Crunch Time

September 3, 2007
     Like a lot of observers in thrall to the agony of the financial markets, I have been commenting on less-than-the-Big-Picture in recent weeks. The Big Picture is the health of American society, which includes both its economy and culture. In healthier times, finance was but one part of the economy, the means for raising capital investment to apply to productive activity. For the past two decades, we have allowed it to become an end in itself.

      As US manufacturing decamped to low-labor-cost nations, we turned increasingly to the manufacture of abstruse investment schemes designed to create "value" ingeniously out of thin air rather than productive activity. These succeeded largely because of the momentum of legitimacy American institutions accumulated in the years after the Second World War. The rest of the world believed our ingenuity was backed by credibility. That momentum has about run out.

     You will hear about central banks and hedge funds and derivatives and mortgage backed securities, and all kinds of jargon, but the issue will really come down to matters other than finance. Are we building a society with a future? Does our culture affirm life or yearn for destruction? Are our daily ceremonies and rituals meaningful or empty? Are our hopes and dreams consistent with what reality has to offer? Can we look in the mirror and say that we are upright people?

     I think we are in trouble with all these things. But I doubt we can give up our current behavior without going through a convulsion. The psychology of previous investment is, for us, a force too great to overcome. We will sell the birthrights of the next three generations in order to avoid changing our behavior. We will blame other people who behave differently for the consequences of our own behavior. We will not understand the messages that reality is sending us, and we will drive ourselves crazy in the attempt to avoid hearing it.

    I haven't changed my view of what is happening to us. We have run out our string of stunts and tricks in the money rackets. We've spent our legitimacy. The rest of the world will strive mightily to get free of their obligations to us, including their respect for the value of our currency. The meta-cycle of suburban development, including the "housing" and all its accessories in roads and chain stores, is hitting the wall of peak oil. The suburban build-out is over. This will come as an agonizing surprise to many. The failure to make infinite suburbanization the permanent basis for an economy will rock our society for years to come. Hundreds of thousands of unemployed men with pick-up trucks and panoplies of power tools will feel horribly cheated. I hope they don't start an extremist political party when the re-po men come to take their trucks away.

      Even under the best circumstances, with a nationwide change of heart, and really wise leadership, America would find it difficult to make the necessary changes that new reality requires. Of course, reality will force us to make these changes whether we're on board with the program or not. The only variable is how much turmoil may ensue in the process. If we resist doing what reality commands, our trouble is certain to be worse.

     What does reality command? Well, first of all (and especially for the benefit of the enviro-progressives I have met recently, who want gold medals for buying hybrid cars) we'd better drop the idea that there is any way whatsoever to preserve our system of happy motoring. The car as a mass market phenomenon, and enabler (dictator, really) of all our daily life arrangements, is finished. We'd better find something else to talk about, or the American future will amount to little more than a colossal circle-jerk on an increasingly unfixable freeway. I am hugely worried (obviously) that even the intelligent-and-educated fraction of our society cannot focus on anything but how to keep all the cars running. A failure to drop this, and move on to more practical endeavors, will lead automatically to a failure of reasonable politics in this country. It is already manifest in the abysmal failure of the Democratic candidates for president to address the looming oil import crisis that will certainly be underway as soon as any of them is inaugurated.

     Reality commands that we prepare to rebuild our small towns and small cities and downsize our gigantic metroplexes. Reality commands that we get serious about local food production and local economies. Reality commands that we rebuild the kind of public transit that people will be grateful to travel on. Reality commands that we prepare to rebuild our harbor facilities for a revival of maritime trade, using ships and boats that do not necessarily run on oil. Reality commands that we put an end to legalized gambling, in order for the public to re-learn one of the primary rules of adult life -- that we generally should not expect to get something for nothing.

     The trouble we are seeing in the financial sector is largely a result of blowback from tens of millions of people who tried to get something for nothing. It is a circumstance that is now beyond the control of the Bushes, Paulsons, and Bernankes. Their intended-to-be-soothing statements on Friday will not hold back the implosion of cascading defaults and cumulative insolvency. A few "poster children" may be symbolically rescued to try to prop up confidence in this-or-that paper, but an awful lot of other people and institutions will just go down, unfortunately, because of their own bad choices.

