A Christmas Eve Story

     Two things happened over this weekend before Christmas that jarred me a little. One was when an old friend said I sounded crazy, and the second was when I read the galley proof of Dmitry Orlov's forthcoming book, Reinventing Collapse (New Society Press, Spring 2008).

     I ran into my old friend "G" on our town's main street, Broadway, on Saturday afternoon and we ducked out of the drizzle into a nearby coffee shop to catch up. G had worked the past twenty-five years in the software industry and recently bought the company that employed him. He was consumed now with plans for "growing" this company. I made a point not to antagonize him with my Long Emergency notions, since his obvious mental investment in the wish for a reliable "growth" economy was a bulwark of his current world view. But the conversation did get around to the various troubles in the capital markets and the possible connection of this with the global oil predicament.

     G doesn't believe we have a problem with oil. He said, if the fuel efficiency of every American vehicle on the road was increased five percent, we wouldn't have to import any oil. This assertion was, shall we say, not consistent with anything I understood about the situation, and I said so, pretty much in those words, to avoid ramping rhetorically into debate mode. G said, "Do the math." I suppose G had read this "formula" somewhere and was impressed by it. "The Market," he said, would "take care" of our motor fuel problems. Just wait and see. We talked for a while about getting the railroads working again. G said it would never happen. "This isn't Europe."

     I was content to let is drop, but G then said. "You know, you've been predicting all these catastrophes for years now, but we're still here, the cars are all rolling down Broadway out there, and life is going on. You're beginning to sound like a crazy person." It didn't bother me especially that G thought my my ideas were outlandish so much as being comprehensively written off by an old friend as a crazy person, someone who... I dunno... rummages through dumpsters and talks to himself on the street without any sign of a cell phone in hand. I didn't hasten to defend myself. G obviously needed to feel that the world would continue functioning like a well-oiled machine now that he was responsible for an operation that employed a hundred other people. We parted agreeing to acknowledge a difference in our view of things.

     Dmitry Orlov's publisher sent me the galley proof to get a blurb for the dust-jacket, and I'll furnish one in short order because Reinventing Collapse is an exceptionally clear, authoritative, witty, and original view of our prospects. The thesis is that the United States is headed for troubles as broad and deep as the ones that brought down the Soviet system in Russia, though we will get there via a somewhat different route. Orlov has been in the privileged position of living under both systems at critical times, and the parallels are striking, but the differences even more so.

      The Soviet experience was a collapse of consensual reality as much as of economy. Nobody could continue to support the credibility of a one-party, centrally-planned, "command" economy best represented by the joke: "We pretend to work and they pretend to pay us." An economy in which nobody had any real stake other than ideological finally ground ignominiously to a halt. Once the state surrendered its authority, the society was stripped of assets. The social safety net dissolved. A lot of people on the margins slipped through the cracks and died. Eventually, the Russian economy (and government) reorganized on a different basis -- largely because its remaining oil resources and annual production exceed its domestic consumption. So, this reorganized new oil-exporting state, with its shocking poles of extreme wealth and poverty, will go on for a while until the oil is gone, and then it will face more transformations.

     The comparison with the American situation is chilling. For all its gross faults, Soviet Russia was ironically better prepared for economic collapse and political turmoil than we will be. For one thing, all housing there was owned by the state, and allocated under bare nominal rents, so when the economy collapsed, people just stayed in their apartments. Nobody got evicted. There was scant private car ownership in pre-1990 Russia, so gasoline allocation problems did not paralyze movement. Train service was excellent and cheap, and the cities all had a rich matrix of underground metros, on-street electric trams, and trolley-buses, which continued to run even when central authority flickered out. There was no suburban sprawl to strand and isolate people (in homes owned by banks, that can be taken away after the third monthly failure to make a mortgage payment). Official Soviet agriculture was such a fiasco for half a century that the Soviet people were long-conditioned to provide for themselves. For decades, 90 percent of the food was coming from tiny household gardens, wherever it was possible to grow stuff. When America's just-in-time supermarket resupply system wobbles, and the Cheez Doodles disappear from the WalMart shelves, few Americans will have a Plan B.

