A Real Freak Out

   

Note: This is the official publication week of my new 'post-oil' novel, "World Made By Hand," a vivid depiction of life in The Long Emergency.  Visit the book's website:

     Things are getting very weird very fast -- and will probably get even weirder, faster, as the train wreck of bad debt meets the Saint Paddy's Day Parade of bacchanalian excess at the grade-crossing of destiny. The train is carrying America's financial system, but the engine driving it is peak oil, because declining energy resources necessarily means declining capital wealth -- and declining value of all the institutions, instruments, and markers that denote that wealth or hope to profit by trading in it. The fiasco leads straight to the necessary reinvention of American life on other terms and by other means.
      I've maintained for a long time that, even among those who recognize we have a big problem, there are many impediments to imagining a credible outcome. One thing I've noticed is that in any given public meeting (or lecture hall) you can divide participants into two groups: those who believe we will 'high-tech' our way out of this predicament; and those who believe we'll organize our way out.
     I don't subscribe to either point of view, strictly speaking. Both POV's assume that there will be an orderly transition between where we're at now and where we're headed. They're tainted by the kindergarten ethos of entitled happy endings and outcomes, which has been the chief operating system for the Baby Boomers, a therapeutic bias for placing 'good feelings' ahead of reality -- which also has obliterated the tragic sense of life that acts as the only brake on humanity's inherent hubris.
     Ultimately, in my view, the issue of what happens next will be settled not by the fantasies of the algae-biodiesel geeks or the wishful thinking of the sustainable futures organizers, but by the natural, self-organizing properties of a society responding 'emergently' to new circumstances. One of the implications of destiny-as-emergence is the probability that we will try any damn fool thing besides the right things to keep the old game going for a while -- even in the face of obvious failure.
     I'm sure our political leaders will mount a campaign to rescue the futureless infrastructure of suburbia. It will necessarily be an exercise in futility. But it has already started. That's what the swindle of ethanol has been all about. And the touting of hybrid cars, and the flimflam of "energy independence." Even the "environmental" crowd" squanders most of its attention these days on how to keep all the cars running on something other than gasoline. They don't question the assumption that we will remain a car-dependent society.
      As much as I loathe the suburbs in their grotesque late-stage efflorescence, I can understand why those stuck in them would wish to defend their misinvestments. I just hate to think of the political consequences when their disappointment catches up to the reality that the suburbs will not be rescued. And by that I mean not just the houses but the way-of-life associated with them and all its accessories, furnishings, and activities. Bewilderment will soon turn to rage out in the highway-strip-and-cul-de-sac empire.
     Now, apparently, we'll also opt for a bail-out of all those who tried to become rich by getting something for nothing at both ends of the Ponzi scheme called the housing bubble -- the "little guys" who signed mortgage contracts they could never hope to pay off, and the Wall Street playerz who bundled these hopeless contracts into fraudulent securities (and their enablers in the ratings agencies, plus the hedge fund smoothies who tried to cash in by using recondite algorithms to dissolve the risk associated with imprudent lending.) The bail-out is likely to accomplish nothing except the more rapid bankruptcy of government at all levels and a second Great Depression at ground level (worse than the first one).
     Over the weekend, the Federal Reserve engineered a $30-billion dollar Saint Paddy's day present for the JP Morgan bank by handing them the corpse of Bear Stearns. The object of the game is to prevent the "assets" of Bear Stearns from going to the auction block, on which they would be discovered to be nearly worthless, which would instantly render all similar assets held by the other big banks to be similarly worthless, and would result in a universal margin call that would pretty much unwind the hallucinated "wealth" acquired the past ten years.
      Despite the heroics around the fate of Bear Stearns, it looks like the financial system is tottering anyway. Perhaps the last trick left in the rescue bag will be the 100-basis-point drop in the Fed rate rumored to be announced tomorrow. It won't help any of the big banks, since their problem is holding liabilities in excess of assets. Almost certainly it would crater the US Dollar.
     The next thing in store for America, in my opinion, will be a rather new surprise: oil-and-gasoline shortages. While frightened money pours into the oil futures markets, driving the price up, strange behavior will start brewing in the actual physical allocation process. Imports of oil and gas to the US may not be as reliable as it had been when America seemed to be a solvent nation. The exporters may be changing their terms of doing business with us -- and that's nearly two-thirds of all the oil we need. The public would probably suck up oil price increases indefinitely, but shortages are going to be something else. A real freak out.

   

Comments

[Movenonup]

BTW, the USA was one of those countries that overstated their reserves by 90%.