     A strange new meta-reality will assert itself in America: that shit happens. We will see the ruined people and feel bad about them, but we will not be able to un-do the shit that has happened to them, that they have brought upon themselves. This is how the idea of moral hazard returns to a society that has lost its way. Meanwhile, there is too much to do for the survivors to sit around wringing their hands and being crybabies. You can start by taking all the mental effort that you are currently wasting on the subject of cars, and how to run them on fuels other than gasoline, and instead focus your energy on how to rescue our political institutions so that a truly informed public can reconstruct a bankrupt society into a living and credible republic.

Comments

[Nudge]

Lovely post, Jim. The future is now here, scratching at the door, and collectively we're not ready to face it. Charlie Foxtrot Nation, indeed.

[DaveL]

Well, JHK has come around to the bigger picture this week, but not far enough around. there is no salvaging this economy or society, nor should either be salvaged.

Instead of talking about getting rid of cars, we need to be talking about reducing population, and there's no real point in talking about that. It will take care of itself in the same way it has always taken care of itself, starvation, war, disease, natural disaster etc. Of course we've added nukes into the mix.

DaveL

[Dave]

Great Piece !
JHK is an optimist and old time patriot that values what this country has done and mourns what it has become. I wish his wishes well.
But (and it is a big one in my view) there is the past as others have experienced it and its consequences as others see them. There is the deep seated genocidal and racist stuctures that has so harmed out national psyche, there is the fact of our relations to other peoples that festers and needs airing, there is our military agressions of the past two hundred years, and finally there is the sickening hubris of empire that has fatally damnaged the Republic JHK so loves and as I once did as well.
Perhaps there can be a national renewal and shared vision for America. I think not. I see massive social breakdown and chaos followed by separtist movements damn near everywhere with the final curtain being the end of the American Experiment in Democracy.

[DaveL]

anyway, as David Mathews might say: it's a beautiful day, time to go out and play.

DaveL

[marcyincny]

I'm gonna be thinking of my grandparents today and the rest of their generation of Donovans and Hapgoods, remembering my grandmother telling me how she would send my grandfather off in the morning not knowing if he'd be home for dinner or in jail and how the deed to the Donovan farm in North Brookfield, Massachusetts used to be put up as bail on a regular basis. It's amazing how that kind of passion and courage can die out in a couple of generations.

[adrian]

So the "Big Picture" makes sense to me, all the elements being in place. My problem boils down to the question of how this all plays out and on what timetable. Does it happen as a meltdown over the course of a decade or does it take generations so that people adjust slowly. The "Archdruid" lays out a scenario for a long slow collapse like the Roman Empire. Somehow this makes sense to me. I see adaptive responses to to energy shortages/ever increasing energy costs. many small individual decisions will be made over many years. Smaller cars will be bought, people will shorten commutes and houses will shrink while a new interest in energy efficency will be reflected in design decisions. Trucking will evolve so the long legs will be done by containers on trains. Civil aviation will change gradually while fast rail will increase. I think life style evolution will happen in stages so that many folks will view it as "progress" rather than seeing themselves in the throes of the "Long Emergency". Now, it's true that geopolitical upheaval could upset this scenario and bring on an extended crisis, but if that doesn't happen, it could take generations of incremental change to get to the stage Jim envisions. After all, it took 100 years to get where we are and could take that long to go back to a lower energy use world and that world probably won't look like the world of 1900.

[Alfred]

How I wish you were correct Adrian.

Unfortunately, the goodwill that the USA earned during WW2 and its aftermath has dissipated. There are a lot of people out there who will not supply the necessary inputs to your vision without real resources or goods in exchange.

