Serial Bubbles?

     Eric Janszen of iTuilip.com has made a splash in the mainstream media with his Harper's Magazine cover story on the "The Next Bubble." His thesis is that a new tidal wave of investment will shortly roll toward "infrastructure and alternative energy." By this Janszen means a revived nuclear power push, refurbishing highways, bridges, and tunnels, "high-speed rail," solar and wind power, and alternative liquid fuels. This coming boom, he says, would be driven by political fear about energy security.

      On the face of it, Janszen's proposition seems more promising and intelligent than the previous engineered boom in suburban houses. But it raises a lot of questions and flags.

     For one thing, the term "bubble" suggests something more like a financial Chinese fire drill than actual productive activity. It would be an excellent thing if Americans invested in a restored passenger rail system. But if it were merely a scheme for big banks to issue innovative new securities for gigantic fees without actually getting any trains running -- well that would be in the nature of just another old-fashioned swindle, as the bundling of mortgages into securitized debt paper has proven to be.

     In other words, does Janszen make a distinction between a boom and a "bubble?" He seems to understand that the previous two bubbles in dot-coms and houses were essentially frauds that generated imaginary wealth, which sooner later evaporated off the balance sheets and out of the financial system. A boom, it seems to me, is not the same as a "bubble." While perhaps wasteful and messy, booms at least produce something of value beyond the fees paid to bankers for arranging the deployment of capital. A boom that resulted in citizens being able to take a train from Boston to Albany would produce a substantial public good. The creation by Goldman Sachs of a company on paper that never accomplished anything would be something else. This, of course, leads to a deeper question as to whether the USA is actually a serious society or just a nation of hopeless, greedy clowns? Are we even capable anymore of distinguishing between purposeful activity and the art of the grift?

     This leads to a further consideration of where the capital for "the next bubble" supposedly comes from. Janszen doesn't account for the essentially bankrupt condition of the USA. The capital that was deployed and squandered in the previous two bubbles is not there anymore to be washed, rinsed, and recycled. It's gone. It was winkled out of hundreds of pension funds, millions of individual investors, and, in terms of eventual obligations, the federal government. There is a black hole of unresolved debt where that "capital" used to be.

      Janszen's idea seems to be that the new investment comes from simple credit reflation. I don't see how this is possible while the current bubble in housing remains only fractionally "worked out." It has a long way to unwind yet, and a lot of damage to do. It will bring down banks, insurance companies, hedge funds, municipal governments, and leave a lot of individuals impoverished, literally out in the cold. As long as trillions in losses remain concealed or unresolved, the basic system for deploying capital will remain paralyzed.

      I wonder if fixing all the infrastructure for happy motoring is not an exercise in futility and another layer of tragic misinvestment. After all, it's based on the assumption that we will still be running huge numbers of cars and trucks decades ahead, and I'm not convinced that this will be possible under any circumstances. The psychology of previous investment will exert a powerful pull to throw money at our highways. It might be more realistic to think of this as a triage process -- to ask ourselves how much of this stuff do we just let go of and which parts do we actually keep. Thousands of miles of suburban commercial strip highway six-laners may not be needed at that "level of service." What becomes of them? Do we run trains down the interstates? Surely, we don't want our bridges to crumble.

       By the same token, I wonder if our investments in alternative energy will prove to be chimerical -- things wished and hoped for but impossible to achieve. My own hunch is that our notions of scale are not consistent with what reality will permit in this field. I don't believe that we will build more than a few giant wind farm installations. Rather, I believe we'll discover that wind power is only really practical on the household or extremely local basis. Ditto solar. I also doubt that we will continue to get all the necessary exotic metals needed to fabricate the hardware for these things. Along similar lines, I believe our expectations for ethanol and bio-diesel fuel production will prove to be not only disappointing but destructive to the food production sector.

    All of which is to say that an investment campaign aimed at sustaining the unsustainable by other means would end in tears. Personally, I don't think there will be a "next bubble." I think we're out of bubbles and that our current mode of life in this nation is running out of time. We're facing such an array of potential instabilities that even assuming we continue to live in an orderly society may be too much. Like every other activity in our lives, finance, too, may be in for an epochal downscaling.