[LaughingAsRomeWasBurningDown]

For some of us, puerility is a goal. For a compleat clusterfuck, you forgot Poland, errr, I meant that T*chn*cr*c* guy.

[oneEyeOpen]

""Econuts" like clean air and clean water and may not be the ones that are nuts."

Would you please point out to me the single person on this earth that does not like clean air and clean water" What a fucking idiot.

[Mr. Purple]

Nicholas Paredes wrote:

"Coal! Sure we have plenty of coal. But, does liquified coal run in cars? Does it require conversion of plants, delivery, and stations? It’s sort of like changing railroad gauges, but without the money or community spirit!"

I don't know if Joe Average is going to be the one "benefiting" from liquefied coal. Check out "Coal - jet fuel of the future?" at:
http://www.flightglobal.com/articles/2008/02/25/221766/coal-jet-fuel-of-the-future.html

I suspect it will be hard to argue with the official group of people with guns (a.k.a. the military) when they get in line ahead of you for the petro-goodness.

[Mr. Purple]

It seems as if some of the little people want their cut from the Bear Stearns carcass.

http://www.reuters.com/article/ousiv/idUSN1756243320080317

Hmmm... looks like the trial lawyers have started circling. I wonder how much trouble JPMorgan Chase & Co. just bought themselves.

[Mr. Purple]

PeakOilBoy wrote (asked, really):

"As for shortages, expect armed security guards around food places and gas stations soon?"

I would expect that, on gas tanker trucks, "riding shotgun" starts meaning the person in the passenger seat has a shotgun once again.

"History doesn't repeat itself, but it does rhyme."
-Mark Twain

[free_way_4_life]

It's not the public's fixation on techno-fixes and/or organizational solutions that's the problem, its their other dependence on the Wall Street and Washington "experts" to provide the solution, and their media mouthpieces telling them that they are providing the solutions. Its a lot like when I was an adolescent just starting college, when I sincerely believed that internet self help gurus and lame pop-alternative "rock" bands to show me the answers to all my problems of alienation and romantic rejection. In the end, it took self initiated action to feel any better.

The point is that I believe that we shouldn't be overly optimistic (ala Wall Street Journal) nor overly pessimistic (ala JHK), we should just act. Along the lines of that lawns to gardens link that PeakOilBoy provided. I mean, if the government and banks go belly up, can't the suburban masses occupy foreclosed McMansions and figure out how to till those huge lawns. Or can't a bunch of unemployed engineers and laborers squatting in an abandoned factory and retrofitting it, using salvaged materials, in to a productive, sustainable enterprise. If the self destructed carcasses of Wall Street and Washington want to raise a fuss, can't they just tell them to screw off, or at least strike a deal.

I'm not implying that it will be that easy, because the truth is we're looking at a long period of trial and error learning and development among those who are already awake and ready to move on, with the slow awakening of the majority and the shenanigans of the dying, desperate power structure in the background. The next few years will be tough, but all we can do is try and enjoy life the best we can. (By the way, I'm not trying to be a feel good Baby Boomer, just an honest 26 year old who has been living and often painfully adjusting to the first stages of collapse for the past seven months).

I'll end with a few questions. First of all, appreciate the coal discussion as it really does need to be examined as an option, but has there been any promising research findings? That is, a significant possibility that coal can be mined with little ecological impacts and processed in to usable materials and fuels with no CO2 and toxic byproducts? Also, freight transport is the only determent to the independent action I outlined above. How will the commercial railroads be affected by the current financial crisis, e.g. how indebted are they and do they have the assets to pay for diesel until they can be electrically retrofitted by the self organized army of the unemployed?

[Nudge]

Hot damn, some numbers. So the Syntroleum prez said the UPL's oil output of 5.5mbd would be doubled if we just devoted 5% of the UPL's supposedly 270-year coal reserves to making oil from coal? Too bad he didn't give a timespan for that comment.

If he meant perhaps that 5% of the coal reserves would double our oil output for a year (which is what I think he meant) then that's horrible news .. follow the numbers, meaning that it would take 10% of the coal reserves to quadruple our oil output for a year. Hmm, at that rate, all the coal would be gone in just 10 short years, and then where would we be? Holding Senate hearings about hydrogen, duh? Congressional inquiries into the possibility of burning methane (from livestock) in our by-then rusting SUVs?

