People Get Ready

      In the twilight of the Bush days, in the twilight of the twilight season, a consensus has formed that we are headed into a long, dark passage leading we know not where. Even CNBC's Lawrence Kudlow has been reduced to searching for stray "mustard seeds" of hope on hands and knees in a bleak and tortured financial landscape. Half the enterprises in the land are lined up for some kind of relief bailout and a blizzard of pink slips has cut economic visibility to zero.
      The broad American public voted for "change" but they thought that meant a "changing of the guard." Out with the feckless Bush; in with the charismatic Obama... and may this American life now continue just as it ever was. The change actually coming will be much more than they bargained for, namely our transition from a wealthy society to a hardship society. The sharp break is a product of our years-long failure to reckon with the energy realities of our time. We're still confused about that, but it's hard, otherwise, to ignore the massive disappearance of capital, asset values, livelihoods, domiciles, comforts, and necessities.
      The price of oil is suddenly down to an astounding $40-odd per barrel. Those of us studying the Peak Oil story have said that the "bumpy plateau" years of peak production would be expressed in tremendous price volatility, and for exactly the reasons now evident -- that the high-price phase would mangle advanced economies, that they would fall back in paralysis, then respond anew to oil price collapses by straggling up again, only to be crushed again when a resumption in demand for oil drove the price back up.
       What was not so generally anticipated was the wholesale destruction of global finance in the first phase of this period. This has now occurred so comprehensively that we know the banking business will never be the same again. It has also accelerated other plot-lines in the story. One affects the global oil industry itself: a lack of capital to go forward with the new oil projects that were designed to mitigate the present depletions in old oil fields. The result of this quandary is as likely to be oil shortages in 2009 as much as an extremely sharp snap-back in oil prices. The oil markets themselves are changing in the face of financial disruption. Between pirates lurking off the Horn of Africa, and a shortage in letters-of-credit that enable the shipping of anything for delivery between nations, the allocation system is impaired. This affects poorer nations the most, and when they don't get their oil shipments, conditions in these nations get worse. People lose incomes. Ethnic strife ramps up. All this will make it harder to move oil from the places where it is produced to the importing countries.
     So much artificially-generated pixel "money" is being pumped into the system now that it will eventually overtake the quantity of capital currently vanishing in the form of exposed securities swindles, unwinding bad debt, and imploded worthless counter-party contracts. The pixel money will express itself as super or hyper inflation, lagging from 6 to 18 months from the time it was actually introduced in the form of bailouts. For the moment, money is moving into the presumed safety of US Treasury paper. Personally, the safety of this is not something I would presume. But in the current deflationary stage its hard to find any other place to park cash, and when asset values are crashing everywhere, cash is king. Gold is physically unavailable in the form that non-millionaires usually buy it in, ounce and half-ounce coins.
     President-elect Obama has announced his intention to kick off a massive "stimulation" program when he hits the White House "running" in January. Early indications are that it will be directed at things like highway repair. If so, we will be investing long-term in infrastructure that we probably won't be using the same way in ten years. But I doubt there is any way around it. The American public can't conceive of living any other way except in a car-centered society. Anyway, some parts of our highway-bridge-and-tunnel system are already so decrepit that they pose a menace right now, and the clamor to direct "stimulation" there is already very strong -- backed by all the fraternities of engineers.
     Stimulus aimed at perpetuating mass motoring will be a tragic waste of our dwindling resources. We'd be better off aiming it at fixing the railroads (especially electrifying them), refitting our harbors with piers and warehouses in preparation to move more stuff by boats, and in repairing the electric grid. Unfortunately, our tendency will be to try to rescue the totemic touchstones of everyday life, things familiar and comfortable, regardless of whether they have a future or not.
     The ominous forces gathering out there will defeat these efforts and everyday life will reorganize itself some other way consistent with the single greatest trend: the force of contraction. Every sign we see is pointing in that direction, from the inability of the earth's ecology to support more human beings, to the dwindling of mineral and energy resources, to the destruction of farmland, to mischief in the climate. We just don't know how badly things will fall apart in the meantime, or how kind (or cruelly) people will act in the process.
     Mr. Obama would be most successful if he could persuade the public how much more severe the required changes are than they currently realize, and inspire them to get with program of retrofitting American life to comply with these realities.
____________________________________
My new novel of the post-oil future, World Made By Hand, is available at all booksellers.  

Comments

[umass82]

A major investment in the auto industry and roads with government money is almost a sure thing, and yet it is almost impossible to take the train from much of the country.

Why not a bail out of the buggy and buggy whip industries we will be needing them more than the autos soon enough.

[The Dancing Cavalier]

And here in Vermont, we were told just this past week that the anemic Amtrak service we have may be cut almost completely because the state can't come up with the $5 million or so needed to fund it.

