Anxious Hiatus

      My new novel of the post-oil future, World Made By Hand, is available at all booksellers.
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     Loveliness was everywhere this holiday weekend in upstate New York, and it was probably hard for many to believe that the wayward nation would return to the dread uncertainty of life in the crash lane when the barbeques were over. There was even a wan overtone to the late-night sports news about the Indy 500 race -- as though the spectacle of cars droning round and round a speed oval epitomized the futility of American life in this moment of our history.
     I had a discussion with one guy at a Sunday night party about the prospects for hydrogen-powered cars. We rehearsed the usual reasons why such a system was unlikely to get up-and-running -- and then he said, "...but what if we took all the money from the war and put it into something like the space program and... they came up with some way to make it happen...!"
     This is certainly the golden heart of the great wish out there, as the empire of Happy Motoring begins to run down on $4 gasoline. It seems inconceivable that a society so bold as to put men on the moon (fer crissake) can't overcome such a prosaic problem as finding something other than oil byproducts to run our cars on.
      From this holy font all cognitive dissonance flows.
      It seems inconceivable, but it begins to look like that's the way it really is, and we just can't accept it.
     Of course, one of the reasons that Americans are so anxious to get away on a holiday weekend from the places where they live is because we did such a perfect job the past fifty years turning our home-places into utterly unrewarding, graceless nowheres, where the private realm of the beige houses is saturated in monotony, and the public realm has been reduced to the berm between the WalMart and the strip mall. Now, we barely have the gasoline to run all this stuff, let alone escape from it for a weekend.
     We're at a dead end with all this and a lot of Americans are paralyzed with fear about what's next. This may actually be a deeper fear than the anxiety about money and banking in 1933, when Franklin Roosevelt was sworn in and tried to reassure the nation. Back then, despite the grave problems of capital, we still had plenty of everything: plenty of good productive land, plenty of manpower earnestly eager for hard work, plenty of ore in the ground, shining cities equipped with excellent streetcar systems, a railroad network that was the envy of the world, sturdy small towns and small cities fully equipped with locally-owned business, and a vast number of small family farms that could re-absorb family members unable to get wages in the cities. Most of all, we had plenty of oil in the ground, and the world's biggest industry for getting it out and selling it. What we didn't have in 1933 was cash money.
     The crisis at hand now goes way beyond a crisis of capital -- though that is certainly part of it. Notice how many of the things we had in 1933 are gone now. Our cities, with a few exceptions, are imploded husks. Our small towns and small cities (Schenectady, home of G.E.!) are gutted, especially in terms of locally-owned business. Our passenger rail system is worse than anything a Soviet ministry might produce (while the airline industry that replaced it is dying of a kind of financial hemorrhagic fever). Our local transit hardly exists anymore. Family farms have all but disappeared. We have plenty of manpower earnestly eager to become American Idols (but certainly not for heavy labor). Our oil industry now supplies only a fraction of the world's daily supply (and not even enough for half of our own needs).
     What happens now? We face not just change but convulsive change. The public senses the rapid unraveling of our car-centric arrangements. In the week before the holiday, gasoline prices went up several cents each day -- in upstate New York, it crossed the $4 mark and kept going up. The trucking system faces collapse as diesel fuel price-rises exceed even the rise in gasoline, and the vast number of independent truckers who make up the system confront the individual calamity of a personal business failure. American Airlines last week announced severe measures to keep operating through the fall of 2008. but none of the airlines can feasibly carry on as usual with oil prices above $120-a-barrel -- and the ominous message is of a business model that has no conceivable way to adapt to the new reality. Most likely, in a very few years air travel will no longer be a "consumer" enterprise. 
     In the background of these practical problems -- "off screen" during the holiday of car races and ball games -- is a crisis of capital orders of magnitude worse than the one faced by Franklin Roosevelt in 1933. For behind the "liquidity" (i.e. insolvency) issues faced by the big institutions lurks the Godzilla of the derivatives trade, which has evolved into a black hole capable of sucking all notional "money" into oblivion. That "money," which represents the aggregate value of our society, also amounts to the emperor's new clothes of an empire in serious trouble. As the black hole of derivatives sucks away these "new clothes," America will stand naked against the elements of fate.