Jim, this week's post was fantastic. :)

[LaughingAsRomeWasBurningDown]

Nudge, couldn't find a quote, but a story about Syntroleum says:

With over 270 billion tons of proven reserves, the United States is the Saudi Arabia of coal. If the United States converts just 5 percent of its estimated recoverable coal reserves, Syntroleum estimates it would be equivalent to the 29 billion barrels of proven oil reserves in the United States.

end quote. In ohter words, 13.5 billion tons of coal to get 29 billion barrels of oil is the claim.

[Cloud]

This image (from the Fed itself) says much - http://www.leap2020.eu/photo/885078-1089640.jpg
- it ought to be shown on the evening newz, it would be amusing to watch the anchors' faces.

[alantex]

There's a little problem in converting those suburban lawns to vegetable gardens -- something anyone who has tried will be familiar with.

The standard way to "install" those lawns is to scrape and roll (pack) the ground around those McMansions. All the spilled concrete, scraps of asphalt shingle and tyvek, dropped nails, chunks of sheetrock, cigarette butts, fast food wrappers, paint bucket washings, etc are compacted along with whatever "soil" might have been left after the lot was prepared for building. This "preparation" usually involves scraping all the topsoil off and hauling it away to become landfill .

Then a crew comes along in a semi and unloads pallets of rolled up sod which is then unrolled across the scraped and packed lot. A good dose of chemical fertilizer and insecticide is added to keep it green for a while. The new homeowner only learns later that his "lawn" is essentially a semi-living carpet a couple of inches thick on top of a compacted landfill.

Converting this mess to a garden is, of course, possible, but the amount of new organic material and tilling necessary will be extremely daunting. Mobilizing one's teenagers to get out there with picks and spading forks when most of them have never even pushed a power lawnmower, is not going to be a boon to family morale.

[LaughingAsRomeWasBurningDown]

Cloud, for those of us less economically clued up, just what does that picture mean? Non-borrowed reserves? In other words, the banks are afloat from "loans" from the Fed, and no real reserves such as my savings account?

[Dave]

http://www.youtube.com/watch?v=_Kli7dB4uO4&feature=related

[Dave Cohen]

I wouldn't look for those oil and gasoline shortages any time soon, Jim. The price will be going up, though, now that (beyond the fundamentals) speculators have discovered they can play with people's lives betting on oil futures in deflating dollars.

Ain't it a kick?

That big sucking sound you hear is current Bear Stearns shareholders trying real hard to breathe.

best,

Dave

[PeakOilBoy]

"The new homeowner only learns later that his "lawn" is essentially a semi-living carpet a couple of inches thick on top of a compacted landfill."

Agreed. I created a major advertising campaign for one of America's largest home building companies, and suggested they could retain value in their communities by leaving a few plots undeveloped and installing:

1) A Solar generator
2) Small scale alcohol fuel production
3) Mini-plots designated as garden areas for homeowners since they had fake lawns unworthy of gardening

Their marketing folks appreciated my suggestions, and then asked me to focus back on the ad campaign for their new McMansion Villas.

Now they are running "Leap Year Sales", saying prices will only be this low once, so buy now!

Sad, truly sad.

So many people say that the "Next Generation" will have to fix our problems, but whenever the next generation tries, they are marginalized as dreamers.

I look forward to helping lead this country when people are hurting enough to listen.

[ASPO Article 374]

NOW can we get going on the rusty butt dirty fingernail part of the Oil Interregnum Solution Set. Hello all you planners in the 3066 US Counties. Time to get familiar with the rail corridor running and not & built over & forgotten. We old first responders call that "PrePlanning".

Railways are the most efficient user of renewable energy, that being precious, lets use it wisely. As we progress back to the "Post Roads" emphasis in transport & distribution (See Act Of Congress July 10, 1838) take heart from knowing that railway can keep us connected, giving de minimus SOCIETAL & COMMERCIAL COHESION.

It will be interesting to see which presidential wannabe is first(spokesperson probably) to SAY railway rehab... Or will they be so cautious as to have a joint news conference on the "Emergency" (being careful not to Plagiarize Jim's full title)?

You regular people interested in the rail mode rehab, see "SPVdot com" for maps of the USA rail net past & present. Get a copy for your county planner before the feds outlaw sale... (Strategic Infrastructure info)

In California, still blessed with rusty rail remnants to places like Monterey, Isleton, Placerville, Santa Rosa, Petaluma, Arcata & Mare Island, You Know What To Do! Will Kempton is Director of CalTrans- help the poor guy out.