[judetennessee]

Sadly I am afraid that O's team is filled with many of the same industry folks who have brought us to our current financial situation. Funding the bank bailouts and the failed auto industry while ignoring finacial needs of the average citizens is going to put us smackdab in the middle of the 2nd Great Depression. Don't kid yourself Mr. Obama is first a politician and a very smart one . I voted for him as the lesser of two evils, I will be interested to see what the 2012 elections shape up to be. To paraphase JHK in the Long Emergency, bad times will produce Facist leaders or worse. The economic decline of Germany after WWI produced Hitler. God help us all.

[nunoliveira]

An expected 30$/barrel in early 2009 and it's winter in the northern hemisphere- what to make of this?

Between Global Warming, Peak Oil and other scenarios who would have thought that the Credit and Real Estate crunch would be the thing that brought upon a dramatic change of habits?

[Nicholas Paredes]

Perhaps it is more like wealthy, albeit polarized, world returning to a hardship world. This is not going to be US centric.

While I agree that we should not be rebuilding much of the road infrastructure, much of what will be rebuilt is probably much of the urban fabric tied to the highway infrastructure. Suburbs don't generally have large bridges unless they cross geographic obstacles. But much of the urban system was multi-level and is badly deteriorating. We really do have to rebuild that even if it is a return to the Teamsters with actual horses. It will be electric though, so get a grip.

I'm not sure I was looking for change so much a competency. Can't say I'm disillusioned by the actions so far... Remember that much of the current bailout with a lack of oversight is the response of the current administration. They did not react to LB and freaked with the market reaction. I would have loved to have been a fly on the wall when the Fed met with W!

[SouthBranchDaddy]

Although not particulary sympathetic to the executives themselves, I am astonished at the beating the automobile industry executives are taking for asking for 1/10th of the amount of bailout money Citibank received with nary a whimper from Congress. At least these folks actually manufactured tangible goods. And it does appear that letting them go down will be somewhat catastrophic in terms of unemployment and further carnage as suppliers and all manner of others affixed to the teats of the Detroit Dinosaurs fall into the pit of economic despair. However, it is truly good money after bad - well, borrowed or printed money after bad. The stock market and CNBC/Bloomberg crowd has been pushing some optimism lately, but I still see nothing real out there to back it up, and have decided the whole thing boils down to the ability of the US government to borrow huge sums and, at the same time, engage in quantitative easing (i.e., printing money) without sane limits. The bubble has moved to the Federal Reserve's balance sheet and the Treasury, and there is no place left to go. So watch for signs of this bubble bursting. It may be to the entire global financial system's advantage to not let it burst, but sustain it for as long as it can, until reality intrudes, and that boggles the mind.

[Cymon Dendu]

Anyone else watch Leslie Stahl interview the Saudi oil minister and the CEO of Aramco on 60 Minutes last night?

http://www.cbsnews.com/stories/2008/12/05/60minutes/main4650223.shtml?source=mostpop_story

Don't worry, be happy, plenty of oil!

[envirosponsible]

Zimbabwe is suffering a widespread collera outbreak due to their failing waste treatment systems and poor hygiene.

North America may experience similar horrors in the event of system failures. Water treatment plants rely heavily on fossil fuel input.

I'm buying a composting toilet.

I predict that in two years they'll be commonplace in our homes.

They don't use any water, and the benefits are huge. The inert compost generated can be used to fertilize the victory garden.

[David Mathews]

I am in favor of $30 oil as much as I was in favor of $147 oil. $147 oil killed the SUVs and the auto industry, hopefully $30 oil will kill the tar sands and the oil industry.

I am looking forward to a world without any industry. Such a world is not too far away, just a handful of centuries down the road ... long after the United States has collapsed, space travel become a distant nearly mythical memory, and even the airplanes in the museums have eroded to dust.

Humankind has 100,000 years left (if that much) ... use the time wisely, use the time foolishly, it doesn't make a bit of difference. The human era has an end, and that end isn't eternal life brought about either by technology nor God's grace.

Don't look for a heavenly home nor entertain any dreams of a home in the heavens. Humankind isn't going to conquer the Universe. Humankind isn't even going to conquer the moon.

Humankind has conquered the Earth, and (in the process) trashed the planet sufficiently to drive humankind extinct. Such is Nature's harsh justice. Whether you approve or disapprove doesn't matter, unlike God Nature doesn't heed anyone's prayers and isn't either merciful or sentimental.

At least humankind has left monuments to itself on the moon and Mars. These monuments will linger for millions of years after humankind is extinct, unseen and unnoticed by anyone.

