The Dis-information Society

September 10, 2007
     One question that readers ask me often is why the mainstream media is doing such a poor job of reporting the nexus of the global energy emergency and the turmoil in global finance. I maintain my "allergy" to conspiracy theories. There isn't any clique of top-hatted Wall Street biggies with monocles joining with with gray-suited CIA-types to intimidate editors with tongs and electrodes. American culture has become self-dis-informing.

     As my friend Peter Golden (blogger at Boardside) puts it so well: "When people lie, they know they are doing something wrong. But when they just make things up, there's no consciousness of right or wrong at work. It seems morally okay to live in a fantasy world -- and this is much more pernicious to the public discourse than lying."

     My friends, who are mostly ex-hippie, yuppie progressives, have been locked in prayer to exorcise the evil spirit of George W. Bush for six years, but they fail to recognize a more comprehensive failure of leadership in every sector of American life, and especially in the ones where a lot ex-hippies-now-yuppies run things. Our political leadership may be deplorable, but so is our leadership in business, education, the arts, and especially the media.

     The poster child for this is The New York Times. In their reporting on the world oil situation, they have consistently and uncritically swallowed the public relations handouts of Daniel Yergin's Cambridge Energy Research Group (CERA), a wholly-owned PR shop serving the oil industry. Laziness doesn't even explain this. It's bad editorial leadership. It's a failure to ask the important questions.

      On Friday, the oil futures markets closed a dollar-and-change away from the all-time record high price (the same day the Dow Jones Industrial Index fell 250 points.) Today's (Monday's) lead headline in the NY Times Business Section is "Disney to Test Character Toys for Lead Paint." Well, I hope we get that situation straightened out so that civilization can continue with a full supply of Disney action figures under the Christmas trees -- and forget for a minute whether Grandma will be able to drive to the WalMart in December, or whether WalMart will be able to keep the diesel tanks filled for their "warehouse-on-wheels, or whether both Grandma and the Assistant Manager of her local WalMart are three months in arrears on their re-set mortgage payments, and maxed out on their Discover cards. . . .

     To me, there seems to be an obvious correlation between the current failures in the financial markets -- in particular the credit sector -- and the gross failure of leadership across the board in American life. Ultimately, credit depends on legitimacy, and so does authority. They are tied together. For years, both have been immersed in fantasy rather than reality.

     How does one otherwise account for the remarkable disappearance of standards in lending among the human beings who lead banking institutions? All the banking executives didn't wake up one morning missing sixty IQ points. And yet neither can one say that they all woke up one morning with evil intentions to work wickedness in the world. They simply became subsumed in a fantasy that there was no material difference between borrowers with a proven ability to pay back loans and borrowers with no record of credit-worthiness. And they got rid of the problems that might have ensued by selling off wholesale bundles of good-and-bad loans to willing buyers (other banking executives) further down the line, who in turn sold certificates representing these bundles to willing executives in pension groups and money markets. It became normal. It was justified at the tip-top of American leadership by the Explainer-in-Chief saying that it was a good thing for as many Americans as possible to own their own house.

     Did the American media report on this chain of dangerous fantasy? Not in the least. They were simply mesmerized by the amazing, supernatural rise of nominal house prices, and the fantastic flow of paychecks from the production home-builder's payroll offices, and the fabulous cash-out re-fi's that sent streams of revenue to the Crate-and-Barrel furniture outlets, and the Williams-Sonoma catalog headquarters, and the plastic surgery parlors.

      All this occurred against the background of what has come to be called Peak Oil, the turnaround point in global oil production, and indeed the all-time high-point of world oil consumption, which can be dated precisely now (in the rearview mirror) as having topped absolutely in July of 2006 -- the exact moment, incidentally, that a gigantic pin first pierced the outermost molecules of the soapy film that held the housing bubble together.

     Oil production (all liquids, including natural gas byproducts, tar sands, what-have-you) are down now by more than a million barrels a day. We've only experienced it so far in the juddering rise of oil futures prices. Over this brief period of time since the absolute peak, the losses of supply have been yielded in the world's poorest societies, who simply drop out of bidding for oil supplies.

    What the mainstream media is missing now is the prospect of a really swift worsening of the problem as exports from the major oil producing nations fall off at a sharper rate than their production declines. This idea has been articulated best by Dallas geologist Jeffrey Brown over at The Oil Drum.com (and for one particular discussion of it go to this blog at Jeff Vail's Energy Intelligence site).