A good place to start is by studying the collapse of the Soviet Union and its aftermath. Take a look at Dmitry Orlov http://www.survivingpeakoil.com/article.php?id=soviet_lessons

[Matt Holbert]

I think that some of the stages that Adrian refers to will be fairly painful. The manipulation that Jim refers to has gone on for so long that when it finally unravels it will leave many without any equity in their homes and little in their 401k's. For a good explanation of the production and manipulation cycle that Jim mentions, read Robert Prechter's *Conquer The Crash*. He makes the case that the market will drop to around 777, but does not predict how long the manipulators can keep the game going. It will be interesting to see how people react to the sudden drop.

Once people adjust to the fact that they have lost most of their retirement money, we may enter a long period similar to that described by Adrian.

[XER]

It's time for America to look in the mirror, and be honest with what it sees. This must be done without a plastic surgeon standing in the back ground glowing about the false possibilities. "A tuck here, a nip there, and you will be young and beautiful again my dear!" We need to face the brutal truth about who we are.

"Can we look in the mirror and say that we are upright people?"
Sadly the answer in no. We are viewed as a brutal and violent nation, that is quick to threaten and bomb innocent women and children, when our selfish way of life is threatened. We are going to learn the hard way, that crime does not pay. We deserve every bit of bad shit the comes our way. It is high time to tell Jiminy Cricket to fuck off and die.

[Philski]

"Now, it's true that geopolitical upheaval could upset this scenario..."

The most predictable upheaval is the imminent oil import crisis. Oil producing countries will be exporting less oil as Peak becomes self evident and their own needs soar with growing populations. This alone will shitcan your incrementalist approach.
America will reach for it's gun when it can no longer buy what it needs to perpetuate it's own myhos.

[Perfectscotty]

Very good response Adrian ! What you described is the best case scenario, the best that we can possibly hope for but I like many others are quite a bit more pessimistic than Yourself. Change is painful whether it's as a society or as a person. This will be a rude awakening for some but we have a leg up and will have it a little better.

[umass82]

As jim Morrison said
"this is the end ... my friend weird scenes inside the gold mine"

What has been happining is nothing short of counterfitting, but using funny bonds which sell for real (So called) money, as in any instance when the currency is devalued there are consequences.

I am constantly amazed at the lack of a public dialog on peak oil. It is quite apparent that we ARE NOW ON THE PLATEAU.

I have given up trying to explain it to freinds and family I am called a downer and am told by folks that they can not deal with it or that the oil will not run out for years.

That is why politicians even if they are aware of the situation will not discuss it, if they did they would lose votes, people do not want to hear that as a result of the lack of preparation that theis way of life will start to collapse. Apart from a few incongress, no politicians are publicy speaking on this.

So when the oil shock strikes and the SHTF it will be a real shock to most, and that will be a crucial time, because at that point there will be little time to react before the folks realize that unlike 79 the pumps will stay dry, and do not expect help from the SPR that will go to the military in a split second.

Having lived in FLA after the hurricanes and seen what happens after the pumps stop for even a short time, I can tell you that it will not be pretty.

With no way to power transportation imported goods will stop appearing on store shelves so stock up on those high quality made in china products that you can not live without, like happy meal toys and toasters etc. Also stock up on can goods veggies etc for the long winter, no 9000 mile salads in the future.

The shitstorm we are facing is a cataclysim toys and salads are the least of our worries, think of the english truck strike lasting the days it almost ruined the country now think of that lasting 4eva,

[Nudge]

Umass82, nice comments. I think you've expressed the almost-certain potential future quite well.

It's pretty sad that just 2 generations ago, educated & willing self-sufficiency was quite the norm here in America. People were intimately involved in the details of their own survival. These days we've reduced survival down to its simplest common denominators here in the United Parking Lot of America, so that almost any retarded schlub can hold down a job of some sort, keep a car on the road, and go buy food at the supermarket.

The supports holding up the intricate debt-creating land-wasting fossil-fuel guzzling infrastructure that makes this modern American Disneyland possible are now vanishing fast. In the place of the Disneyland America will be realities we're woefully unprepared to face. It's very illuminating that not a single serious politician will address these issues. Ah, guess they're too busy pandering to the big-biz lobbying interests that paid for their vacation in the Hamptons or helped get their kids into the right schools.