The Peak Oil movement's glory days are in the past, too. Serving as the mouthpiece for the American Petroleum Institute isn't necessarily a profitable endeavor during the Obama years. Where have you gone, Matt Simmons, our Peak Oil savior?

Shed a tear, too, for all of the survivalists. They prepared for everything ... except for what is actually coming. Oh well, survivalism is like a hobby, it need not have any practical uses as a means to survive.

This world is ending at its own pace. It is good enough to know that it is ending.

As for myself, I devote all of my attention to the beautiful enduring living things ...

http://www.flickr.com/dmathew1

Nature has survived for four billion years for a reason. A primate infestation isn't sufficiently powerful to exterminate Nature, but it is powerful enough to exterminate itself.

The meek shall not inherit the Earth, but the plants and animals will inherit this planet from us. They will fix what humankind has damaged and restore the Earth to a pristine state. Whereas humankind is running out of time, Nature has at least a billion years left.

So it goes ...

[Frank Gifford]

Great post, Jim! It sure is looking like Richard Duncan's Single Pulse Theory of Industrial Civilization is playing out. The "Olduvai Cliff" comes in 2012. That is when things get really interesting. http://dieoff.org/page125.htm. It is too bad that we humans are not as smart as we think. Some relatively simple adjustments, and we live lives of beauty and grace, and leave a reasonable Earth to children of future generations. We model one possible way at http://entropypawsed.org. Unfortunately, those with power under the current system have been totally blinded by the biases resultant from the space they inhabit. See http://ishkbooks.com for how to learn how to learn to see what it means to be human and our place on the Earth.

[Babystepper]

David Mathews,

Nice work.

[johnnytown]

As a family who raises most of its food, heats and cooks with wood, has a pantry stocked for a year, walks to work, and drives a car getting over 40 mpg, I resonate with much of what JHK has to say. However, I notice that he blames most of this crisis on the current administration while completely ignoring what I believe was a primary cause of our current problems. Namely, social engineering of the market place via Barney Frank, Chris Dodd, etc. If the left is not honest enough to claim their share in the creation of this crisis, then I think that validity of their other positions suffers. Neither side of the political spectrum is without blame.

[FARfetched]

« The price of oil is suddenly down to an astounding $40-odd per barrel.»

Yeah, and I saw gas under $1.50 this morning on the way to work: http://is.gd/aH2u

JHK, I think you're absolutely right about the price volatility and how it will play out. The question is, whether the economy recovers enough to pull demand back up. If not, we may get through 2009 without whipsawing oil prices… but as production capability falls to current demand levels in 2010 or so, Katie bar the door.

Another thing I saw on the way to work this morning was something I rather expected: a work truck (remodeling/carpentry) had a sign in the back: "We can design, build, and *finance* your dreams." It's a win-win for companies like that: if the bank won't loan the money for a home improvement job, they can lend it and hold a "mechanic's lien" on the house if the payments don't come in. They may even use the lien to secure the loans from the bank lending *them* the money for materials & labor.

I still don't think hyperinflation is a given… when the hole is filled, just stop shoveling. I know it's asking a lot of a politician to think logically, but if anyone has a scrap of logic in Washington it's Obama. Rebuilding the highway system will have the intended effect of putting people to work and thus helping out the economy… and when the 18-wheelers are idled, it may well last for certain values of forever. Then again, I suspect any kind of what I call "RoadTrain" projects would put at least as much stress on the highways, so maybe they'll need another round of rebuilding in 2050 or so.

Short post this week, seemed to me. Funny how I'm hearing a lot of chatter about stuff I'm writing about now in FAR Future (in to-be-released episodes). In Episode 63 this week:

http://is.gd/aG4T

The junta continues to unravel.

[Ryan Crocker]

Envirosponsible,
You don't need to buy a composting toilet to compost your own shit. You can make your own out of a 5 gallon bucket.

[Howard Effing Beale]

People Get Ready. What.

http://www.youtube.com/watch?v=WRq7A_5sdfY

Rejoice and be terminated. Bitch.

[Ryan Crocker]

Anyone feel like those Easter Islanders as they cut down their last palm tree?

[peakoilmom]

David Mathews: I have read you enough that I know it's you posting even when I've only read a few sentences. I know you think we are going to be toast thousands of years from now, but what do you think is going to happen in the next five? Could you provide some insight into the following part of your post?

"Shed a tear, too, for all of the survivalists. They prepared for everything ... except for what is actually coming. Oh well, survivalism is like a hobby, it need not have any practical uses as a means to survive."

[Ryan Crocker]

Kunstler's right on the money about the coming investments in infrastructure. It's painful to watch our society misallocate dwindling resources.