      The mainstream media is also failing to get the connection between the supreme commodity that allows the world's industrial economies to operate, and the credibility of a financial sector whose chief mission is to finance the operations of industrial economies. In the absence of any real prospect for growth in America's industrial economy, the financial sector dreamed up a system in which we could invest in the manufacture of investment instruments instead of productive activity per se. And so all the expertise and time of those working in the financial sector has gone into the production of tradable debt vehicles based on abstruse formulas that almost nobody could understand (especially the people buying and selling them).

     All this dangerous fantasy gained legitimacy because for a while it seemed to pay off. Ordinary citizens could acquire houses much bigger and better-equipped than their incomes justified. And mortgage originators and bankers made whopping fees in enabling the action. And higher-up bankers in the chain derived un-heard-of bonuses from leveraging the securitized debt from all that, and politicians basked in the glow of a seeming hyper-prosperity, and professor Bob Bruegmann at the University of Illinois declared suburban sprawl a good thing, and even The New York Times, while staggering in news-gathering effectiveness against the Internet, was able to rake in enough advertising to build an unnecessary new headquarters skyscraper in Manhattan.

     The dream is over now. Reality-based moral hazard is returning (literally) with a vengeance. Right and wrong are going to matter again and a lot of people who put these things aside for a while are going to suffer.

Comments

[American]

Very good essay.

[Nicholas Paredes]

Newspapers have rarely been anything but the sounding boards for interests related to the owners and their acquaintances. There may have been a time, where some thought that they could change the functioning of these organizations, but did they really change much? The history of news is fascinating as a function, particularly when the citizens played a participatory role as in early American newspapers. The last page was blank for commenting prior to forwarding the paper to somebody else.

I like to think that criminals and victims play a symbiotic role. Rarely does somebody get scammed who does not want an easy buck. The criminal is an expert at eliciting the desired emotions, “you could get rich!” Isn’t the current financial climate similar?

[Laura Louzader]

Consciousness of Peak Oil IS beginning to sink in among the population at large, but it isn't sinking very deep, and most Peak Oil-aware people think they will only have to make minor adjustments in their lifestyles.

They think that it will be a replay of the seventies, during what time we were still able to drive our cars, only less, and had only mild unemployment. I sailed through the seventies in a large apt that was never ever cold. I had a good job. I had a car I hardly drove since I lived less than a mile from work. Everyone whined about the high gas prices but I suffered not at all and most people didn't suffer very much.

This time, we will all suffer and it's hard to grasp that.

This time, it will be different, and it's hard, really, to grasp how much different, and harder. We still had our manufacturing base, sort of, and now we don't. We did not have 300 million people and now we do. The outer suburban buildout was only beginning, and most suburbs still hugged the city and you could halfway live without a car. Now most suburbanites live far from the city in places where you have to drive 3 miles to get a gallon of milk and 4 miles to the nearest train line. Most outer burbs in most places have no access to any kind of public transit, and they are now where most people in the U.S. live.

A drastic credit crunch in combination with a sudden drastic shrinkage in fuel supplies will really throw us. Folks in this part of Chicago, "progressives" all, think that if they buy a prius and take the train once a week, they will cope. People still are buying much bigger condos than they need and we still scream everytime an old, leaky 4000 sq ft renmant of the Victorian era is pulled down to build condominiums, but who will be able to support these houses in the future if people can't support them now?

It isn't just those of the outer burbs with 3 cars who will have to give up their idea of what constitutes the ideal life. So will many of the more CF-aware.

It's going to take a few more price shocks for people to come out of denial.

[Bubbanp]

My view of the future changed fundamentally about 2 months ago after watching Crude Impact. I was stunned. I frequently worried about long term sustainability,particularily with overpopulation, food supply, and to some extent energy.

The day after I watched this documentary, I scanned the internet for some evidence of mainstream media reports on peak oil. I found the Independent newspaper in the UK and the Guardian had some coverage of the issue.

What would mainstream media coverage accomplish? Climate change is all over mainstream media, yet individuals, corporations, and governments seem resistant to the implications, and mired in debate or inertia on what actually to do.

Peak oil needs urgent mainstream media attention, but I am not optimistic that it will effect any meaningful policy or behavioral change in the short term.

Bubba

[Tangurena]

There are 2 books I recommend that document some of what you're describing. Toxic Sludge is Good for You and Trust Us, We're Experts.

Part of the reason that the news media falls for it is that they've stopped being reporters and become PR release editors (sample: http://www.paulgraham.com/submarine.html ). And part of it is that the news media cares more about next quarter's profits than it does about the news. Or truth.