   

Comments

[XER]

RUSSIA TO BECOME AN ECOVILLAGE NATION?, By William Kotke

"Vladimir Putin has indicated full support of Dmitriy Medvedev for the post of President of the Russian Federation. Medvedev, who is presently First Deputy Prime Minister has indicated enthusiastic support for the concept of eco-villages. Medvedev will be the candidate of the Edinaya Rossiya Party."

http://carolynbaker.net/site/content/view/313/

[XER]

"Imperial culture, Kotke emphasizes, in contrast to natural culture, is shortsighted and accumulative. No longer is value found in preserving soil, water, forests, or other resources. Thus he argues that:

No one in the empire advocates long-term gain in soil fertility when the short-term gain of profit margins or production quotas are the whole point of the effort. This is the reason that nothing real will be done to avoid the final collapse of civilization. The structure of empire is to enrich the emperor/elite at the expense of the earth and society, not to manage affairs for the benefit of the whole life of the earth. (205)"

[XER]

Link to the above....

http://carolynbaker.net/site/content/view/306/

[XER]

It is time to fully embrace collapse. We are in it now, and there is no turning back. The entire object of saving the empire is nothing more than an ego driven fantasy. Those that are trying to "save" this rotten mess are misguided idiots bent on mass suicide. There are no "solutions", other than to just...well, live.

Yamato is sinking, and there is no way to save it.

http://www.ussessexcv9.org/Bravepages/images/yamato4.JPG

Hoka Hey!

[XER]

http://hubpages.com/u/28075_f496.jpg

[Holmes, I presume]

Correction: "The Coming Economic Collapse", was written in 2006, not 1996.

[LaughingAsRomeWasBurningDown]

Guess I'm not as gloomy/doomy on alt.energy as I could be. Or it could be that super bowel hangover or something. I'm looking at a solar water heating system for this old ranch house, it already has a woodstove and a nice place to plug in the inverter from the Prius when the power is out (as it is about a day a month for no apparent reason) as this fellow has done: http://hiwaay.net/~bzwilson/prius/priups.html . Off the grid's looking attractive, too, if I were building a new house instead of trying to rehab this one that's what I'd be looking hard at. I guess I still see a bubble as possible if not inevitable once energy prices rise (for all the SUV and F350 drivers, even here in Say-you-love-Jesus-Nascar land, I saw 3 other Prius's and an Insight on may way to work today).

After all, things were way different in 1981 than they were in 1971, if we just had followed through on CAFE, conservation etc., but cheap oil etc. etc. etc.
preaching to the choir.

[Movenonup]

Holmes,

Am I reading you correctly? Do you sound less Doomish than usual? If so, what has changed? If I am wrong, it is something I seem to be getting off of recent posts.

XER and all,

I have graduate students who are hooking into this material with me. One of them has gone hard core on me. He is making life altering decisions based on interactions with me and these materials. I feel saddled with the responsibility of having been the one to have shown him this. Hell, I am not 100% sure what I am doing to prepare myself. Now I feel responsible to him, and a lesser extent to others. I am not up to it sometimes. And then there are moments when I feel vulnerable and ask myself, "Who am I to impart this 'Peak Everything' perspective on others?" I may be wrong and there will be a soft landing (god I don't think so). But if I am wrong and I am steering folks down this road...Jesus. I don't know how well I am communicating this... I think I see probabilities that frighten me out of my mind for all of us. I think that preparations, without peak oil and peak suburbia, are a good idea anyway, so why not do some prep? Kinda like insurance (one I know I can collect on without a fucking agent).

Do any of you worry that we are wrong about this?

I still don't know that I have asked what I mean. I don't think I am wrong, I think we are headed for a collapse.

But do you worry about being wrong? Do you see the difference in what I am asking here?

My husband puts it in an interesting manner...even if I am wrong about this, he likes the lifestyle better than one of mindless consumption. He likes the values more.

It is one thing to steer him and me here, but students...

Thoughts?

[UncleYarra]

MOU,
The situation you describe is unusual in my experience in that they are listening to you!
Frame your advice correctly, i.e. espouse your own experience without exaggeration and encourage them to discover things for themselves.

[UncleYarra]

MOU,
And focus on real life value(s). There’s no point in walking through your garden and saying to yourself “ I feel rich”, then going inside and looking up the next hottest uranium/Big Pharma/Big Ag stock to make a quick buck.
Your husband has the right idea, a quite straightforward outlook.

[LaughingAsRomeWasBurningDown]

MoveOnUp, try to consider that if your showing of this web page to someone is leading them to make life altering decisions, then perhaps they were ready to make those decisions anyway.

[XER]

Separation, isolation, disintegration, and death is the process of empire that is suffered by the homeless, the executive of transnational corporations, social bodies of empire culture and the ecosystem alike.

Eight thousand years ago we began to see death of ecosystems from over-grazing and agriculture in Central Asia, the Indus Valley and China. Five thousand years ago we began to see the death of the conquered, the slaves and the land, as the empires grew. Two thousand years ago, death was accelerating with the Mediterranean empires. Five hundred years ago death was spreading planet-wide. Now all of the corners of the world are filled up. The finale of disintegration is upon us.

