Not Your Grandma's Depression

    This isn't so funny anymore. Intimations of a July banking collapse rumbled though the Internet this weekend while mainstream news orgs like The New York Times and CNN pulled their puds over swift boats and Amy Winehouse's performance technique. Something is happening, and you don't know what it is, do you Mr. Jones...? to quote the master.
     What's happening is that American society is sliding into a greater depression than the one Grandma lived through. On the technical side, there has been unending controversy as to whether we're gripped by inflation or deflation. It's certainly deceptive. Food and gasoline prices are rising faster than the rivers of Iowa. But the prices of assets, like houses, stocks, jet-skis, GMC Yukons and pre-owned Hummel figurines are cratering as America turns into Yard Sale Nation.
     We're a very different country than we were in 1932. In that earlier crisis of capital, few people had any money but our society still possessed fantastic resources. We had plenty of everything that our land could provide: a treasure trove of mineral ores and the equipment to refine it all, a wealth of oil and gas still in the ground, and all the rigs needed to get at it, manpower galore (and of a highly disciplined, regimented kind), with fine-tuned factories waiting for orders. We had a railroad system that was the envy of the world and millions of family farms (even despite the dust bowl) owned by people who retained age-old skills not yet degraded by agribusiness. We had fully-functional cities with operating waterfronts and ten thousand small towns with local economies, local newspapers, and local culture.
     We had a crisis of capital in the 1930s for reasons that are still debated today. My own guess is a combination of a bad debt workout that sucked "money" into a black hole (since money is loaned into existence, but vanishes if the loans are not systematically paid back) plus a gross saturation of markets, meaning that every American who had wanted to buy a car or an electric toaster had done so and there was no one left to sell to. (The first round of globalism -- 1870 - 1914 -- had shut down after the fiasco of World War One.)
      Our debt problems today are of a magnitude so extreme that astronomers would be hard pressed to calculate them. By any rational measure our society is comprehensively bankrupt. From the federal treasury down to the suburban cul-de-sacs so much loaned money is either not being paid back, or is at risk of never being paid back, that the suckage of presumed wealth has passed through an event horizon out of the known universe into some other realm of space-time, never to be seen again in this realm. This would seem to be the very essence of monetary deflation -- money defaulted out-of-existence.
      This condition is partly disguised by both the loss of credibility of US currency and real-world scarcities of oil and food, but the upshot will be something at least twice as bad as the Great Depression of the 1930s: people with no money in a land with no resources (with manpower that has no discipline), hardly any family farms left, cities that are basket-cases of bottomless need, comatose small towns stripped of their assets and social capital, an aviation industry on the verge of death, and a railroad system that is the laughingstock of the world. Not to mention the mind-boggling liabilities of suburbia and the motoring infrastructure that services it.
     The banks have been doing their death dance for an entire year now, pretending that their problems are those of mere "liquidity" (i.e. cash-on-hand) rather than insolvency (no cash either on hand or in the vault and nothing else to sell to raise cash except worthless "creative" securities that nobody would ever buy). But the destruction of money (resulting from loans not paid back) is now so intense that the game of pretend has reached its terminal point. The question for the moment is exactly who and what will be crushed as these institutions roll over and die.
     Complicating matters is a global oil predicament that is really not hard to understand, but which the organs of news and opinion have obdurately failed to explicate for an anxious public. Call it Peak Oil. There are only a few elements of it you need to know. 1.) that demand has now permanently outstripped supply; 2.) that new discoveries are too meager to offset consumption; 3.) That under under the circumstances, the systems we rely on for daily life are crumbling. I've called this situation The Long Emergency.
     Our chances of mitigating this, and of continuing our current way-of-life is about zero. I've tried to promote the idea that rather than waste remaining resources in the futile attempt to sustain the unsustainable (i.e. come up with "solutions" to keep suburbia running), that we should begin immediately making other arrangements for daily life -- mainly by downscaling and re-scaling everything from farming to commerce to the way we inhabit the landscape -- but my suggestions have proven unpopular even among the "environmental" elites, who are too busy being entranced by new-and-groovy ways to keep all the cars running.
      So where we are at now is the equivalent of standing in the slop by the ocean shore under a gathering hundred-foot-high wave that is about to come crashing down on our heads. Since I sure don't know everything, I can't say how this will all play out in the months ahead, especially with the presidential election coming at the exact moment that voters will be turning on their furnaces for the cold and dark winter beyond. I would venture to say that so far our society as a whole has done a piss-poor job of comprehending the situation. But there is still the possibility, with four months of politicking left, that the nature of our predicament can be articulated in a way that few can fail to understand, the way Mr, Lincoln articulated the terms of the Civil War on the eve of its fateful outbreak.