Comments

[Nudge]

Great post, Jim, and happy Mem Day weekend to you.

Woohoo, frist psot!

[thal]

There goes my trip to Zurich.

[barefootbookseller]

One thought/suggestion to use in a discussion with someone that says "if we can put a man on the moon, we can come up with a replacement for oil."

You can take energy and make anything, but you can't take anything and make energy.

Fossil Fuels + Man's ingenuity = Man on the Moon

Man's inguenity - Fossil Fuels = Man on stationary bicyle pumping water out of the ground for his garden and family.

Things change quickly without unlimited amounts of energy.

[Nudge]

The derivatives trade thing is not even visible on the imagination horizon of the average 'murikan person. The issue of motor fuel depletion is only inches closer, from the perspective of all those walking sleepers out there mindlessly consuming like mad and only vaguely become aware that something's not quite right.

The derivatives monster will indeed not just blow down the rest of the house of cars, but suck it up completely, along with the table it sits on, the participants in the creation of the house of cards, and more, as the whole room implodes down to smaller than a pinhead. And who but a pinhead would have been so stupidly egotistical as to think up ways of getting rich without really doing anything? Of course, the “wealth” collected by those people was vacuumed up from elsewhere in the system. Hundreds of millions of 'murikans are seeing their pensions, their 401(k)s, their life savings, their homes etc lose value most precipitously. Some of this is good old-fashioned inflation (thank you ever so much, Ben Bernanke et al, for your “no fund manager left behind” policy) but some of it is the entropy monster beginning to devour.

It's feeding time, kids.

[MBerger47]

Looking back at the problems from the Depression certainly puts our current crisis in perspective. Thanks

[peakoilmom]

Great op-ed in the Washington Post Sunday, Jim. I hope some of TPTB read it and act...

[Loveandlight]

I know what you mean about our cities' mass transit. Milwaukee, the city in which I live, is supposed to have one of the best bus-systems for a major American city. That's sad, because our transit system is basically just barely adequate, and the stupid manner in which it is funded from local property taxes pretty much guarantees that the system will always be on the precipice of financial calamity.

[Nudge]

Loveandlight, states and municipalities everywhere like to point out that public transit is “unprofitable”, while with the other hand those same entities pour millions into road maintenance, which is just another fancy expensive project-Apollo type way of subsidizing the whole cars-on-roads paradigm.

On BBC radio today was a cute piece about Los Angelinos bemoaning the excellent light rail system the city lost in the 1950s as the cars-on-roads thing took off. And look where we are now. Gosh, was it too much for any one of the hundreds of thousands of politicians great and small who handled this thing to consider that there might someday be unintended consequences?

[daazdnkuntfuzd]

The Surreal Life: "PPO", Merika's newest reality Reality"show".
Being a late product of the Boomer gen I consider myself extremely fortunate having been witness to and beneficiary of the unending wonders of our modern machine-age. I dare say that there is not one thing in my current environment that doesn't bear the stamp, "Conveniently brought to you and yours by the astoundingly cheap(undervalued and under appreciated) oil energy output!"
I live around the Phila. 'burbs in an area of mostly discrete yet astounding wealth - all things considered.The homes, suv's, paychecks, egos, and bills are all huge. It's a veritable Disneylandesque manifestation of the of American dream. It goes for mile after mile out here - lorded 1-5 acre estate after lorded estate - all looked after by our new low-wage neighbors from way south. Perhaps there is something in the water here because reality for these folks permits no time for nay-saying contemplation of the exigencies of PPO. Let the good times roll?!

[daazdnkuntfuzd]

The Surreal Life: "PPO", Merika's newest reality Reality"show".
Being a late product of the Boomer gen I consider myself extremely fortunate having been witness to and beneficiary of the unending wonders of our modern machine-age. I dare say that there is not one thing in my current environment that doesn't bear the stamp, "Conveniently brought to you and yours by the astoundingly cheap(undervalued and under appreciated) oil energy output!"
I live around the Phila. 'burbs in an area of mostly discrete yet astounding wealth - all things considered.The homes, suv's, paychecks, egos, and bills are all huge. It's a veritable Disneylandesque manifestation of the of American dream. It goes for mile after mile out here - lorded 1-5 acre estate after lorded estate - all looked after by our new low-wage neighbors from way south. Perhaps there is something in the water here because reality for these folks permits no time for nay-saying contemplation of the exigencies of PPO. Let the good times roll?!

