efforts to create a community-run renewable energy utility company.Buy from local farmers. Put your savings in the local credit union. Take a Transition Launch! training course.
If we do these things now, then when fingers can no longer plug leaks the ensuing mess may be far less daunting. Meanwhile there may be some substantial psychological benefits from living in a way that’s more localized and communitarian.
If that’s your choice, you’d better get going. There’s no telling how much time we have.
Related articles
- Richard Heinberg: why end of growth can mean more happiness (takeahappymoment.wordpress.com)
- America’s natural gas revolution isn’t all it’s ‘fracked’ up to be (valuewalk.com)
- SNAKE OIL: Chapter 5 – The Economics of Fracking: Who Benefits? (resilience.org)
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Richard Heinberg on Natural Gas: Bridge Fuel or Fool’s Gold?
Richard Heinberg on Natural Gas: Bridge Fuel or Fool’s Gold?.
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Olduvaiblog: Musings on the coming collapse 