Will Kempton has, locked in a drawer someplace, an original unabridged copy of the 1995 US50/I-80 Rail Corridor study, showing a new TranSierra rail line via Placerville & South Lake Tahoe & over to the Carson Valley & Reno. Carson Valley? Maybe Senator Reid and his chief of staff, Bob Herbert, should be talking to will about that 1995 study, do ya think?

There just happens to be over 800 megawatts of hydropower already online in the 50 corridor. Wouldn't that be a nice renewable powered rail demonstrator?

[Praedor]

Uh...us "echo freaks" hate coal for the simple reason that there is NO way to get it without destroying, literally and almost forever, thousands of acres of land and habitat.

I've lived in the shadow of a strip mine. It is nasty nasty nasty and is not fixable. You get poison in your water, barren land at and around the mine, and, of course, heavy metal and CO2 out of burning it (whether it is in the form of "gas" coal or actual coal).

That's out West. Out East, you get monstrous mountaintop removal with concomitant destruction and poisoning of all local rivers and streams...and it is also (for all practical purposes) permanent and uncorrectable.

Coal is NOT the answer.

[SolubleFish]

"Very well said, Jim. And I'm sure XER will agree. :-D If you could just get over your disdain for homosexuals, you would actually be one of the few Baby Boomers I would regard as being well-clued."

I quite agree!

[upnatpishtim]

i like some cities. those west of the missippi are clean and well laid out.
most of the cities in the great state of new jerky are bombed out shells. some have spots of renewal.
but... what city in the usa is big enough to absorb all the ex suburbanites? if you take some large cities in new jerky, you'll find they are already surrounded by large urban tracks. all with piss poor mass transit and stores banks clustered along major roads.
local businesses charge 10% more for same items you can get at the big boxes, hence local stores open for a while and then close. it is true most of the urban areas surrounding the big cities are walkable. they have sidewalks and shade trees. just 20 miles away in
suburbia there are no sidewalks.
in what is left of the countryside
condo tracks and gated communities spring up. even going to the supermarket is a 20 mile round trip. in fact these new builds go on prime farm land.
it is being sed that the new slums
will be the suburbs. all low lifes and crack users and cheap hookers will be forced out the cities and into the surrounding suburbs.
however, in my experience, in new jerky, those type of folks depend on mass transit and easy walking distances to the nearest drug dealer. image a checker board or bulls eye pattern within the cities and subburbia. no matter where you live there always will be the wrong side of the tracks.
to reach this equalibrium may or almost certainly require social unrest and civil disruption.
i would dare say the landscape will be dotted with the corpses
of those unable to adapt. when population falls then cities will become livable. ben chopping wood and burning for heat this march.
450 dollar electric bills. the future is goan to be very bleak.
especially when the trees run out.
but after gun powder runs out we shall see an improvement.

[LaughingAsRomeWasBurningDown]

Speaking of accurate crystal balls, this prediction from 2001 nailed it perfectly:

http://www.theonion.com/content/node/28784

[PeakLife]

Here's Nudge, "the arithmetic monkey":

If we on this board are like a group of monkeys in a room staring up at a bunch of bananas hanging from the ceiling 9 feet above us, Nudge is the monkey who proclaims:

"Guys, I've ran the numbers. The lowest tips of the bananas are 9' above us. Our highest jumping monkey can hit 8 feet. So this means that we will never be able to reach those bananas, guys. We're screwed. We should start planning for our death now."

And meanwhile, outside the room down the hall sits a 1-foot high footstool.

That's Nudge--able to apply arithmetic to unambiguous, tangible situations, but wholly unable to perceive the larger context in which true problem solving takes place.

[Uncle Remus]

"Converting this mess to a garden is, of course, possible, but the amount of new organic material and tilling necessary will be extremely daunting. Mobilizing one's teenagers to get out there with picks and spading forks when most of them have never even pushed a power lawnmower, is not going to be a boon to family morale."

My dilemma exactly, sans teenage children (closer to 30 now).

Two words - raised beds.

[PeakLife]

"Guys, the numbers tell me that there will *always* be at least 1 foot of space between us and those bananas. There's no point in talking about it anymore--we're screwed."

[Uncle Remus]

"Guys, the numbers tell me that there will *always* be at least 1 foot of space between us and those bananas. There's no point in talking about it anymore--we're screwed."

As soon as a couple of you pass on from starvation, we'll stack the bodies and stand on them.

[Movenonup]

PL

Now does that 8 ft. jumping monkey need a running start? Could be that stool is a lot like the coal, nuke, or hydrogen solutions... the solution is more deadly than the immediate problem (monkey go oowww). :-)