[theroachman1]

Amtrak was nearly thrown out for dead after 9/11 when the Stupid Congress and even dumber Vice President and his pet tried to end all funding for Amtrak.

But there has been a huge resurgence 2007 was Amtrak's single greatest year ever!!! Thanks mostly to the head of the Federal Railways and to hundreds of dedicated volunteers around the US. Amtrak has actually expanded and improved service. They are very far from where they need to be but at least they are slowly headed in the correct direction.

End the subsidies for the airlines and put them into Amtrak. Private capital will follow.
I paraphrase Princess Leigha, "Help us Amtrak your our only help"

[MaryW]

The Indy 500 - how appropriate, however most people will continue to go around in circles about increasing fuel and food prices because they believe anything that their government tells them.

It will take a job loss and a foreclosure on their house and probably more before they get some inkling about peak oil which is the beginning of a series of worsening and never ending recessions/depressions.

Yet people still continue to motor along in SUVs thinking that in time the price of fuel will drop - poor deluded fools. All they will have in the end is a rusting hulk of a white elephant that they'll be lucky to sell for scrap. Fuck me ragged - how stupid can you get?

Of course air travel will only be available to elites such as heads of states or pop stars but even then the law of diminsihing returns will begin to cut deep for them - how will Madonna cope without the mass adulation on a regular basis?

On the subject of pension funds I have managed to warn a friend off joining one because the funds are invested in local and overseas stock markets. I said to her, "You might as well as take your money and blow it at the casino because the net effect will be the same - put it on your mortgage as you will have a better chance of holding onto your house if you increase your equity in it."

Trying all the time to think of ways to get leaner and meaner with everything and not to worry to the point of ending up completely joyless. A lot of the comments here on CFN really appeal to my black sense of humor - keep 'em coming.

[theroachman1]

help = hope

[GBenzon]

Is the Merkin public coming the realization that we're on a downhill slant, possibly headed for a cliff? If you keep up with blogs like this one, and other such as The Oil Drum and Energy Bulletin etc, it's like running with a crowd that is in-the-know, and may give the false impression that the general public is as up-to-speed as you are. I think this is an illusion. Sure, people are pissed that it now costs $100 to fill up their Suburbans, but that's surely just a problem of some vague entity out there trying to screw them. Eventually everything will get back to "normal" and the good times will roll again....

I don't live in Willets or Berkeley. Where I live, I come across virtually NO ONE who really has a clue-- and most of the folks I have discussed it with have reacted either with belligerence or ridicule. It's going to take something a lot more catastrophic than $4 gas to change this, I think.

I saw a new commercial for American Express last night. A wife hands her husband a new credit card saying "We need a new TV. Don't go overboard." The next scene-- the husband is standing there wide-eyed before a huge collection of the largest flat-screen TV's and sound systems where he says in an airy voice:

"I want it."
"I want it all."
"I want it now."

That about sums it up.

[oneEyeOpen]

Fudge sez:

"Once the lumpen demotorization thing gains traction (so to speak) most folks will be restricted to going places that are within walking / bicycling distance."

Well, I suppose that since you continue to motor about in your cute little car you count yourself as one of the "lumps"? Once again a nice little moralizing sermon by one of the bigger hypocrites to ever drive down the pike.

[Nino]

Another great post.

http://www.flickr.com/photos/know-our-enemy/2419527659/

[Nino]

Another great post.

http://www.flickr.com/photos/know-our-enemy/2419527659/

[slackful]

Nudge, how often do you pay for something that is worthless? Not often, I bet, you seem like an intelligent person. So why do you carry around the implicit assumption that lots of other people do? I guess you're just smarter than most people. The fact is, it's not possible to "steal" the amounts of money you assume are being stolen, through derivatives or otherwise, precisely because people like you don't purchase worthless things in the multi-billions of dollars. Sad as it may seem to some, the reality is, finance is valuable, has a purpose, rewards hard work, and punishes laziness and those who are mere dreamers or wanna-be grifters. So, just as the West has not "stolen" all it's wealth from completely destitute people who produce little of value, neither has Wall Street "stolen" most of the wealth that has already been produced through derivatives chicanery. In physics, someone who argued that gravity now pulls up, not down, would be laughed at, because physical reality punishes those who believe such things, when they die after jumping off the empire state building. Unfortunately, economic reality is more obscure and less well understood. The punishment, though inevitable, is not as easily avoided. Pinheads abound.