The swelling mass that eats up its own sustenance has now reached the end. There is no more, but the mass continues to swell. It is not likely that the habits of empire, set subconsciously in the minds of billions, can be reformed in the decade or two decades that would be necessary to save the situation. Barring transcendental transformation of the whole culture of empire, we will see the trends of ten thousand years of imperial history culminate in our lifetime."

Yea! I mean fuck YEA!

Reading this kind of of stuff just fills me with joy, and mekes me so happy, I just need to sare it.

We are living in great times!

[UncleYarra]

MOU,
"Do any of you worry that we are wrong about this? "
Sometimes, sure. It's worth going to Wikipedia and looking up biases - confirmation bias especially. But without being too 'ad hominem' about it, who and what are the groups who will most vehemently deny all this? And what are their interests?
FWIW, I also visit http://www.peakoildebunked.blogspot.com

[Uncle Remus]

Might be more "green" money than you think...

Prime the pump?

http://www.theregister.co.uk/2008/02/01/green_tech_the_next_it/

[Dr.Doom]

"It is not likely that the habits of empire, set subconsciously in the minds of billions, can be reformed in the decade or two decades that would be necessary to save the situation."--XER

So who says we have 10 or 20 years left to make some corrections? Where did you get such an "optimistic" appraisal of our circumstance, XER?

MOU, sounds like you picked a good husband there, congratulations and please give him my kind regards. Oh, and stop worrying about the students, they will find their way.

[megga_what]

I fully agree that the cycle of bubble for which the U.S. economy has come to rely upon as a substitute for real and sustainable economic growth cannot last forever. In the end, I believe Mr. Kunstler’s predictions will prove right.

I still believe, however that the U.S. has the ability to engineer one more bubble. After that, all bets are off. And, alternative energy/infrastructure is a good candidate for the reasons spelled out by Jansen.

As we have seen by the turmoil in the financial markets over the last several weeks, the world economy is not as “decoupled” from the U.S. economy as many have come to believe. In order to avert a serious recession/depression in their own countries, countries with export based economies holding large amounts of treasury debt & other dollar based financial instruments will have no choice but to assist Ben Bernanke & crew with a reflation effort to prop up the U.S. economy. As the saying goes, “if I own the Bank $1 million, I have a problem; if I owe the bank $100 million, the bank has a problem”.

The housing bubble does have a long way to unwind. In the mean time, the U.S. govt. will do what it needs to do to get bad mortgages off the balance sheets of banks and onto its own balance sheet in order to get the credit markets flowing again. This will include the GSE’s buying mortgages or allowing banks to use toxic loans as collateral to borrow from the treasury.

[LaughingAsRomeWasBurningDown]

http://www.theglobeandmail.com/servlet/story/LAC.20080202.ZOE02/TPStory/Environment

Europe likes biofuels, but some are 'worse than useless'

In the long run, greenhouse-gas savings from today's biofuels are marginal to none when you factor in the fossil fuels required to power the farm machinery, transport vehicles and refineries. Moreover, if you consider the extra nitrous oxide (also a greenhouse gas) emitted to the atmosphere from the required fertilizers, some biofuels - in particular, canola - can actually be worse for global warming than fossil fuels, says Keith Smith, an atmospheric scientist at the University of Edinburgh who published a research paper on the subject this week in Atmospheric Chemistry and Physics, co-written with Nobel-prize winner Paul Crutzen. "So in practical terms, some biofuels are actually worse than useless," Prof. Smith says. "The evidence against them is piling up."

[XER]

"In order to retain our sense of reality it is necessary for us to look briefly again at where we are in our understanding of food producing, so that we can appreciate the tremendously valuable advice of the elders, even if we and the anthropologists can only glimpse the larger outlines of it. Civilized agriculture is war with the spirit of life and war with the cosmos. Agriculture is an effort to force the simplicity and unbalance of the "ten world food plants" on the cosmos. When the climax ecosystem is cleared for agriculture, the earth seeks by all means at its disposal to heal the wound. It sends in the first aid crew to revegetate the area and cover the poor oxidizing and eroding, bare soil.

If life finds some unnatural abundance of exotic plants there, like soybeans or designer flowers, it calls in all of the species of fungus, micro-organisms and insects that can eat up that sickly or unnatural life and reconvert it back into the life stream. What this means is, that it takes energy to fight life which is making an effort to rebalance itself. To do this requires fertilizers, poisons, petroleum, steel mills, agricultural universities, polluted waters, dead seas and on and on. When technicians look at a swidden plot in a rainforest and compare its productivity to a farm field and talk of how the "natives" might increase the productivity of the swidden plot to "help" them achieve some surpluses to sell so that they can exist on the margins of the money economy, what we are really looking at is trying to help them get some money so that they too can help poison and kill."

