Forecast for 2009

Introduction

      There are two realities "out there" now competing for verification among those who think about national affairs and make things happen. The dominant one (let's call it the Status Quo) is that our problems of finance and economy will self-correct and allow the project of a "consumer" economy to resume in "growth" mode. This view includes the idea that technology will rescue us from our fossil fuel predicament -- through "innovation," through the discovery of new techno rescue remedy fuels, and via "drill, baby, drill" policy. This view assumes an orderly transition through the current "rough patch" into a vibrant re-energized era of "green" Happy Motoring and resumed Blue Light Special shopping.
      The minority reality (let's call it The Long Emergency) says that it is necessary to make radically new arrangements for daily life and rather soon. It says that a campaign to sustain the unsustainable will amount to a tragic squandering of our dwindling resources. It says that the "consumer" era of economics is over, that suburbia will lose its value, that the automobile will be a diminishing presence in daily life, that the major systems we've come to rely on will founder, and that the transition between where we are now and where we are going is apt to be tumultuous.
      My own view is obviously the one called The Long Emergency.
      Since the change it proposes is so severe, it naturally generates exactly the kind of cognitive dissonance that paradoxically reinforces the Status Quo view, especially the deep wishes associated with saving all the familiar, comfortable trappings of life as we have known it. The dialectic between the two realities can't be sorted out between the stupid and the bright, or even the altruistic and the selfish. The various tech industries are full of MIT-certified, high-achiever Status Quo techno-triumphalists who are convinced that electric cars or diesel-flavored algae excreta will save suburbia, the three thousand mile Caesar salad, and the theme park vacation. The environmental movement, especially at the elite levels found in places like Aspen, is full of Harvard graduates who believe that all the drive-in espresso stations in America can be run on a combination of solar and wind power. I quarrel with these people incessantly. It seems especially tragic to me that some of the brightest people I meet are bent on mounting the tragic campaign to sustain the unsustainable in one way or another. But I have long maintained that life is essentially tragic in the sense that history won't care if we succeed or fail at carrying on the project of civilization.
      While the public supposedly voted for "change" this fall, I maintain that they underestimate the changes really at hand. I voted for "change" myself in pulling the lever for Barack Obama. I regard him as a figure of intelligence and sensibility, but I'm far from convinced that he really sees the kind of change we are in for, and I fret about the measures he'll promote to rescue the Status Quo when he moves into the White House a few weeks from now.

Where We Are Now

      Without reviewing all the vertiginous particulars of the year now ending, suffice it to say that the US economy fell on its ass and that the "global economy" did a face-plant as well. The American banking sector imploded spectacularly to the degree that investment banking actually went extinct -- as if a meteor landed on the corner of Madison Avenue and 51st Street. The response by our government was to shovel "loans" onto the loading dock of every organization that pretended to be something like a bank, while "bailing out" an ever-longer line of corporate claimants with a pitiable song-and-dance. The oil markets went on a roller coaster ride. The housing bubble collapse grew to avalanche velocity (taking out whole colonies of realtors, mortgage brokers, and construction contractors in its path), the commercial real estate sector developed hemorrhagic fever, retail drove off a cliff on Christmas Eve, the stock market fell in the toilet, jobs and incomes went up in a vapor, and tens of millions of ordinary citizens addicted to revolving credit found themselves in a life-and-death struggle for the means of existence. None of this is over yet.