[mattsh1]

Jim. You stated...

"Our passenger rail system is worse than anything a Soviet ministry might produce"

Uh no kidding. A little history about the Soviet rail system....

Soviet period ---
In the Soviet period People's Commissariat of Communications expanded railway network to a total length of 106,100 km by 1940. During the Great Patriotic War (World War II) the railway system played a vital role in the war effort transporting military personnel, equipment and freight to the frontlines and often evacuating entire factories and towns from European Russia to the Ural region and Siberia. After the war the Soviet railway network was re-built and further expanded to more than 145,000 km of track by major additions such as Baikal Amur Mainline.

http://en.wikipedia.org/wiki/Rail_transport_in_Russia

[mikeh13]

I love JK...sheer entertainment value that's hard to beat, but let's face it, unless and until JK and Matt Simmons move into a tent together in Upstate NY and give up every convenience of modern life..in other words, make their own underwear and digest tree bark, it's hard to imagine these fellers as anything other than carnival barkers. Simmons is particularly shameless: every interview he appears in we see a copy of his latest book over his shoulder. Is it Matt Simmons the Nobel laureate? Matt Simmons the Non-Profit Humanitarian? No, it Matt Simmons the INVESTMENT BANKER, chief huckster for $300 oil on behalf of his very-much-for-profit clientele. Jim...call up Matt and see how willing he would be on behalf of society to give up the bespoke suits and plush office surrpoundings and retreat with you to a teepee in the Adirondacks for the duration of next winter..I'll provide the animal skins but you guys have to peel the bark.

[Rudi]

Could this be real cold fusion this time?

http://newenergytimes.com/news/2008/29img/Arata-Demo.htm

Doctor Arata

[Rudi]

Here's a paper that seems to explain Doctor Arata's so-called 'Lattice Reactor': http://www.journalarchive.jst.go.jp/english/jnlabstract_en.php?cdjournal=pjab1977&cdvol=78&noissue=7&startpage=201

[EEofDC]

"....neither has Wall Street "stolen" most of the wealth that has already been produced through derivatives chicanery." --slackful

slackful-

Take a quick trip over to www.solari.com for a very different perspective on finance. FYI: Fitts was valedictorian of her Wharton MBA class and the first woman director at Dillon Reed investment bankers. She is currently a director of GATA.

--------------------------
For it has established that the Federal Reserve does have secrets about the U.S. gold reserve--that things have been done with their gold that the American people might object to if they were allowed to know, or that things have been done with the gold reserve that can be accomplished only by deceiving the financial markets.

The Fed's acknowledgement that it is withholding information about the U.S. gold reserve may be taken as more evidence that the U.S. government is surreptitiously manipulating the gold market.

You can find GATA's letter of appeal here:

http://www.gata.org/files/GATA-FedFOIAppeal.pdf

[asoka]

barefootbookseller said: "One thought/suggestion to use in a discussion with someone that says "if we can put a man on the moon, we can come up with a replacement for oil."

You can take energy and make anything, but you can't take anything and make energy. Things change quickly without unlimited amounts of energy."

Ummm.... I just visited friends in New Mexico who are living off the grid. They have unlimited amounts of energy and will have it for the next several hundreds of thousands of year.

They did take anything (mud) and make adobe bricks and trombe walls. Solar heats their houses.

Around here in the northwest public buildings are being built with state funds which have geothermal energy for heating.

Then there is wind, tidal, and hydroelectric.

Energy is not the same as barrels of oil.

[se-cyclist]

Here in Portland, there's a new commuter rail line on the west side and a new light rail line is scheduled to go into service next year. So to say that local transit is nonexistent is not true universally. Portland isn't all that big a city, and others can follow its example.