     Perhaps most striking is that the Soviet collapse provoked almost no bloodshed (at least in Russia itself). The political failure was so comprehensive that the party leadership didn't even have the will to defend its prerogatives anymore, and for a while politics simply slipped into a vacuum -- until Mr. Putin came along and revived the oil industry and managed to get the police back on a payroll that inspired them to do their jobs. Meanwhile, the tremendous drain of the Soviet armed forces and all their equipment -- apart from the nuclear arsenal (as far as we know) -- was allowed to wither away, along with its monumental demands on the nation's resources.

     Whatever other differences there may be between Soviet Russia and Clusterfuck Nation, a big one here is that our domestic oil consumption long ago exceeded our production capacity, and when we run into just a little supply trouble with our oil imports (apart from mere rising prices) it will shake the foundations of our economic life. We are stuck with a physical infrastructure for daily living that has no future in an oil-scarce world. Our cities, for the most part, have imploded internally. Our public transportation is grossly unbalanced on the side of private cars and airplanes utterly dependent on imported oil. At the moment, our capital finance sector is cratering in the aftermath of an unprecedented surrender of responsibility in the management of securitized debt -- an event that may end up as a curious parallel to the looting of assets that occurred in the Soviet twilight.

     The biggest difference, though, between Soviet Russia and America today is the psychology of the people. Soviet citizens were prepared for trouble by lifetimes of comparative hardship. I won't even go into the Stalin terror and the agony of World War Two. In more recent Soviet times, money meant little in a system without real shopping -- but maintaining personal networks based on mutual trust or strength-of-character was the greatest asset in acquiring life's necessities. Americans didn't need political dictators to whip us into line -- we volunteered to become a nation of TV zombies. Our fantasies are arguably more disabling than the mere cognitive dissonance that reigned in Soviet times. Liberty itself has allowed the American public to freely choose passivity, illusion, and incompetence. Anyway, when it comes out in 2008, Dmitry Orlov's book will deserve the attention of whatever thoughtful people remain in the land of the free and the home of the brave.

     It was disheartening, of course, to be written off as sounding "like a crazy person," by an old friend. I don't doubt that his perception is genuine. I'm prepared to live with the disconnect between what my friends believe and what I think. I even reserve a portion of my mind for the possibility that their view may be more realistic than mine -- but I won't torture myself about it. Someday, surely, I'll meet this old friend again and perhaps he'll say something like "...things didn't work out quite the way I expected...."

     In the meantime, Christmas Eve is upon us, truly my favorite night of the year (Hebrew though I am), and I am very fortunate to be going to a warm house full of people tonight where the wassail will flow. I'll be back next week with a review of 2007 and my predictions (ha!) for 2008. In the meantime, God bless us every one.

   

Comments

[DerekK]

Awesome show, great job, JK.

The Internet tubes told me that New Jersey was among those states *least* affected by the housing debacle. Well, I, too, can sit in an office and make spreadsheets. But how about a little on-the-ground evidence (to the contrary)? It's not hard to find (you can't avoid it), and I've filmed it:

Rock Avenue
http://youtube.com/profile?user=bluebook9

In the reverse stock market of American housing, Rock Ave. closed on Friday at 32, as there are now 32 "for sale" and related signs along a 1.6-mile stretch (up from 27 last week). That's one sign every 264 feet. One intersection has 9 signs as of yesterday. I have the photos to prove it.

I wouldn't expect too much in the way of reverse dividends this quarter, unless you're the Salvation Army or the guys who steal the copper pipes from abandoned houses.

There are whole generations of signs now, with the old, wind-torn signs being replaced by new ones.

Sure, one data point can never be used to refute a statement, but many data points can.

[Roger]

Five percent of our surface transportation fuel consumption would be approximately 500,000 b/d. The U.S. liquid hydrocarbons importation rate is almost 13 mb/d. Your friends math is not too good.

RB

[Dr. Girlfriend]

Warmest Holiday greetings, Happy New Year, and thanks for all your hard work! 2008 will be interesting, to say the least! I'm looking forward to what you have to say in the coming months-

Cheers/Dr. Girlfriend

[dale]

LTL,
I'll decline the audition, thank you. I've seen plenty of evidence that I'm not as amusing as a number of posters here.

Scott,
Precisely, for all the cynicism present on this blog, the doomers seem to think that the data is honest (in the first place) and not manipulated by market makets(in the second).
I've studied markets too long to be that innocent.