The Year Ahead

Much of what has been lost in 2008 will not be recovered: enterprises, personal fortunes, chattels, reputations.
     I expect a period of euphoria to mark the early weeks, perhaps months, of the Obama team. It will be a relief to have a president who speaks English correctly and has experienced something like real life prior to politics. Restoring credibility and legitimacy in leadership will be a big deal. If nothing else, we may recover a collective sense of consequence from a president who tells the truth, even the harsh truth. The age when it was enough to claim that "mistakes were made" might be over. A sign of this sort of change may be the commencement of prosecutions for misdeeds in banking and securities that are now destroying the entire system of deployable capital. A good place to start will be an investigation of Henry Paulson for insider trading stemming from Goldman Sachs's shorting of its own issued mortgage-backed securities when Mr. Paulson was the company's CEO. Beyond his case, there should be enough work at Attorney General Eric Holder's office to employ a line of law school graduates stretching from Brattle Street to the planet Mars. It will be salutary for the nation to see those who engineered the banking collapse come to greater grief than the mere surrender of their Gulfstream jets and Hamptons villas. By the way, being allergic to conspiracy theories, I don't believe for a minute that there is some kind of shadow elite of "Bilderburgers" standing in the background to protect these grifters -- and I also believe the reason these paranoid notions persist is because it is otherwise hard to account for the extravagant irresponsibility of the Bush circle and its servelings.
     Apart from "cleaning up Dodge," so to speak, and from issues of collective character-and conscience-in-office, I worry that the avalanche of troubles already ongoing will overwhelm Mr. Obama and his people. It's also well worth worrying whether they will pursue policies similar in kind to the ones pursued by Bush, namely throwing money at everything and anything, and it sure looks like they are planning to do just that. I am especially concerned about an "infrastructure stimulus" project aimed at highway improvement at the expense of public transit. This would be the epitome of a campaign to sustain the unsustainable. We need to begin planning right away for a transition away from automobiles, not in order to be good socialists but because Happy Motoring is at the core of our unsustainability trap. The car system is going to fail in manifold ways whether we like it or not, and it will fail due to circumstances already underway. For one thing, it will cease to be democratic as the remnants of the middle class find it impossible to get car loans, or pay for fuel, or insurance, and that will set in motion a very impressive politics-of-grievance setting apart those who are still able to enjoy motoring and those who have been foreclosed from it. Contrary to what you might make of the the current situation in the oil markets, we are in for a heap of trouble with both the price and supply of petroleum (more on this below). And there is no chance in hell that any techno rescue remedy to keep all the cars running by other means will materialize.
      A consensus in the blogoshpere says that the stock markets will rebound strongly during the first Obama months. This is possible just on the basis of pure "animal spirits," but the Obama Bounce will occur against a background of continued dismal business and financial news. It will appear to defy that news. By May of 2009, the stock markets will resume crashing with the ultimate destination of a Dow 4000 before the end of the year. Meanwhile, jobs will vanish by the millions and companies will go bankrupt by the thousands, especially in the so-called service sector, and in all the suppliers of such, along with the landlords in all the malls and strip malls. The desolation will mount quickly and will be obvious in the empty storefronts and trash-filled parking lagoons. In the event, two things will become increasingly clear to the nation: that the consumer economy is dead, and that there is no more available credit of the kind that Americans are in the habit of enjoying.
     We'll turn around early in 2009 and discover that we are a much poorer nation than we thought because from now on credit will be extremely hard to get for anyone for anything. The businesses that survive will have to keep going on the basis of accounts receivable. This is the area where the crash of giants will be heard. I've been saying since publication of The long Emergency that comprehensive downscaling in all our activities, from farming to business to schooling to governance, will be the categorical imperative of the years ahead. Giant enterprises requiring giant loans to get from quarter to quarter will tend to not make it. Borrowing from the future will become a practical impossibility as past bad debts from previous borrowings continue to unwind, cease performing, and get written off. This argument implies that the federal government will tend to flounder just as General Motors, Citicorp, Target Stores and other gigantic enterprises will tend to flounder. It would be sad to see a President Obama so hamstrung and helpless, and it is largely why I see his role as largely symbolic -- as a reassuring presence encouraging the distressed public to bravely bear their hardships, and to be kind and helpful among their neighbors.
     Households, like businesses, will have to pay as they go from earned income. The house as ATM is over. Credit cards are maxed out and credit ceilings are lowering like the ceiling in "The Pit and the Pendulum," preparing to slice-and-dice the old "normal" of family life in America. Bankruptcy will be the new Nascar. A lot of families will lose everything. They will sift and disperse into the housing owned by other family members -- parents, siblings -- and a strange new not-altogether comfortable kind of togetherness will become common. Over time, a lot of people will go looking for casual work "under-the-table"( and probably low-paying). To some degree, these workers will begin to look and act like a new servant class, and before too long they may be absorbed into the households of people who employ them. There will be plenty of room for them there.
      Counties, municipalities, and states will join in the bankruptcy fiesta. It would be reasonable to expect collapsing services as a result. This would be a situation fraught with danger -- of rising crime, of public health emergencies as water systems are not kept up and sewage treatment becomes unaffordable. I don't imagine the federal government stepping into every Podunk or Metropolis from sea to shining sea and propping up these services. People will have to cope with danger and deprivation.
      2009 may be the point where we begin to understand what kinds of places will be more hospitable to human society further ahead. I maintain that our giant urban metroplexes have way overshot their sustainable scale and will contract severely. With all the economic hardship, we ought to expect a lot of demographic churning, people leaving hopeless places and moving on to something more promising. I believe we will see them move to smaller towns and smaller cities. The reorganization of the rural landscape into smaller-scaled farms has not begun to occur -- though 2009 might be very hard on agribusiness, given the shortage of capital and if oil begins to march up in price by late winter. Eventually, the rural landscape will require the labor of many more people than is currently the case. Whatever else happens, 2009 will surely see a massive return to home gardening as budgets become strained to the extreme. As the New Urbanist Andres Duany said recently, "Gardening is the new Golf!"