But I don't think the financial crisis is as dire as he makes it sound (particularly as it relates to oil production). Like FarFetched, I don't think we are necessarily headed for Zimbabwe-style hyper-inflation. In fact, it's unlikely that all this stimulus spending will fully replace the pixel money that's hemorrhaging from the system. A deflationary spiral leading to defaults and further debt contraction is a far greater threat for the economy.

And unlike Jim, I think this economic crisis is a blessing in disguise for the future of oil production. Right now production projects are being put on hold for lack of investment capital and/or low crude prices. This is a good thing longer term, it means we get a longer plateau of production--longer to catch a clue.

When the declines in production do begin, we will begin the long descent and cut demand. I think global demand for liquid fuels is much more flexible than many people think. Unless there is a major disruption in supply, price can effectively ration our use of oil. I'm obviously ignoring the issue of carbon emissions here.

My point is that we will have some time to adapt to the decline rates once they hit. That said, I do agree with Richard Heinberg -- we need a global Oil Depletion Protocol, and fast. Price volatility will be a brutal, if effective means of rationing.

How much could oil demand could fall if we really pared down to just keeping the trucks moving and the heating oil flowing, etc.? Quite a lot, I would imagine.

No need to panic. We just need to act deliberately. People are catching a clue...slowly but surely.

[Ryan Crocker]

The truest thing Kunstler says about this whole situation is that it's a 'long emergency'--emphasis on LONG

[OldGreyOne]

When Obama met with the Governors, they stated they had up to $136 billion in infrastructure projects ready to takeoff. Does this mean that the states developed projects through the planning stages, acquired bids and all the rest that these projects would require and then stopped? I think it will take over a year before any real hiring will be done.

[jerry mcmanus]

I think I saw in the paper that the networks are going to start showing "It's a wonderful life" this week. Not a moment too soon, if you ask me.

It is a shame that investing in roads and bridges will be a wasted opportunity, but long time students of overshoot and collapse will know that spending on so called "green jobs" is equally futile.

Solar panels and windmills have a useful life span of about 20 years, and then what? No more fossil fueled factories to make new ones. Oops!

Even the commendable idea to electrify the rails has it's downside. Where exactly is all that juice going to come from? Yep, that's right, King Coal.

Kiss the climate good bye.

The truly long term alternative is to power trains (and everything else for that matter) with wood.

Oh my, doesn't that sound just so last millenium!

But think about it, it would close the carbon loop (trees just love CO2) and it is the one sure-fire way we can be certain that we are running things on our yearly income of sunlight alone and not just partying into the night on the fossil trust fund, which is what got us into this mess in the first place.

Cheers,
Jerry

[Nudge]

FAR, as part of that "chatter" you mentioned on the internets .. I resemble that remark! :)

Jim, fantastic post. Mr President-elect at Change.whatever is busy filling his cabinet posts with legions of centrist let's-not-change-the-system folks. Like the other poster above, I voted for him as the lesser of two evils. It appears that, yes, we will get change, but it will be the "change" of voluntarily bankrupting ourselves (and our following generations) by attempting to [re]build Interstate Highway System 2.0, Detroit Automakers 2.0, and so on.

Our present system of asphalt-covered roads & parking lots is incredibly high-maintenance and depends on having lots of energy and (surprise) fresh asphalt / concrete / etc for inputs. Take away "routine maintenance" and pretty soon that road everyone uses gets pretty unusable pretty fast.

We are going to blow even more money (of the borrowed-from-the-future variety) on rebuilding or maintaining things that will have no place whatsoever in a fossil-fuel-deprived world. Uggh, I feel sick. This is like that moment when your plane is far up in the Rockies and all the engines die at once .. and there's nothing below but trees, rocks and snow.

Rough ride ahead.

[Dr.Doom]

Jerry, regarding wood power, we been there, done that. Unless you want the USA to look like a Moonscape in a few years, the only way that would work if it is post-many mouths to feed, transport and keep warm. What was the US population in 1850? Perhaps at that level, it would work.

Please don't try to boost wood production with some techno-fix, like NPK. It's not sustainable, but it can appear so if you're willing to steal it from others!

[Babystepper]

Tsunamis just don't care who you are, how rich you are, how smart you are, they just don't care....

http://www.youtube.com/watch?v=a-8_wEm7t8k&NR=1

http://www.youtube.com/watch?v=XyqBVS9B1XU

People see it coming in, they giggle, they film it, they can't believe it, then they are in it and making second to second decisions in a world where all the rules have changed and things are no longer predictable.

Others who were more in touch with the cycles of nature, made it to high ground early, with the fleeing animals.

The title of this weeks post works for me...

People, get ready.

[Bob Snowjob]

Nice riff, Jim.

And a good Monday to you CFers.

This is a good Robert Kaplan essay...worth a read.

http://www.theatlantic.com/doc/199402/anarchy