[jonny quest]

Brilliant essay this week! You've summaried everything I've been thinking for the past several years in a tidy 1,500 words. The first truly scary part is that your friend is correct. If America would use logic in deployment of resources and matériel, rein in excesses, and have her states petition a constitutional convention to revitalize the republic, we could get through this soon to arriving mess, but with a delusional, apathetic, disassociated, scared, and just plain dumb populace, we know the odds of that happening; none. But I'll be happy to let Ron Paul prove me wrong.

The second is what Orlov is pointing out, since Nihilists were a 19th century Russian party, those living under sovietism were already steeped in nihilism. In the land of the plastic pumpkin, all we've got is our perception that everything is all right. There is no looming crisis of confidence and neither can one be hinted at. TPTB will throw everything they have at their disposal to push this crisis back, thus making it all the worst.

So let's do what we can, while we can, then rearrange the deck chairs with the rest of our brethren, and pray we're wrong, being humble enough to remember whatever we do, we're probably wrong anyway. Like the story (or parable) I read of a Virginia farmer in the 1850's who saw the Civil War coming and desiring to do something to move his family out of harms way chose Gettysburg, PA as the best place to relocate to.

Shalom aleichem.

[American]

Jim, I look forward to your essays every week, and regard you as quite sane, except when you let go with your immediate-horizon forecasts about what's going to happen in the next week or so.

Those can get a bit crazy...

Happy Holidays to you and all here!

[XER]

Jim,

Jim, your whole fuckin generation is crazy, so don't worry about it. Rob Reiner claims to be a "very young old person". Reality is a hard road for our soon to be elders.

Dmitry Orlov. What is there to say. Mr. Orlov is my hero. I look forward to his book. I hope it sells millions of copies, and he gets interviewed for the telescreens. I hope he becomes a superstar in Russia. He can go Russia and be photographed with Dmitry Medvedev. Dmitry can go on a book signing tour. Fucking bitchen.

[dale]

Like a few posters here, JHK has a tendency to create strawmen to knock down. So...he has a friend who wants two new Yukon Danali XL's, or whatever. He takes an extreme position then posits the opposite for effect.

It's not the simple, of course. We all can and will adjust Jim, it may be painful at times but we won't fall into any abyss or lose our minds.

If you want to see what people, Americans, are really capable of, go read "The Worst Hard Times" - the story of the dust bowl on the high plains. It will sober you up right away about how bad things can get and people tough it out.

[asoka]

Jim,

Either you are not crazy or everything is indeed all right. I'm going for the former.

Great column this week!

Thanks!

[artiefacts]

"I'll be back next week with a review of 2007 and my predictions (ha!) for 2008."

Jim, here's a free Christmas tip that's worth every penny: avoid the temptation to make specific predictions about the Dow in '08. That should help dispel the appearance of craziness.

[PeakOilBoy]

Happy Holidays, Jim!

My band's guitarist DD was homeless for 8 months, living on the streets of Portland.

I headed out with him to document survival tips for street living, and made a mini-documentary anyone can watch over at www.lawnstogardens.com.

DD told me he had absolutely nothing to his name. He ate out of trash cans. His house was his backpack. He begged for money. But to him, he was free.

Free from any responsibility - and if he could tolerate the cold and wet conditions, he could survive and just get drunk all day. It was bittersweet - and he knows over five Iraq veterans who have taken the same path - choosing freedom and drugs/alcohol over rejoining society.

While he was able to get back on his feet, it's only because he chose to re-enter the pseudo-safe societal construct that is still up and active.

It was certainly an eye opener to go down in the engine room to see how broken it is on the bottom floor of America.

[Lurkerlu]

Awww Jim, don't let your friend's opinion upset you - anyone who uses "ignominiously" in a Christmas Eve essay can't be too crazy.

Thanks for sharing all your thoughts over the last year - look forward to continued commentary in '08.

Happy Solstice everyone!

[XER]

POB,

Great film on DD. Thanks for putting it up. There is no question, that America hates people like DD. This man is a free spirit. Free spirits are not tolerated by a society that hates real freedom.

America loves Jonny when he goes off to kill and maim children for them, but when he comes back, they tell him to fuck off and disapear. They don't want him around their children.

Men like DD are the true pillars of society, and our future leaders.

Nice music.

XER

[Nudge]

Jim, lovely post. Looking forward to seeing Orlov's book when it comes out. Your own “World Made by Hand” ought to be hitting the stands in spring '08 too. Nice job!