The Oil Scene

     Many were stunned this year to witness the parabolic rise and fall of oil prices up to nearly $150 and then back around $36 by Christmas time. Quite a ride. I said in The Long Emergency that volatility would be the hallmark of post peak oil because it was obvious that advanced economies could not absorb super high prices and would crash in response; that at some point after crashing, these economies would respond to the new lower oil price, resume their cheap oil habits, and build to another price rise. . . and crash again. . . in a declension of ever-lower industrial activity.
      What I probably didn't realize at the time was how destructive this cycling between low-high-and-low oil prices would actually be in the first instance of it, and what a toll it would take right off the bat. We can see now that our first journey through the cycle took out the most fragile of the complex systems we depend on: capital finance. As a result, a huge amount of capital (say $14 trillion) has evaporated out of the system, never to be seen again (and never to be deployed for productive purposes). It will be harder for the USA to rebound from the grievous injury to this crucial part of the overall system, and Europe has foundered similarly -- though the European nations are not burdened to the same degree by the awful liabilities of suburbia.
     Even if these advanced economies -- throw in Japan too -- remain moribund, the price and supply prospects for oil look ominous. My own guess is that the price of oil has overshot on the low end just as it overshot on the high end, and that, when all is said and done, we'll still see an upwardly trending price line over the long haul. The plunge, which began right after the $147 peak in July 2008, was as much the result of banks, hedge funds, and individuals dumping oil investments and positions to raise cash as it was a matter of the markets predicting a sharp fall-off in economic activity (and supposedly oil consumption). The truth is that demand destruction for oil in the USA has been surprising mild compared to the drop in price. Jim Hansen's Master Resource Report says that gasoline consumption dropped from 9.29 million barrels a day in 2007 to 8.99 million barrels a day for 2008. That's not much of a fall-off, especially compared to the price drop.
      As Julian Darley of the Post Carbon Institute put it recently: "There won't be any energy bail-out." And, as many other people have noted, the recent plunge in oil prices strongly implies future supply destruction, since so many planned oil projects have been suspended or cancelled because they are economic losers at $40-a-barrel (or even $70). Even projects well underway, such as Canadian tar sand production, have been scaled back or shut down because they don't make sense at current prices. Some of these other newer projects will now never get underway -- they have missed their window of opportunity with so much capital leaving the system -- and so the hope of offsetting very-near-future depletions in old giant oil fields looks dimmer and dimmer.
       Those depletions are very serious. For instance, Mexico's super-giant Cantarell oil field, the second-largest ever discovered after Saudi Arabia's Ghawar field, has shown a 30 percent depletion rate in the past year alone. (Pemex had forecast a 15 percent rate entering the year.) Cantarell provides over 60 percent of Mexico's total production, and Mexico is America's third largest source of imports -- just after Saudi Arabia (#2) and Canada (#1). Obviously, Mexico soon will lose its ability to export oil, and as that occurs, America is going to feel more than pinch -- more like a two-by-four upside the head. In short, remorseless depletion is underway and we are less likely now than even a year ago, to make up for it.
      At some point, then, demand, even if slightly lower, will catch up with declining supply. My prediction for 2009 is that we will see two things occur, possibly at the same time: a resumption of rising prices, and spot shortages. I say this because the global economic fiasco is sure to produce geopolitical friction, and inasmuch as America has to import almost three-quarters of the oil we use, the prospect for trouble is great.
     The tragic part of all this, of course, is that the temporary plunge in oil prices has prompted an incurious American public to assume, once again, that the global oil predicament is some kind of a fraud. Given the flood tide of fraud they have been subject to in banking and investment matters, I suppose you can't blame them from thinking that everything is some kind of a scam. Given feeble car sales this season, there are reports that an increasing percentage of those sold now are are trucks and SUVs.
     Though I give Boone Pickens high marks for stepping up to the leadership plate, I'm not altogether on board with his energy proposal for swapping natural gas for gasoline in motor fuels while we swap out wind power for natural gas in electric power generation. I don't believe that the ballyhooed shale-gas-plays of the last few years will prove-out long-term, as some huckster's claim. They are expensive to drill and run, and they all tend to deplete very quickly -- around one year. I'm not convinced we have the capital or the resources even to come up with the steel necessary to drill for it. Anyway, the last thing we need is a way to prolong our car-dependency.
      In the meantime, there are still those who hope (as described above) that various alt.energy systems will insure the continuation of Happy Motoring. This is an idle hope, and 2009 will be very sobering for those who imagine that hybrid cars, or electric cars, or "air" cars, or natural gas cars,  or any other kind of car technology will save the day. Even if President Obama mounts an "infrastructure stimulus" program, it will not keep up with all the necessary routine road repair that our highway system requires. The extreme financial hardship faced by localities and states insures that they will have to postpone a lot of expensive highway maintenance -- even if the federal government fixes a big bunch of bridges and tunnels -- and so we face the interesting prospect that our roadway systems will enter their own deadly zone of systemic failure even before the whole car issue is settled.
     I am waiting to see whether Mr. Obama will undertake a restoration of passenger railroad service. I've said enough about this in the past, but it's worth reiterating that a failure to get comprehensive passenger rail service going will be a sign of how fundamentally unserious we are as a nation.