This administration has excelled at perverting truth and feedback mechanisms. For corporations, for their own wargasm in Iraq. Don't like how M3 is looking? Discontinue publishing the number. Don't like how campaign contributors' hydroelectric dams are grinding up salmon? Make it illegal for anyone other than one particular agency to count salmon population, then defund that one agency.

I think the public *does* understand something wrong is going on. But like people who live downstream of a dam, the fear of dam failure rises the closer you get to the dam until the dam is in sight, then the fear appears to go away because the people push it completely out of their minds. And in the case of this administration, complete failure of this country appears to be something they are intentionally engineering. Like the privatization that happened during the "rebuilding" of New Orleans after Katrina (almost every public school in NOLA is now a private one, for example), they expect their corporate buddies to be able to pick up major bargains when the US collapses as well.

Amazon links:
http://www.amazon.com/Toxic-Sludge-Good-You-Relations/dp/1567510604
http://www.amazon.com/Trust-Us-Were-Experts-Manipulates/dp/158542059X

[tstreet]

The lead editorial of the NY Times today proclaimed that in fact the government is really bailing out those who took these subprime loan. I take it that the Times believes this is a good thing. I am not so sure. But won't this just perpetuate the current cycle and serve to keep house prices up way beyond what is really affordable?

JK is very persuasive and yet the juggernaut of debt just keeps rolling.

[bud4wiser]

JK,

Yes the big hurt is coming, but no one wants to be the messenger. Jimmy Carter, notwithstanding, the next prez will have [real]ity problems.

Feb, 2009, when the dreams end....

[FourEleven]

I'll assume the end of the 7th paragraph should be read with quotes around the word "own", i.e. - "own" their own house.

[soleri]

The problem with the media is real, and much more troubling than the obviously mendacious presidency of George Bush. It's why the Democratic landslide of next year will solve nothing. There is simply no room in our culture for a serious discussion of issues.

Still, something might force our attention, whether it's a sharp spike in energy prices, hyperinflation, or some combination of an economic breakdown and social collapse. At that point, we'll see if the media report this as a complex series of interrelated events, or in their current shorthand style of election handicapping.

We are stupid with excess. This is the real scandal of The American Dream. Because we're dreaming, we cannot tell the truth individually or to one another. We will find scapegoats and straw men, but we will not find answers. It's much too late for objectivity. A catastrophe might wake us up but by then it could be too late.

[Alfred]

Over here, on the Isle of Wight http://www.IslandMap.co.uk , we recently had an article in the local weekly newspaper - http://www.iwcp.co.uk - that ended by mentioning that there is little chance of young people on the Island being ever able to afford to buy their own housing. I guess the housing would all be sold off to wealthy Londoners as the local elderly died off.

Clearly, the writer believed that the upward march of house prices, which allows many of the elderly to use their houses as ATM's, is quite impossible to reverse.

I sent in a letter to the editor that mentioned that post-peak oil someone is going to have to expend some effort in looking after the elderly who are planning to live in luxury in their half-occupied houses. It will become increasingly difficult to attract people from abroad to do so - especially when there is little heating in the winter. The letter was not published - quite an accomplishment in this place.

[Kickaha]

Reuters is reporting this morning of terrorist attacks on oil and gas pipelines in Mexico. http://uk.reuters.com/article/oilRpt/idUKN1030399520070910

My search of NY Times turned up no mention of this. Like JK, I don't think it's a conspiracy by the Old Gray Lady, just laziness and not giving a damn.

[montysano]

Damn right that no politician wants to be the messenger of Peak Oil truth. Look what the media does to those who bring a message that doesn't conform to the approved world view: that messenger is attacked, slandered, and vilified. Some even have lives and careers ruined. Say what you will about Al Gore, but I have never doubted his sincerity. Despite that, he is accused of having the darkest motives possible.

The corporate media may be our biggest problem, because, by poisoning the well of public discourse, they prevent any rational discussion of our most pressing issues. I believe there is a special circle of Hell for the Limbaughs, Hannitys, et al, who poison the well simply to draw a paycheck.

[XER]

Jim,

You have been discussing this topic for a long time, but in this essay you did a good job of summarizing the big picture.

"Our political leadership may be deplorable, but so is our leadership in business, education, the arts, and especially the media."

Politicians-Game show hosts, and compulsive liars. Any politician that tries to tell it like it is, is shouted down and called all kinds of names. Traitor, nutter, tin foil hat, out of touch, mean spirited, just to name a few.