Let me second Roger B's comment about how your friend G's math is not that good. I hope he's a better programmer than he is a thinker. The UPL has some 230million cars collectively consuming something like 385million gallons of gasoline per day. Oil imports are 14mbd, domestic production is 8mbd. Given that a 42-gallon barrel makes about 19.5 gallons of gasoline (see http://www.gravmag.com/oil.html) we get a figure of 19mbd of oil going into making gasoline for the domestic auto fleet ~ in other words, using all of the imports plus most of the domestically produced stuff, or around 80% of all the 24mbd used here in the UPL.

OK, to continue the fun, that 8mbd domestic production, assuming it could all be put to use making gasoline and nothing else, would be worth around 156million gallons of gasoline per day. Given that the domestic fleet consumes 385million gallons per day, we would need to more than double the per-vehicle fuel efficiency to survive on that much less gasoline. The average efficiency would have to increase 2.47x for each vehicle on the road. That 22mpg Ford would now have to get 55mpg, that 9mpg Hummer would have to get 22mpg, the 48mpg Prius (see http://greenhybrid.com/compare/mileage/) would have to get 118mpg, and my 70mpg Insight would have to get 173mpg instead.

Three words for your friend G: Not. Gonna. Happen.

LTL, even our unofficial court jester has spoken already. I think that shows good initiative on his part .. sort of like a jack-in-the-box that needn't be manually kept wound up all the time just to guarantee that he'll spring out in front of the right visiting plenipotentiary and say something inappropriate.

I wonder if Mr Orlov has made much of a distinction between the central planning methods of the Soviet Union (which didn't work) vs those of Cuba (which do in fact work)? Does anyone here know if he's written about Cuba and her responses to PO?

Merry fricking solstice everyone! :)

[Farmgal]

No- you're not crazy. There's a bunch of other somewhat descriptive words that might fit you :), but not crazy. As for your friend, he's just trying to convince himself that all will be fine and that he did the right thing in buying this company. He doesn't want to hear anything to the contrary and what you have to say on a regular basis is contrary to how he wants life to proceed.

Looking foward to Orlov's book.

As for next year- why even bother to speculate on the weekly doings of the stock market anyway? I've not noticed that the stock market is too tuned into reality in any event- lots of forces at work there that make little sense to me. I think you're much better at discussing bigger picture ideas anyway- and more useful. So just stay away from stock market predictions and you'll be fine.....

Have a Happy Whatever-

[scott]

I have been both dreading and looking forward to this years forecasts, dreading because it will not be as easy as last year but maybe even easier in some respects since we believe I think correctly that global capacity for growth in energy distribution has been reached. I say more difficult because there is a lot more economists on that side of the forecasting fence now than a year ago so being correct generally will not carry the same impact as say a year ago's forecast that slowing growth in the U.S. would not translate into a slowdown for emerging economies. Of course the jury is still out on that one but I think the worlds producers will be better off without the worlds 'sumers if their excess consumption can translate into global growth potential.

I think the trend of dollar depreciation as a means of targeted demand destruction on the U.S. 'sumer has to continue to support overall global growth because if global growth is being limited by energy supply constraints then the U.S.' 25% of global resource consumption would be the path of least resistence for freeing up misallocated resources such as is commonly found in the form of large inefficient luxury vehicles, suburban sprawl and the long commutes that it produces.

We forecasted more talk of recession in the U.S. for '07 and am forecasting actual contraction for '08. I am expecting growth to continue to flourish in emerging countries despite the demise of their number one customer.

[Abrey]

Dear Jim: Don't tease us. Who is Dmitry Orlov's publisher, so I can put in a pre-order? As for your upcoming 2008 predictions column, I recall one of your comments from the Long Emergency, to be Better Neighbors; and Mr. Diamond's book, Collapse, to have a useful skill, to survive whatever may be coming for America. If Russia's citizens could muddle through, then so can we. Happy holidays to you and your loved ones.

[bud4wiser]

Merry, or Happy [whatever] to everybody.

JK, no doubt a comparison/contrast examination of Russia's crash and our future economic misfortunes is appropriate fodder for the BLOG.
And as you so clearly note - "it's not HOW you crash - it's WHATS LEFT to pick to reestablish order when some aspects of the immediate crisis are understood.

Dale, it's good that you picked up the "banner of reason."

I think I'll nominate a quote from your posts as the 2007 PO slogan of the year. [[ "Supply" is still a function of "Price", but engineers don't understand that so it is never a factor in their equations." ]]

Oh that poor dumb Hubbard, too much book learnin' - ehh? No, real business experience, huh?