Interesting times, indeed.

[Nudge]

Gang, yesterday I had the pleasure of visiting upstate NY's capitol district, the area generally agreed to encompass Albany / Troy / Schenectady. Was there to visit Grandma and to meet Greenbeans, one of the other posters here.

Greenbeans has a magnificent organic garden in a suburban setting. I was pretty much awestruck by the quantity and variety and tastiness of stuff he's got growing there. We had a delicious salad of stuff from the garden, so now I'm of course taking his post-peak harem offer pretty seriously :)

[Brandon]

I've got to take up blacksmithing somehow...but where in the Casino laden tourist trap known as Niagara Falls?

[greenbeans]

I really liked "Crunch Time". Great comments too from some new voices.

"I've got to take up blacksmithing somehow..."

That's the best news I've heard today. Brandon, you are the real deal. Do it!

I'm a little wired up from the 'magnifico' coffee that Nudge gave me.

[DavidinLA]

Nice post, umass82. This week my new employer had its 401(k) Representative come to the office to pitch their new enrollment plan. I declined to attend the session, but I could hear the Rep in the other room discussing the importance of the plan, that the Social Security safety net will not be around 30 years from now, -yada yada. The 20-somethings in the office fell for it big time and most of them enrolled in the 401(k) Plan, seemingly excited. Then one of the 20-somethings returned to her desk and jabbered on and on about going to Disneyland this weekend. As Umass82 said, maybe it's best to keep your mouth shut. I'll continue riding my bike to work, bringing homegrown zucchini to the office, and maintaining an aura of mystery...

[adrian]

In my more pessimistic moments I do envision a total collapse coming soon with many aspects of the great depression and, in moods of nihilism and anticipation of reveling in schaddenfreude, I say to myself: "bring it on". There is so much that is utterly tawdry in our society that seeing it all laid low is, on some levels, a welcome prospect. That aside though, I still do believe the likelyhood of a scenario where alternate schemes to keep all the cars running will be avidly pursued and sttempts will be made to economize. This will work, posssibly for a long time, but people will be slowly cooked by the ever increasing costs associated with ever smaller EROEI. At some point, driving as we know it will become an expensive luxury that many will opt out of and, as Jim has mentioned, will become more and more the preserve of the wealthy who will be the object of resentment. In the end I think the car will turn into a light utility conveyance, maybe battery powered, and used just for local use, not for mass transportation. Look for freeways to be taken over by an increasing network of heavy and light rail. I do think Jim is right about the ultimate fate of far-flung suburbs. Most of the buildings are low quality and not adaptable to other uses. Because of their low quality and need for constant maintenance, many will simply be abandonned. I just got back from another western trip. To fly over Atlanta with its miles of big box McMansion suburbs is to view the full display of ultimately futile investment in infrastructure as evanescent in its own way as a 19th. western mining town. I changed planes in Phoenix on my way back and was shocked to see what's been built there. On my return, my google search told me 4 million people live in the "Valley of the Sun". What's to become of that should make for quite a story. So too with the commuter suburbs of the great valley of California where streams of cars converge on the Bay Area from dense-pack subdivisions spread over the valley all the way to the Sierra Foothills. Ever since living in Europe in the sixties I have had the strong conviction that gas was too cheap in this country, way too cheaap and still way too cheap, and that it afforded people the freedom to make life-style choices which they just never should have had the opportunity to make.

[Holmes, I presume]

Nudge,

There’s a technical solution for fat fucks that cower and shiver and the prospect of having to waddle unassisted from SUV to McStore, McHouse, McEtc. They need only to blanket their ordinary reality with conveyor belt sidewalks that move people through air conditioned plastic tunnels (like the one’s that ferry obese primates into Las Vegas casinos). I think that the plastic tunnels have a television monitor every 100 yards or so to provide bursts of entertainment/advertisement along the way.