The Specter of Inflation

      This is the "other shoe" that a lot of people are waiting to drop. Right now we are caught up in a compressive debt deflation as mortgages stop "performing" and loans of all kinds are welshed on. Since money is loaned into existence, and a great many loans are not being repaid, then a lot of money is going out of existence. That's what I mean when I say that capital is leaving the system. At the same time, the Federal Reserve has made good on its promise to drop money from helicopters if necessary to prevent an implosion of the banking system (as all that older money goes out of existence), and so it's now a question as to when the amount of new money will exceed the disappeared old money. (Of course when I say money, I mean "money," because we are dealing here in a shadow realm of assumed value.) In any case, there is bound to be a lag period between the time that the Fed's money is dropped from the choppers and the time it actually filters through the banks and other recipients to the so-called "real economy" of people who buy and sell real things. The credible estimates I hear run between six and 18 months.
       I'll only venture to guess that we could see the start of serious inflation sometime in 2009. To some extent, all currencies are now free-falling together, some at slightly faster rates than others, but the situation of the US dollar is so grotesquely dire, and our structural imbalances so monumental, that it is hard to imagine that our currency will not win the international race to the bottom. Gold resumed its movement upward against the dollar a week before Christmas, and that may be an early sign. The government -- and anyone badly in debt -- benefits much more from inflation than deflation, so every effort will be made to avert the latter. The trouble lies in the government's dumb incapacity to control dangerous things that it sets in motion, so that an inflationary campaign to avoid compressive deflation can so easily lead to a fiasco of super or hyper inflation -- the kind that kills governments and turns societies into murderous monsters. I'll forecast the that the US dollar is worth 40 percent of its current value by next Christmas.

Geopolitics

      Well, now, who the hell knows what's in store. Aside from a few bombs here and there, and pirates skulking around the horn of Africa, the world scene was miraculously free of major incidents in 2008 -- perhaps the worst being a toss up between the September Mumbai bombings and the fiasco in Georgia, where the US prompted Georgia President Mikheil Saakashvili to send troops into the South Ossetia region and the move was answered by overwhelming force from neighboring Russia, leaving the US looking feckless and retarded for our troubles. But otherwise, there wasn't a whole lot of action out there.
       Until the last few days of the year, that is. I'm sure the ever-growing cohort of American anti-semites who send me emails will be tickled when I assert that the Hamas rocket attacks against Israel of recent days guaranteed a sharp response from Israel -- and now, of course, Hamas is playing the crybaby card: "... what'd we do to deserve this...?" Well, you fucking fired a bunch rockets into Israel. Did you ever hear of cause-and-effect? This matter requires no further elucidation, except that it seems to suggest a ramping back up of hostilities. I wonder if it is the beginning of a new coordinated offensive by Islamic extremism aimed at taking advantage of the West's current economic plight (and the West's probable aversion to anything that will complicate its desired recovery). We'll know in a month or so, I think, since any coordinated campaign (if such a thing were possible) might well be aimed at confounding the new American president.
      The other hot corner of the world right now is the India-Pakistan border where the 60-year-old rivalry, which has already produced three wars, looks to be gearing up for yet another round. I'm not the first one to say that Pakistan is an extremely dangerous regional player, being an economic basket case, possessing a score or so of nuclear bombs, harboring more Islamic fundamentalist maniacs than any other place in the world, and having a government held together with duct tape and twine. The caper in Mumbai last September could well have been construed as an act of war, but somehow India kept its head. Who knows where this is going. . . .
       So far I have only described what is already obviously going on. Add to this the likelihood that Iran is closer to achieving membership in the atomic weapon club. They've been spinning their centrifuges all year and nobody has done anything about it. My guess is that neither the US nor Israel will attempt to take out their facilities in the year ahead. If Iran used a nuclear device against Israel, or anybody else, they would be asking to become, in turn, the world's largest ashtray. End of story. A different story, though, is how Iran might behave if and when the US Military presence in Iraq is reduced. I can imagine Iran doing anything possible surreptitiously to gain control over Iraq's southern oil regions around Basra, but even the Iraqi Shia don't like the Iranian Shia that much. Anyway, iran's economy has suffered hugely from the fall in oil prices. That nation may be in for more internal trouble than they have seen in thirty years since the Shah was tossed out by the minions of Ayatollah Khomeini.
     There's been a lot of sentiment the past year that as the US and the Europe fall into economic disarray, China would emerge as the great new hegemonic superpower. While it's come a long way in a quarter-century, China's internal problems are still enormous and worsening. They're in trouble with water, food imports, mass unemployment, and energy. They have locked in some oil contracts around the world, but they are still susceptible to vagaries in the oil markets and Black Swan events. As the US consumer economy falls into a coma, and the shipping containers from China to WalMart get sparser, the Chinese government will face the wrath of millions of unemployed workers. I believe they will struggle through 2009, perhaps growing more surly as the US dollar inflates and their holdings of treasury bills begins to look more like a swindle.
      Russia may be suffering economically for the moment due to the crash of oil prices, but they are energy resource-rich -- at least for the next couple of decades -- and if they don't like the current price, they can keep more of their oil in the ground until the price looks more attractive. I think Mr. Putin has the confidence of the Russian people and will survive the current malaise.
      Japan remains a riddle wrapped in toasted nori. They're beggaring their own factory workers to stay solvent. Their banking sector has been zombified for a generation. They import 95 percent of the energy they use. Do they have a plan? One can imagine them sliding in resignation back to something like the sixteenth century, giving up the whole industrial circus as more trouble than it's worth, just as they once gave up on firearms.
      The over-arching geopolitical theme of 2009 will be the end of robust globalism as we've known it for some time. Reduced trade, competition for energy resources, sore feelings over debts and currencies will drive the nations inward or, at least, direct their energies toward their own regions. Note to Tom Friedman: the world turned out to be round after all.