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My new novel of the post-oil future, World Made By Hand, is available at all booksellers.

Comments

[mikeh13]

I'm first...just wanted to point that out.

[Nicholas Paredes]

I had thought that the 1890 depression was worse than the 1929 version... But, the effect is the same to those who suffer.

The articulation of this mess is likely to lead to a press release from GM stating the opposite, the workers hoping to hang on until retirement in the desperate dream of a solvent pension fund becoming angry with the any leader that dares utter such drivel, and Boone Pickens stating that it is actually much worse and that everybody should invest in his wind farm. In other words, a confused electorate unable to sort through the confusion after watching too many infomercials and news casts with Mr. Shiny Hair.

Let's call it Swift Boating just so we can continue a meme that should remain a disgusting footnote in history. It was easier to respect a military that stuck together, and stood against things like torture. Perhaps the thing to learn from W is that people are actually idiots, and deserve to "get it good and hard."

Nice way to start the week! Thanks Jim.

[upstatebob]

You are right, this IS scary. We are looking into the unknown and unpredictable. A friend asked what would be the best form of capital preservation. -Wish I knew. Move to a warm climate with a good garden plot.

[umass82]

And do not forget that as the great depression hit our cities had a vast public transit system of streetcars and trolleys that allowed movement within and in many cases between cities to be done cheaply and efficiently without cars, these have for the most part been done away with to free up room for the automobile.

[Laura Louzader]

I have only to say that I sincerely hope, Jim, that you are not counting on Obama to articulate the reality we are facing.

I had hopes for Obama, but they are fading as he continues to yap about his detailed plans for the replacement of oil with biofuel- with billions of $$$ in government subsidies of course.

To me, this means that Obama is complicit in plans that will force 90% of us to subsidize our own descent into starvation, as well as having no transportation at all, in order to finance biofuel development for the 5% of the population that will still be able to afford cars.

I can only sit here and hope that Obama, who is the only faint hope we have, is lying about his plans and will Get Real after the election , and allocate our money to public transit and railroads- and away from biofuel, airlines, and highways.

But, somehow, I'm not feeling very hopeful.

[enobarbus37]

Only one problem with this post. I honestly think it's right. It's that situation when someone you read could and should be accused of hyperbole, but, the problem is, they're right.

The Bush Administration would do well to have watched the European Cup final. It was asymmetric.

Just like Iran versus the US is going to be. How could Iran possibly whup the US? How could Hezbollah possibly whup the IDF?

I guess you forgot to mention Iran which is why I brought it up.

[JLee]

And Obama runs on the claim that he is for change. What is that? Wearing a blue tie today instead of a blue striped tie yesterday. He won't know change even when it smacks him in the face.

[Nicholas Paredes]

Eno,

I like your analogy in soccer. Yesterday, Viva Espana!, I pondered the difference between American football and soccer, and how many compare football to war. And yet, soccer is much more war like. A grinding game where a single point makes the difference after much toil.

We have no clue what brutality war is, though does anybody until witnessing the mess? And, here we are, ultimately facing a decision as to how we will secure resources in the near future, after squandering them for so long.

[montysano]

Whether Obama represents any real change is yet to be seen. Yes, he's tacking to the center, just as presidential candidates always do between the primaries and the general election.

Even if Obama is Peak Oil aware, and is up to speed on the financial debacle (which I have to believe, on both counts, that he is; he's a smart guy), what's he to do? In our current media environment, which is worse than Howard Beale's worst nightmare, he'd be crucified if he spoke the truth. That's how we roll in 21st century America: the masses get their "news" in sound bites from Fox and Rush and Sean, and their ignorance and apathy and laziness ensures that they'll never dig any further for the real truth. Hannity has been bawling for weeks now about how "we have more oil in North America than there is in the entire Middle East", and this gets accepted as factual. Rush says that we absolutely can drill our way out of the problem, so the debate launches from this platform.

How do I know this? Because my co-workers and acquaintenances throw those talking points back in my face, without having any idea of their factuality.

While we desperately need a big dose of truth, Obama would do this at considerable peril. How would be cable news channels and the echo chamber react? Well, they would react in whatever fashion would garner the highest ratings, and the truth can go f**k off.