I’m glad that you made it out to see greenbean’s garden. It sounds great!

[Nudge]

About upstate NY .. some of you regulars probably already know I grew up out there and used to live in Schenectady, at least until the late 1980s. Besides visiting Grandma and meeting Greenbeans, I wanted to see how the area had changed since I left.

Sadly, much of the area seems afflicted by sprawl of the most banal type. Part of it is the nearly nauseating manner in which all the newer stuff is completely homogenus, for example in the way they make every new drive-in eatery look the same no matter where in the country it's located. The current style seems to be those striped colored plastic awnings over every window, decorated in loud colors, with acres of asphalt around for fat schlubs to park their Tonka-lookalike vehicles on. We wouldn't want them to suffer the indignity of having to walk, say, more than 30 feet to the door of the restaurant, would we? Some of them might not even make it that far. If you observe some of these schlubs carefully, you will even see some of them going through an obscene ritual of gross waste whereby they drive from one overdecorated roadside fry pit to the next, looking for a parking space close to the door – all in some giant fuel-guzzling SUV of course.

Everywhere you could see signs of the same sorry sprawl story being repeated elsewhere in America – that is, the process by which local farmers are pushed out via raised taxes and raised land valuation, all brought on by suburban sprawl, and eventually sell their land to grubby RE speculators who build more McHouses and move on to the next farmer's field. I feel less about the developers doing this in Phoenix or Las Vegas, however, than about them doing the same here in the northeast. Some of our very best farmland and topsoil here is being bulldozed and paved over. The northeast is special in that it's got lovely human-scaled terrain, lots of standing & running water, lots of interesting ecological niche environments, and plenty of precipitation. We're desperately going to need that space for growing stuff once the Ogalalla hits the “low” mark and the great arid expenses of the west and midwest and inner CA are no longer irrigated.

[Perfectscotty]

"fat fuck" conveyors, "obese primates" bwaaaahaaaa.... man did I laugh at that because you know what ? It's true and it's hard as heck to watch.

Greenbeans garden, even greenbean himself is a reason to be optimistic. There are a lot of survivalists out there, more than we realize and they are the ones best prepared for our futures. Good job greenbean ! You can grab a lawn chair, pop some corn and watch the SHTF like it's a bad sitcom.

[Nudge]

Greenbeans, sorry, that coffee is a tad strong. Nice stuff though :) My cousin introduced me to Jungle Jim's a few years back and now I always go there at least once during vacation in Ohio.

[longtimelurker]

Sorry ta look like I dissed ya and left ya hangin' in the the last thread, Homie. Actually I've been on assignment out of the country for the last couple of weeks so I haven't had the pleasure of experiencing the heatwave back at home though I've been following it remotely.

Damn high end five star hotel I've been put up in here charges something like 4 bucks per 30 minutes of 'net time so my access has unfortunately been limited :( I have about enough time to check emails and save CFN on a daily basis for reading offline.

[mdubbleyou]

The Long Emergency will materialize in strange and unexpected ways.

Farming in the inner city is an example:
http://www.freep.com/apps/pbcs.dll/article?AID=/20070727/FEATURES04/707270349

I, too, have stopped trying to explain our collective Shit's Creek predicament to folks. It's more rewarding to take Matt Savinar's advice and plan my escape to a temperate locale with plenty of rainfall and less than 50 people per square mile.

[Dr.Doom]

I'm not going to get into details because many of you know them already and they do in fact bum me out to think about them too much. Just remember that Jim is actually an optimist (at least compared to me and others) in that he warns us but holds back on the projected outcomes. adrian's first post in this commentary is actually the best we can hope for. My opinion is it is way too late for that outcome, too much time has been wasted. If you look around and judge what is really NOT going on, the feet are heavy on the accelerator, and the cliff lies ahead. Over at TOD, there are many fine posts that are attempting to estimate when the big event may occur. Let's just say you had better made your plans before the end of next year, and yes, things could unravel even sooner.

Nice post Jim, you unfailing optimist.