Conclusion

     The big theme for 2009 economically will be contraction. The end of the cheap energy era will announce itself as the end of conventional "growth" and the shrinking back of activity, wealth, and populations. Contraction will come as a great shock to a world of conventionally programmed economists. They will toil and sweat to account for it, and they will probably be wrong. Unfortunately, this contraction will do its work in unpleasant ways, driving down standards of living, shearing away hopes and expectations for a particular life of comfort, and introducing disorder to so many of the systems we have depended on for so long. People will starve, lose their homes, lose incomes and status, and lose the security of living in peaceful societies. It will become clear that the Long Emergency is underway.
      My hope for the year, at least for my own society, is that we will transition away from being a nation of complacent, distracted, over-fed clowns, to become a purposeful and responsible people willing to put their shoulders to the wheel to get some things done. My motto for the new year: "no more crybabies!"

Comments

[mickey_mouse]

thanks for the predictions. your perdictions summarize the information i've read, but much more colorfully.

if a depression is coming, you really see it happening so quickly in an instant?

[fugeguy]

http://www.dailygazette.com/news/2008/dec/28/1228_yebooks/

Congrats to Jim Kunstler...

[fugeguy]

http://groups.yahoo. com/group/thelongemergency/

[fugeguy]

www. dailygazette. com/news/2008/dec/28/1228_yebooks/

congrats to Jim Kunstler

[fugeguy]

check out (remove the spaces)

www. dailygazette. com /news /2008 /dec/28 /1228_yebooks/

congrats to Jim Kunstler

[Kris]

Wow. This post blows my mind.

My wish for 2009 is that families take this whole mess seriously and plan accordingly.

From those I've talked with, all the bad news: layoffs, credit crisis, housing crisis, financial meltdown...are all isolated incidents.

I guess it won't seem "real" until something happens to shake one's own world.

I agree that families will move in together (amidst conflict, no doubt). A good-sized garden would definitely ease some tension.

The have's and have-not's will be be re-identified as the prepared and prepared-not's.

All this "green" talk is fun and technical...but "brown" is the term for the real deal, like living with the elements and being directly responsible for whether one eats.

I am truly scared for the day when reality comes calling to our community.

Normal people may begin snapping (like the one responsible for this year's Christmas Eve massacre). At the very least, theft will probably be more enticing to many than figuring out a legitimate way to find food.

I feel like the geopolitical scene possesses many variables we aren't privy to. I just hope for the best in the whole world arena.

We'll see.

Jim, you're an inspirational wordsmith--quite an artist.

Kris
Working hard at http://www.sccworlds.com

[Gryphon]

JHK,

You did a pretty good job of forecasting 2008 as I recall, so I don't think you'll be too far off the mark in 2009.

But I do have one prediction for you Jim. 2009 will be the year that you learn the difference between anti-Semitism and anti-Zionism. Yes, cause and effect... indeed!

[MaryW]

Jim

I wondered when you were going to post your predictions for 2009 having just re-read yours for 2008.

You’re so right about people thinking that everything is just a temporary blip that will somehow be sorted out by governments everywhere. Perhaps scripts for Prozac will go through the roof this coming year as people can’t digest the truth.