[LaughingAsRomeWasBurningDown]

http://aawsat.com/english/news.asp?section=6&id=11649

Qatar is considering building one of the world's largest solar power complexes to help meet demand, which could increase four-fold over the next 30 years, the Middle East Economic Digest (MEED) reported.

Gulf Arab states have about 30 percent of the world's oil reserves and 8 percent of its gas, but an economic boom spurred by record crude prices is driving demand for power and water so rapidly that many are considering turning to alternative energies including nuclear.

Qatar expects to add 16,260 megawatts of power to the national grid between 2011 to 2036, almost four times current capacity of 4,200 megawatts, the magazine said, citing Salah Hamza, senior business development planner at Qatar General Electricity & Water Corp (Kahramaa).

[longtimelurker]

Regarding the link posted above by "jim" in the Sydney Morning Herald,"Scientists make oil grow on trees":

According to the article "the biofuels industry will steer clear of the food versus fuel debate." Perhaps that is the case - at least in the very short term.

What they are overlooking is that by removing the "waste material like the stalks and leaves of food crops" rather than tilling it under where it will decompose and build soil fertility, they will be contributing an even more rapid depletion of farmland fertility than what is already occurring.

So while this method is not directly pitting human stomachs against automobile fuel tanks this year or possibly next, have no doubt it WILL in less than five years time, reflected in reduced crop yields unless the farmers pump ever more fossil fuel fertilizers into their fields (while they can still get their hands on it). But then this concept was supposed to *reduce* dependency on fossil fuels, wasn't it?

Just another example of the same old myopic thinking that's brought us to the precipice we currently find ourselves at...

[longtimelurker]

MOU,

Please send my belated sympathies along to your hubby. I hope he's feeling better. I can relate to exactly where he's at, having done a "face plant" myself about a dozen years ago.

[PeakLife]

MOU sez: "Do any of you worry that we are wrong about this?"

It's not so much that you are "wrong," per se, as that you are incompletely viewing the picture in a multidisciplinary contextual sense.

The catastrophic scenarios of total societal collapse within the next 10 years (and if you ask me: 30 years), are not going to happen--the trajectory is not there.

That being said, it doesn't mean that everything will be a bed of roses, either. It'll be life...life as we know it, forever changing, adapting and progressing.

We will see a major increase in biofuels--notably methanol rather than ethanol. As Kunstler stated today (although you heard it from moi first)--the craze going forward will be biofuels and other "alternative" energies. The US energy policy is shifting away from oil as we type. Yes oil is a resource that is finite, but there are other sources waiting to be discovered and applied. Before anything can become a resource, it must have a use discovered around it. Before people figured out how to burn oil for energy, it was just some sticky black goo in the ground. There are other htings like that waiting to be discoverd now.

Incredible fortunes will be made in biofuels by the new energy barrons, who will be written about in tomorrow's textbooks.

The flex-fuel cars will be mandatory soon.

Not enough land for energy crops in the US, you say? So we pay Latin America to grow them for us.
We pay Africans to grow crops, helping them out of their misery in the process.

This is the future--you're either part of it, or you get left behind wishing for doom that never happens, except in isolated pockets--temporarily and spatially.

With students, I would hope that any balanced professor would be imparting to them a sense that there is no single predetermined outcome at this point.

Aloha nui loa

[Johnny Rico]

WTF is iTuiliup.com?

Janzen's article is the cover of Harper's. I could give a shit. I'll probably never read it just cuz JHK posted on it. And I read Harper's.

JHK is Seriously boring the piss out of me. This week is aweful. Write and repeat. Worse than last week.

For all those peeps that write every Monday "Great piece, Jim, keep it coming." Let me just say this. If you think Jim is impressed by that and that is what keeps him doing what he does, you are a complete fucking sap.

Newsflash. You are a complete fucking sap. And we are all fucked because you are what constitutes the best and the brightest, apparently.

XER - I'm not seeing a response to my hesitancy regarding you're knowledge of Hitler.

Brandon - where are you my Klonopin King? I've got a book for you.

Nudge - It's not real.

Sucky and Gilda. MIA, I guess.

Natalee Hollaway. Dead. Biatch!

Stock Market. Best week in 5 years last week. I'm just sayin. JHK forgot to mention that today. So did asoka. Whoops.

[PeakLife]

JHK's not an economist or scientist--he's a writer. His job is just to stir things up, which is what he does. He's got no serious credentials pertaining to the energy crisis. You would expect (and get, a we've seen), a correspondingly even lower level of aptitude, on average, from his religious followers.

[XER]

Dr. Doom,

I should have dated the quote. It was from 1993. I mean, we should feel priveledged to be witness to a planet wide upheval. I'm really getting into it in a big way.