[asoka]

Can someone give a fuller, more technical definition of "July banking collapse"...

It's been a while since Jim gave us a prediction we can evaluate in 30 days. Nailing down the definition would be helpful.

[Rudi]

I think Obama IS the candidate for change. For changing the liability status of telecom companies retroactively from Criminal to Protector. Or is our next hit reality show in the US going to be "What rights? Surprised reactions from ordinary citizens in extraordinary legal situations." How about CSI2: Uncovering the Secret Laws that nobody knows they're breaking till the juice hits!

[steve duncan]

The bad news is greeted on the nightly financial chat shows with exclamations of glee and optimism. If the public, even just of fraction of them, believe what they hear this recession/depression is the perfect opportunity to profit if only you pan for enough gold in the sluice of financial sewage. I'm not sure how the gravity of the situation is supposed to sink in with this counter messsage blasting from the squawk box. When Bush is pressed to answer whether we're in peril he stands at the podium and pronounces all is basically well save a few minor speed bumps, denying anything such as a recession is even a valid economic entity. Sure, his word is not worth much now but there is still that sizable number of people clinging to the paternal protector figure, that "Dad's gonna bring home the paycheck come hell or high water" kinda guy. Hey, he saved us from the evil, marauding Muslim horde, he ain't gonna let us sleep in the poor house, right? The same guys still listening to him are the ones that ask their wife what's for dinner as she's walking out the door with her bags and the kids.

[emergentink]

Read John McCain's "Lexington Project" or Barack Obama's "New Energy for America" and you'll see plans for continuing America's addiction to oil. The key to reducing the risk of Peak Oil is conservation on a massive and unprecedented scale. The candidates are unwilling to talk about any sacrifices Americans are going to have to make. So their plans are only more pipe dreams. We will make those sacrifices, unvoluntarily, starting when it's too late. Most Americans will only start thinking local when they can no longer get anywhere in their cars.

[montysano]

"I think Obama IS the candidate for change. For changing the liability status of telecom companies retroactively from Criminal to Protector."

The current FISA bill is nothing but political kabuki. The real threats to our rights are to be found in the Patriot Act and the Military Commissions Act. Most of those who slam Obama over this have not studied the bill, and have a dim understanding of how politics is played.

[Consultant]

The far right wants to suppress the truth (you know, people are stupid and can't handle it) and the far left wants to everyone to know the(ir) truth (because they know what's true).

What's Obama to do? 1st. Win the damn election. Everything on his plate come Jan. '09 will be reality check stuff. All the fantasy, fun, "I'm going to Disney world!" stuff is out the window. We're broke and up the creek without a paddle.

The best Obama will be able to do is guide the smart folks, twits, racists, wealthy, poor, middle-class, hypocrites, criminals and good folks through a series of increasingly difficult shocks to our American way of life.

Think of Obama as the elevator going down. McCain (and most Republicans and the Democratic Party (not Democratic voters))is the elevator in free fall.

You make the choice.

Obama, '08 & '12 (if we're still holding elections).

[Moondog]

The candidates just want be elected, so their requisite cognitive dissonance is predictable and understandable. Among the progressive-minded reality-based folks, there are those of us who would like to believe that Obama does understand the long emergency underway, and there will indeed be "change" once he is in office. It is on this precarious hope, that he has other plans in mind, to which we naively cling.

[NoOilinthisTarHeel]

Jim I met you at Furman University a while back - it is uncanny how you say all of this unfolding.
The squawkers keep saying to buy the big names while they are so low; because when the recovery occurs you will be positioned well. Would someone draw me a picture of what this recovery is going to look like? The picture I see is one with me getting to know the local farmers better.

[montysano]

Those are great comments from Moondog and Consultant. Currently the idealists and the "Hillary is 44" deadenders are helping to form yet another Democratic circular firing squad. As Consultant said: "Win the damn election", then we'll figure out where to go from there.

Given the current landscape, I couldn't fault Obama if he stood up tomorrow and said "Screw it, I'm going home. President McCain..... it's all yours, baby."

[PillowTick]

you guys will like this.
im on the freeway this guys driving his hummer at 30 miles an hour i go around him to give him the bird and he yell "I'm sorry go around i don't want to waste gas"!
I shit you not. this happened to me. what really burns me is
the millions of stupid dorks like that guy think that digging up not Down is going to get them out of a hole. i didn't say us out of a hole because most people do not think collectively.