It’s difficult to say whether Obama will have the guts to put the news out in all its ugliness, as he along with a lot of people may be gripped by disbelief and inertia. Rather than being pro-active he may end reacting to everything just that little bit too late. Your example of the highway upgrade instead of ploughing money into rail amply demonstrates the flawed thinking about doing what is fashionable politically rather than what is the most important.

The contraction of everything that we have known on the economic front may engender a more thoughtful, resourceful society but I don’t think it will come without a lot of disruption first. Indentured servitude may be the only means by which debt can be forgiven, returning many to third world lives and expectations. All the services we’ve taken for granted and as our due may end up fond memories –the health hazards from uncollected household waste may be the least of people’s worries. Home gardening has certainly ramped up here in the last year and is no longer considered nerdy.

Here’s a Matt Simmons’ flick where he states that demand hasn’t really dropped:

http://www.youtube.com/watch?v=HoGSC37t8TI

There was a letter in the paper the other week where it was put forward that in the future a dollar should be based on energy units, but this would require an earth shattering change in people’s attitude. Spot shortages, I think, will become the norm for most of the globe.

On the financial front, it’s unknowable what anything may be, the only certainty being a wild and crazy ride as rulers and financial whizz kids will try anything to keep papering over the cracks.

‘No more crybabies’ is a sound motto, or as we say here ‘Harden up, bitch!’

[Schizoid]

RE: "By the way, being allergic to conspiracy theories, I don't believe for a minute that there is some kind of shadow elite of "Bilderburgers" standing in the background to protect these grifters -- and I also believe the reason these paranoid notions persist is because it is otherwise hard to account for the extravagant irresponsibility of the Bush circle and its servelings."

Well, that's a load off my mind!

For a while there, I thought I could see a New World Order coming into view.

You know, the one that George H. W. Bush talked about in 1991.

[michael mayberry]

Thank you for your predictions. I don't agree about any significant rebound in energy prices. My prediction is $0.79/gallon gas in May 09.

I do agree that inflation is the most ominous specter of 2009.

I also don't know why railroad expansion would be so great, since no one has any idea what things are going to be like on the other side. I would much rather see a government program offering free gardening tools or free guns or free therapy as all would be much more flexible after things shake out.

thedoomletter

[SunRock]

So, we need trains running into the cities, where so many of the populace work. What are those “workers” producing? There are few, if any inner city factories. What are they doing there? Shuffling figures around on their keyboards and drinking coffee? Can’t they do the same damn thing in their homes? Isn’t it those same office workers who have been responsible for taking down our economy?

There is talk about our need for high speed trains. Haven’t they yet learned that there is no reason to get anywhere in a hurry? There is not a single person on earth that needs to get anywhere in a hurry, unless they need to get to a hospital for surgery, and a high speed train is not the way to go.

Where is Dave? I miss some of his bizarre humor, and shit.

[prosemite]

Until the last few days of the year, that is. I'm sure the ever-growing cohort of American anti-semites who send me emails will be tickled when I assert that the Hamas rocket attacks against Israel of recent days guaranteed a sharp response from Israel -- and now, of course, Hamas is playing the crybaby card: "... what'd we do to deserve this...?" Well, you fucking fired a bunch rockets into Israel. Did you ever hear of cause-and-effect?

I'm really disappointed in this rhetoric, especially coming from such an awesome writer.
Hamas' actions are inexcusable and it calls for a serious response, like you said "cause and effect"....however I don't see how air strikes from fighter jets into civilian targets would qualify as an equaled measured response. This is like a grown man using a baseball bat to defend himself against a 5 year old child armed with a toothpick. And to say that Hamas is playing the crybaby card is lame. The crying is coming from innocent victims that already suffer from the illegal occupation of their land. How many Israelis have been killed or injured from the rocket attacks? Now how many Palestinians have been killed or injured from Israel's response. Why don't you ever mention how much money and equipment and arms are given to Israel by the US? Why doesn't anyone ever discuss the odd fact that every president, congressman and senator from either side of the isle blindly states their loyal and undying support of Israel? Why is Iran the unstable nation that must not posses nuclear capabilities when the only nation to use such weapons just happens to be Israel's biggest arms supplier? And please don't try to label me an anti-semite, that defense is hollowed and begins to lose it's meaning when just thrown around to deflect critics.

[George W]

Thanks for the fine synthesis of many trends, as always. Few writers seem to see the whole picture.

Regarding cars, I understand that a typical car requires about 100 barrels of oil equivalent to manufacture. If it is a 25mpg car and lasts 100,000 miles, it uses about the same energy to build as to operate over its life. This doesn't count the considerable energy used to make cement and steel for the roads. So better mileage can't save the car culture.