Education and Arts- Political Correctness robots. Art seems to be judged by how well it offends people. $9 Billion in porno a year. We spend more than any other large country per child. What do we get? Thuggo, Sluggo, and Slutto. USA Today is edited to a fith grade reading level. Television has some problems to say the least.

Business- "Hi, I'm your new CEO, and I'm here to rip this company off for the next 2-3 years, and then will hit the exit deploying my golden parachute. It is all about me, and if you don't like it, leave."

Media- Advertising peddlers, and stupid yuppies that think they can change the world through journalism. Follow the dollar.

It looks like Jiminy Cricket has infiltrated every sector of American life. This little twirp is one tricky bastard. Clusterfatfuck Nation of CLOWNS!

Well smarty pants Boomers, what the fuck? Big Jim has called your collective ass on the carpet.

[2020Vision]

Another good post that offers critical analysis of the situation in which citizens across the USA and Europe now find themselves in.

The poor, and non-creditworthy who were conned into believing that they could buy their own homes and live the American dream now find themselves in deep debt, out of a job and out on the street.

Whilst the sub-prime market was fuelled prncipally by irresponsible lending by otherwise trusted financial institutions, and fraudulent claims of credit worthiness by a small sector of the borrowers - the alarming aspect is how this poisonous pus has infected the financial institutions worldwide. And no institution wants to publicly "lance the boil" and reveal to the watching media just how deep the putrefaction lies beneath their otherwise respectable flesh.

When a country systematically destroys or outposts its manufacturing industry, then the finance industry which once worked on behalf of the manufacturing industry enabling credit for industry, now finds itself working for itself - and wholly legitimised by the ruling government.

In reality, the finance industry is just creaming off an ever increasing percentage of the GDP and giving it to their top executives as their annually expected 6-figure bonuses.

For every city slicker who gets a $1 million bonus, there are probably 50 sub-primer families who find themselves in an ever increasing spiral of poverty.

This has become an industry in misleading the poor so that the rich get richer.

However the insidious thing about this increasing credit crunch, is that it has been spread around the markets of the world by greedy foreign finance institutions buying into this market for worthless toxic waste. And moreover, such is the manner in which it has become entangled with legitimate financial mechanisms, that the whole trail of damage that it will inevitably wreak, is not yet known - or at least not yet being made public around the world financial markets.

Ultimately it will be the pension funds of Europe, and the stocks of legitimate companies that are eroded to pay off this massive debt.

For a European perspective on the implications of the credit crunch - here are 2 half hour radio broadcasts aired last night by the BBC.

http://www.bbc.co.uk/radio/aod/radio4_aod.shtml?radio4/subprimewoes

http://www.bbc.co.uk/radio/aod/radio4_aod.shtml?radio4/jacksonholegathering

[Laura Louzader]

I never heard of a culture or society whose leadership, political or cultural, could ever discuss the trends that were leading said society to ruin without getting the "kill the messenger" response.

It's too bad we got through the energy "crisis" of the 70s with such relative ease, because the relative ease of that period in combo with the "rescue" that came in the 80s with the North Fields, gulled people into thinking that we would be bailed out of whatever difficulty we dealt ourselves into.

It's pointless to blame any one generation for our current position of being extremely dependent upon resources that will surely not be available a decade hence, because our economy has been founded on frenetic, ongoing "growth" and the concommitant massive waste of resources and misallocation of wealth into unsustainable lifestyles, for the past 100 years. My 74-year-old mother remembers with what ecstatic glee her own parents and the rest of their generation, now gone, dropped the frugality and prudence of the depression era to go on a big spending and growth spree in the years following WW2.

So it was easy to get confused concerning causality. In the minds of my grandparents, who were adults at the time we entered the Great Depression and so surely should have know better, frugality led to poverty and a limited life. They truly believed that we overcame the depression by spending our way out of it, specifically on mobilizing for WW2. Don't ask me how anyone can think this way, but since the end of WW2, poverty is thought to be caused by "negative thinking" and refusing to be good consumers.

This is the kind of thinking that every generation born since WW2 has inherited, and it is going to be very difficult to break this mindset. It will only change when the credit well at last runs totally dry, because we can't meet the obligation we already have.

[Uncle Al]

1) Penn and Teller, "Bullshit." Self-contained arbitrary belief systems are orthogonal to empirical reality. If reality notices with displeasure, the balloon gets skinned. This is called "bad luck."

2) Zimbabwe. Historic White Protestant patriarchal oppressors of Peoples of Colour were burned off their farms as common men triumphed. Major food exporter Zimbabwe now enjoys perpetual lethal famine. Its population floods into South Africa demanding rights. Cf.: US civil rights legislation. The productive have been ground up and shoved down the gasping gullets of a failed race.