Everyone knows the only reason anyone talks about oil shortages is because we can't drill in Alaska. And, none of that matters anyway because we're going to get more out of Iraq that we ever did from the Saudi's. Plus, Russia is going start getting oil from the Arctic Ocean and their going to sell it to the US because we are the closest customer. So there!

That's enough oil for at least 50 years, and that assumes the new solar-powered cars don't come on line until 2020.

And besides all that, pretty soon we will make gas from saw-grass and bullshit and farms won't even need to go to filling stations.

So there. Peak Oil, bah-humbug - God Bless us everyone - from our 200HP two-seat gran prix cars, to our 375HP 4800lb, tow-bar equipped family "sport" vehicles.

As Tiny Tim would say - "It's all good."

[upnatpishtim]

a crazy person you say?
i got you beat by a country mile.
i spend 25 grand on a grid tied
3kw solar PV system.
only a mad man would do such a thang.
a real person, a sane person, would have got a pick up truck that gets 17 mpg. or a 62 inch plasmer tv.
or gambled it away on lottery tickets.
or should have bought that north 40 out side of chewelah, washington.
or instead of investing in gold, should have invested in lead.
or bought those old tyme hand tools for the smythie shop.
or tinker up a still.so dont feel so bad when others call you a crazy person.
what future do youse want?
i made mine.
nuff sed.

[DavidinLA]

I wouldn't worry too much about G's comments. I don't think the subject of energy is sexy enough for people. It's much easier to remain ignorant and smug. It doesn't help that we have presidential candidates such as Huckabee spouting off about the need to wean America off foreign oil. The general public, including otherwise intelligent, educated people, latch onto this disinformation and nonsense. 2008 should be interesting. The car traffic in L.A. has been remarkably light this holiday shopping season---I've never seen it like this before. I have noticed a new neighbor though. His home is a brown 1978 Ford LTD with flat tires and black trash bags flapping in the windows. A dogeared copy of Jared Diamond's "Collapse" is among the flotsam and jetsam scattered on the car's dashboard.

[Holmes, I presume]

PeakOilBoy,

Hey, I like your website and latest video. Keep up the good work! (Young doomers on the rise.)

[XER]

Bud,

You left out how the we will win all military engagements. The ME is building malls and 89 theatre meatroplexi's to play movies made in California. There is a guy in Iraq that has legally changed his name to George Washington, and is looking good in the polls. The entire nation is converting over to Southern Baptist. Rush Limbaugh is looking at property in Sadr City! Large pig factories are being built by ConAgra and Don Tyson. They will eat pork, and like it!

PS

They are also building NASCAR tracks where there used to be mosque's.

[dale]

Nudge,
Thanks for proving to us your calculator works. Now, if the Mississippi River is getting shorter by 500 yards every year, how long will it be before we can walk it's length in a day?

[Dave]

http://www.culturechange.org/cms/index.php?option=com_content&task=view&id=83&Itemid=33

i think that this is DO's latest essay. i didn't know that he was writing a book. i'll bet it's worth reading.

very good post this week. the days are getting longer. the promise of spring and the renewal of life is in the air already. soon, the industrialists will be out of go juice and they'll have to stop killing everything in thier path. people will be able to go back to being human, with human relationships once again. let's all hope for the end of the age of oil to happen soon. and god bless tiny tim.

[Nudge]

Dale, is that distance measured by a laden or unladen swallow? Inquiring minds need to know. Sorry about the numbers exposition .. sometimes it helps to trace out the letters B.S. to see them more clearly. Yes, I know, I should not be picking on you so much. My bad. :(

Actually, until doing that part, I had no idea that 80% of the UPL's 24mbd oil usage was going into making gasoline. Other people have been telling me it's far lower than that, but then, those are the sort who watch NASCAR and dream about the baby Jeebus coming at night to fill up their SUV gas tanks – folks kind of like the Mr. G described above.

On the other hand, maybe that 80% mark means we should start embracing rationing right now. Or leaving half the cars parked every other week, with people making up the transportation difference by carpooling.

Dale, how do you think we could best make the transition to using 2.5 times less fossil fuel within a few years? Let's hear what you have to say. As a builder, you could probably say something interesting about the challenges of building mixed-use communities close to public transportation. Presumably you've done more kind of work than, say, SFR tract housing on virgin land?