[Laura Louzader]

Nothing can save what Kunstler refers to at the National Automobile Slum, but 50% of the population at least will be destroyed in the effort to do that.

I'm thinking specifically of the obscene amounts of money that have been allocated to subsidizing auto ownership and suburban sprawl for the past 60 years, and of the 3/4 of a trillion (at least) that Team Obama is shoveling at highways.

We could, with thought and re-arrangement of our lifestyles, live comfortable lives with a reasonable level of techno-amenity on a third the fuel we currently consume just to run the cars. I use only 120 KwH running my apartment, including my electric stove and all the appliances I want. I'm not depriving myself. I'm not extravagant, but I use what I want, and it strikes me as insane that we are willing to put our municipal sanitation and safety at risk just to make life possible for 4-car families living in burbs 40 miles out of the city.

But our efforts to keep the cars and malls running at all costs will starve our water and sewer infrastructure, our schools, our medical services, our power grid, and all the other technological props that contribute so much more to our lives than the 4-wheeled crap wagons that clutter our streets. The Hoover and other large dams are essential to the basic survival of a few cities and badly need to be restored because they have substantially silted up, yet the money and resources necessary for that are being shoveled into buildng and repaving highways.

We could take baby steps toward reducing the demand for transportation fuel. We could, for example, lower the speed limit to 55 mph nationwide and most of all we could raise the age limit for a driver's license to 18 nationwide and get the high school kids off the road. This would result not only in a steep drop in fuel usage for the tens of thousands of miles driven in aimless cruising on weekend nights, but could save the lives of countless teens, inasmuch as at least as many suburban kids are killed in car wrecks as ghetto kids by gunfire.

And if we don't want to toss more subsidies at railroads, especially for a badly run government-owned monopoly, we could level the playing field between airlines and railroads by canceling the airline subsidies and rolling back the monstrous regulatory strangulation and punitive taxation of passenger railroads, make it possible to turn a profit in passenger service. The heavy government support of the airlines plus the regulatory strangulation of the railroads is preventing the appropriate market response to the increasing demand for passenger rail service. Tens of thousands of travelers out here would eagerly move to the rails if only the service were there. Let's make it possible.

But we won't even do this much. We will divert money away from dams, levees, railroad infrastructure, public transit, medical care, and port facilities to squander it on auto infrastructure, sprawl development, and airlnes.

[WagtheDog]

JHK said: "By the way, being allergic to conspiracy theories, I don't believe for a minute that there is some kind of shadow elite of "Bilderburgers" standing in the background to protect these grifters --..."

I imagine that these grifters, now that they've served their intended purpose, have probably already been consigned by the Bilderburgers to the "useless eaters" category along with the rest of the peons.

Speaking of conspiracies though, check out this Youtube video and see what you think:

http://www.youtube.com/watch?v=9nc5_5IJek8

[Ryan Crocker]

As usual, some reasonable predictions here....some not so reasonable. Like Jim, I'm growing more concerned about serious inflation in the medium term. As banks hoard this bailout money, and excess reserves mount in the financial system, there will be great potential for a rapid expansion of the money supply once banks start lending again. Look out for the cheap money to rush into another asset bubble -- this time most likely in green tech & alt. E.

Defecit spending on dead end infrastructure like the highways, and related plans for hybrid vehicles are exactly as Jim says, efforts to sustain the unsustainable. I support an urgent transition to electrified rail transport for freight and passengers. It doesn't need to be high speed, it just needs to be electrified.

The Pickens natural gas replacement plan only works as an interim, temporary solution. It could buy us some time to scale down our economy and society in the way Jim suggests.

We shouldn't discount the importance of these temporary, band aid solutions just because they are unsustainable long term. They represent steps along a long path of energy descent. We didn't achieve this unprecedented peak of population and consumption overnight, and if we are lucky we won't descend from the peak overnight either.

True to form, Kunstler's prognostications are entertaining, but also hyperbolic and skewed toward his penchant for catastrophic drama. Dow Jones 4000? maybe 7000, but 4000 is doubtful. And if the dollar really does lose 60% of its value in a year, the entire world would have to find a new reserve currency -- again, very unlikely.

http://www.lifeboatcalledutopia.blogspot.com/

[Arraya]

Is it that when the Bildebergers meet you don't think they talk about world affairs? Or there is no such thing as Bildebergers?

Also, do you really think when Cheney was caught with maps of Iraqi oil fields in his secretive "Energy Task Force" meetings from 2000, he was NOT planning on going to Iraq?

[David Mathews]

This was an excellent post, Jim, except for all the neocon tripe regarding Israel, Hamas, and Iran.

Please do remember ... the neocons lost in November. Israel doesn't have a free hand nor a blank check.