3) When everybody is a thief, from whom do they steal?
http://www.mazepath.com/uncleal/fattest.htm

[kochevnik]

You have BAD LEADERSHIP because the current crop of 'leaders' has spent their entire fucking lives as the center of their own little universe - they were pampered spolied little brats as children, teenagers, yuppies in the 80's, tech investors in the 90's and flippers in the 00's.

Guess what ?

Party's over.

The Boomers are going to have a MISERABLE elderhood. At some point the society will be forced to make hard, REAL, unselfish decisions, the kind the Boomers have never had to make in their entire lives.

You won't get decent leadership until the public stops electing Boomer idiots to positions of power.

If you think leadership in this country has been bad so far - consider that things have been quite peachy so far - lots of jobs, lots of money. The financial collapse is ongoing as we speak - this weekend the LA Times reported house sales are down 50 PERCENT YOY for Aug - and since the credit lockup didn't occur until Aug 9, the next months will be far worse.

And then comes PO, and then comes all those Boomers unloading all the useless shit they have accumulated as they retire over the next decade and entitlements skyrocket. Oh, and did I mention that the Dems are just as likely to go to war with Iran as Bush is ? Check the Dem candidates positions - not an ounce of difference between them and Bush, except our taxes will go up.

You want a great CORRUPT leadership example ? Move-on.org sent my father a poll this week about whether or not they should support anti-war candidates ...

BWHAHAHA !!!

Wasn't that the whole fucking POINT of MO.org ?

That's classic Boomer leadership - morals ? scruples ? Not if they get in the way bud.

[Loveandlight]

Another thing that bears mentioning is how much of our agriculture is dependent on fossil-fuels. We use them as raw ingredients for the fertilizers, we use them for the machines that do the plowing, planting, and harvesting, we use them for the machines that process the produce of the harvest, and we use them for the trucks that carry the foodstuffs incredible distances to their final destination. Not including packaging and transportation costs, it takes ten calories of fossil fuel energy to produce one calorie of food energy in this country. Folks, we are in trouble.

[montysano]

An earlier commented said "I never heard of a culture or society whose leadership, political or cultural, could ever discuss the trends that were leading said society to ruin without getting the "kill the messenger" response."

Actually, you don't have to look that far. FDR, during the Depression, leveled with the public and then set about finding solutions.

[American]

Gee, OPEC deciding against big production increase. Even though they could pump more, much more, as much as they wanted, if they wanted to.

http://biz.yahoo.com/ap/070910/opec_meeting.html?.v=6

[Tangurena]

>The lead editorial of the NY Times today proclaimed that in fact the government is really bailing out those who took these subprime loan. I take it that the Times believes this is a good thing.

According to Bank of America, only 18% of subprime borrowers would qualify for the president's plan. These are the strongest borrowers who are also at lowest risk of foreclosure. Since the president's plan helps so few of the people at risk, my conclusion is that his plan has nothing to do with saving borrowers. Which is why I'm trying to decide who benefits from his plan.

[XER]

Could an American version of the "Cultural Revolution" be coming to a Cartoon Town near you?

[Loveandlight]

XER:

I can just see it: "The Little Red, White, and Blue Book"!

[cacomixtle]

Oi - good, no - excellent read this week Jim. It got me to thinking of the decline and fall of the Roman Empire. Several parallels can be drawn - of course they didn't have PO to deal with, but hey, at least they had better entertainment than we do ;-) (read: lions and christians, oh my!)

What truly boggles my mind is how few people - even cultured and somewhat savvy friends of mine still have NO FUCKING IDEA of the massive bitch-slap that's in store. Discussion usually gets a glassy-eyed response and muted uh-huhs. So until further notice it's bidnis as usual - damn the torpedoes and the band plays on...

[XER]

"...but they fail to recognize a more comprehensive failure of leadership in every sector of American life, and especially in the ones where a lot ex-hippies-now-yuppies run things."

After HGH injections, botox, and viagra, uber boomer looks in the mirror and says, "Mirror, mirror on the wall who's the smartest, strongest, richest and sexiest of them all." After a chucle he says to himself, "Why me of course." He then gets in his brand new financed red corvette with the top down, and drives through cartoon town with hair implants flapping in the breeze, checking out every twenty something "chick" along the way and arrives at his office, where he spends the day flim flamming people out of their money. "Hey Bill, let me tell ya about this parcel on 198th and Cartoon, it would be a great spot for a strip mall...."