[bobbymcfadden]

I loved the irony of:

"That's how we roll in 21st century America: the masses get their "news" in sound bites from Fox and Rush and Sean, and their ignorance and apathy and laziness ensures that they'll never dig any further for the real truth. Hannity has been bawling for weeks now about how "we have more oil in North America than there is in the entire Middle East", and this gets accepted as factual. Rush says that we absolutely can drill our way out of the problem, so the debate launches from this platform."

I love it -- believe my statements as truth, but not theirs!

Kunstler makes some interesting points, but to take everything he posts as fact (and to think "digging for truth" at this or any blog is objective education and full enlightenment) is the height of absurdity and the same pack mentality Kunstler so ceremoniously despises among suburbanites.

I agree the current structure isn't sustainable (we're seeing shifts already -- see the near death of SUV's at the Autos), but don't kid yourselves that this is any different than the mass media storylines CNN, Fox, and the rest feed us.

Now, time to drive an hour and a half to get my Sheep Sheering lessons that will no-doubt com in handy when the lights go out.

[ArturoBandini]

On the Obama comments:
There may still be hope that Obama at least "gets it", but I don't know why we should think that he can do anything about it. If he brings to the table a serious plan to resolve our oil issues or even address some kind of deconstruction, he will be lampooned, regardless of if he is president, president-elect, or candidate.

Putting our last bit of hope in a single man seems pretty delusional to me. I think the "elevator going down" analogy is pretty fitting; Obama could serve a useful role in this regard, but I see the rest of the government and the corporate media cutting the cables pretty quick.

[vegasbob]

People have a natural tendency to avoid or tune out bad news. After all, thinking about Disney World is much prettier than thinking about hellfire and brimstone. That's why the stock market kept going up until last October. The financial markets didn't start to fall until the bad news could no longer be ignored. Now that denying or ignoring the problems is no longer plausible, the financial markets are plummeting.

Perhaps Obama does understand what is happening to this country. But the US is financially bankrupt, ethically bankrupt, and spiritually bankrupt. American children play video games or sit in front of television eating HoHos all day. They wouldn't know what real work is if it bit them in their fat asses. So the die is cast and the US will continue to decline. Nothing, not even Barack Obama, can stop this slow-motion train wreck.

That said, someone gave us a visual concept with elevators. We can think of Obama as an elevator heading down slowly. We can think of McCain as a jet plane headed straight to hell. If the American people are stupid enough to vote for McCain, they will get exactly what they deserve. And they will prove beyond any doubt Michael Moore's assertion that "Americans are, quite possibly, the stupidest people on the face of the earth."

[antibanana]

Predicting the future is a dangerous business, not only because you don't know what the future holds, but also because it's hard to tell what assumptions may prove to be faulty.

I disagree that the US has an unmotivated, undisciplined workforce. That may be more true of blue-collar type jobs now than in the 1930s, but have you adequately considered the potential efforts of displaced white collar workers?

It's certainly not my experience that most white collar workers are undisciplined or unmotivated. Many, too, are not that far removed from working class roots. I would not underestimate the survival skills of middle class Americans.

Maybe I'm just an optimist..

[calgarydude]

One of my favorites columnists at "lewrockwell.com" is Charley Reese. Here is part of today's posting:

"For some years now, I've worried that we seem to be more and more like Colonial England – arrogant, racist, overestimating our own capacity and underestimating that of our enemies. As the fate of the British Empire demonstrates, that is a fatal flaw."

Not only is there a financial crisis and an energy crisis, but there is the ongoing fantasy in Washington that America can (and must) rule the world. A war will simply speed the inevitable.

Jim, I saw you speak in Calgary and I was much impressed. You remind me of George Carlin: disrespectful, irreverent, discomforting and vulgar - but telling necessary truths. Please keep it up.

And thank you for your articule observations. You have helped me and many others prepare for the coming times.

[Nicholas Paredes]

McF,

I don't think that we're getting our news here, nor does Jim pretend to be a news outlet. Perhaps, given the secrecy of the house of Saud, and conjecture on the part of oil companies, there is no news to get. There is a general thesis and discussion centered around how we will survive, unless there were more dinosaurs than current projections believe.

Television news is crap in general, and having given up on television a dozen years ago, it has only gotten worse in my limited experience. As many of these threads prove, people 'round are more than helpful in pointing out fallacies in the most vulgar manner possible.

This is actually more like a barber shop. Can we bleed you?