As to the whole "cause-effect" argument ... both Israel and Hamas has bloody hands.

Worrying about Iran's potential nuclear weapons appears a bit premature ... by a decade at least, perhaps two!

But I will make some predictions:

1. The Peak Oil movement has run its course. The oil shill - global warming denier business isn't going to sell during an Obama administration.

2. The Oil Drum's best days are behind it ... see prediction #1.

3. I expect, anticipate and will sincerely enjoy hearing the oil industry whine, moan, and cry about the policies of the Obama administration.

4. The Dow might very well reach 4000 in 2009, but I am not at all satisfied until the Dow reaches zero and CNBC stops broadcasting.

5. I expect 2009 to be similar to 2008 in one respect: Filled with beauty ...

http://www.flickr.com/dmathew1

The sun will keep rising as our civilization is falling. Nature is going to reclaim those areas which humankind has abandoned. Expect grasslands and forests to begin reappearing in suburbia, malls, parking lots, industrial areas and along the coastline.

In other words: the end of civilization is a blessing and ought to be handled as such.

6. While it does seem possible that the Earth will flare up with one final global war, ultimately all of the war fighting equipment will run out of fuel and Nature will transform the sword into rust dust.

7. In the end, Nature wins and the Homo sapiens are extinct. This is the future that humankind has chosen for itself, and it is a fate well earned.

Of course, these predictions are for the years ahead ... not merely 2009.

[ctonious]

Great article. I especially liked his retort to the "brilliant" economist Tom Friedman, relating to his book "The World is Flat". A relative gave me this book, soon after it came out to gushing praise from the usual syndicated idiots, sent it all the way out to me here in Shanghai. I gave it to my housekeeper unread after reading the front flap, and told her if she could sell it on the street to the sidewalk booksellers, she could keep the proceeds. Hope she got more than what it's worth, which is it's paper value.

Quite frankly, though, dire as Kunstler sounds, I think he's an optimist. By themselves, the factors he mentions (credit contraction, derivatives unwind, liquidations, bankruptcies, foreclosures and layoffs) are enough to take us down for the count.

These factors are now participating in a self-reinforcing and absolutely vicious cycle, which will implode the US economy and government finances within the next several months. Most certainly in the US - and not too long after - here in Shanghai too. The delicate global infrastructure that is so highly dependent on the smooth functioning of both physical and financial transactions is being thrown into global and local disarray.

As an analogy, you could throw sand into a a Dutch windmill's gear cogs without too much degradation - but try that with a modern sealed precision reduction drive - and it's pretty much gone. Our economies have evolved during these relatively quiescent decades into a fatally sophisticated system that depends on stability in the key economic powerhouses. That stability is long gone, and the resets of the Alt-A's and the Option ARMS, beginning in 2009, will finish off what the subprimes kicked off all by their little own selves. Not to mention the coming fiascos in securitized commercial real estate and credit card debt.

Furthermore, the hundreds of trillions (yes, trillions with a "T") in Casino-style Derivatives bets riding on all these bad investments will only serve to supercharge the coming mega-implosion.

Of course, the above factors will not be operating in a vacuum. The reactions by various peoples and governments in response to all this will include national debt defaults, hyperinflationary "counterfeiting", trade barriers, predatory devaluations, riots, martial law and ultimately - big wars.

If we are so lucky as to be able to devolve gradually, peacefully and voluntarily into the descoped economy that Kunstler describes, I will be quite happy to be totally wrong. But I just don't see it happening that way.

We are indeed a cluster-fugued planet.

[Nudge]

Jim, great post, and thanks for the excellent predictions for the new year.

Having been around CFN awhile, I can only wonder when it's time to cue the inevitable flood of OEOs, Fefe McVeighs, and other assorted Monday-only drive-by posters who try to make a logical connection between the inaccuracy of past predictions and the argument that these predictions must necessarily be bad too. Sigh. Maybe Dale will do the honors this time.

Here's wishing our crew of CFN regulars a safe & sane 2009 if at all possible. :)

[dale]

Here is a little wisdom to keep in mind for the year ahead:

“You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.”

----Warren Buffet

[Jack Nordby]

Hurrah, Jim! This is the best one yet. I'll miss your blog when the power goes out...Jack

[theroachman1]

Warren Buffet is on his way to failure. His success of the past will not equate to success of the future. He still holds on to the ideas of fiat money and endless supplies of cheap energy.

[The Mule]

I think Kunstler has a great many important things to say, but every time he comments on events in the Middle East he disappoints. This time he had to try to preempt critics with the antisemitic label. Try as the Israelis might, they cannot make those pesky Palestinians just "go away", so I guess bombing them back to the stone-age will have to do for now.

[dale]

....and another

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

-----Leonard Cohen