Bad Collateral

      The wishes of the "green shoots and mustard seed" crowd really hinge on whether the various organs of the suburban economy can be jump-started back to life -- the production home-builders, the granite countertop outfitters, the mall and strip-mall gang, the national chain discount retailers, all the people who make Happy Motoring possible from the factory to the showroom, and, of course, the banks who shovel money into these enterprises.
     All these organs of our now-former economy are gravely impaired, and a realistic appraisal of them would have to conclude that they've entered the zone of congestive failure. The choice we face really comes down to this: do we put our dwindling resources and "hopes" into resuscitating those dying systems, or do we move forward to the next chapter of American life, cut our losses, and make new arrangements more consistent with the realities on offer from the universe? To take it a step further, can we remain one nation, a common culture, without such a conscious re-purposing of our collective spirit?
     The bizarre spectacle being played out right now by President Obama and his team only adds layers of mystery and mystification to this big question. On the one hand, you have Mr. Obama giving a graceful, thoughtful speech on a very difficult issue (abortion) at a very tough venue (the country's leading Catholic university), and presenting an excellent case for common ground. It was a bold deed, unshirking, even brave considering what have come to be the standard modes of pander or evasion in presidential politics. I suspect that Mr. Obama did it as much to demonstrate his willingness to face tough questions in general as to address abortion per se.
       All this is to say why it is so dispiriting to see Mr. Obama's White House mount a campaign to sustain the unsustainable in the economic realm. Everything they've done for four months involving money management and enterprise policy -- from backstopping hopeless banks, to gaming the bankruptcies of the big car companies, to the bungled efforts to prop up artificially-high house prices -- amounts to a gigantic exercise in futility. Worse, it gives off odors of dishonesty or stupidity, since the ominous tendings of our system are so starkly self-evident.
     Not least of the problems entailed in all this are the scary political consequences. It's one thing for a business such as a bank to fail; its another thing for the public to lose confidence in banking, or their own currency, or the credibility of all the people who work in banking, or the authority of those charged to regulate these activities, or the courts and their officers who are supposed to adjudicate misconduct in them. When faith in all these things starts to go, all bets are off for even larger social constructs like democracy, justice, and the destiny of a federal republic.
      The Obama White House has very quickly painted itself into a corner on these things. The so-called bank "stress test" couldn't have backfired more completely. Rather than bolster confidence in our money system and the people who run it, it only made the system appear more obviously corrupt. It made the Treasury Department (and the White House by extension) look idiotic for concocting it. Worse, the game of allowing the banks to audit themselves, and cook their books under newly jiggered accounting rules, only made them look less sound and trustworthy, and their executives more venal and mendacious. The stress test scam also virtually guaranteed that the banks will not get another dime out of congress -- even while it is common knowledge that they will desperately need quadrillions more dimes in the months ahead.
      Who knows what the point of this ludicrous exercise was? Observers in all corners of the media saw through it, and the public has only been made more cynical, and is now so furious over related stunts like AIG using taxpayer money to pay back swaps bets to Goldman Sachs that there is a whiff of revolution in the American air for the first time, really, since 1861. A lot of reasonable people see a good chance that our society will sink into disorder if these trends continue, and these fears could beat a path into radical politics, even the frightful prospect of coup d'etat -- not something that I advocate, by the way.
      The president is playing with fire on all this. The old economy is not going to recover, and so far he has not used his rhetorical talents to articulate what the next economy is likely to be about. It is reasonable to wonder whether he even really has a clear sense of it -- and, based on the fatuous utterances of his economic mandarins like Larry Summers and Austan Goolsby, this team is really behind the curve.
       There are plenty of things you can state about the economy past and future with some confidence right now:
     -- Cheap energy is over and our wishes for alt.energy are currently inconsistent with reality, meaning we have to live differently.
     -- We have to downscale and re-localize our major economic activities: food production, commerce and manufacturing, banking, schooling, etc.
     -- We can't hope to have a stable money system unless we allow a workout of unpayable debt to proceed.
     -- Even if we can do this, universal easy credit is a thing of the past. From now on, we have to save for the things we want and run our businesses and households on accounts receivable.
     -- Major demographic shifts are inevitable as it becomes necessary to let go of suburbia and reactivate our derelict towns and smaller cities (and allow our giant metroplexes to contract).
     -- We have to face the truth that our major social contracts cannot be met, namely the continuation of social security as we know it and probably all pension arrangements. We'll probably have to change household arrangements to make up for these losses.
     -- Health care will have to go through a revolution more comprehensive than just changing how we pay for it. Like everything else, it will have to downscale, re-localize, and become more rigorous.
     We're not going to rescue the banks. The collateral for their loans is no good and it will only lose more value. All those tract houses on the cul-de-sacs of America and scattered on the out-parcels of our tragically subdivided farming landscape will only lose value, one way or another, in the years ahead. Right now they're simply losing inflated cash value -- and that has been bad enough to sink the banks. In the months and years ahead, they'll lose their sheer usefulness as the distances once mitigated by cheap gasoline loom larger again, and the jobs vanish and incomes with them, and the supermarket shelves cease to groan with eighty-seven different varieties of flavored coffee creamers, and one-by-one the national chain stores shutter, and the theme parks, and the Nascar ovals, and the malls, and the colossal superfluous cretin-cargo of consumer nonsense that we've been daydreaming in gets blown away in a hurricane of change that we were not ready to believe in.
____________________________________

My 2008 novel of the post-oil future, World Made By Hand, is available in paperback  at all booksellers.

Comments

[Tangurena]

The sad thing is that the Obama administration appears to be doing all they can to aid the banks and nothing to aid the homeowners.

$700B for bank bailouts, and it is almost all spent.
$75B for homeowner bailouts, and none of it has been spent. Why? Because the rules for homeowner bailouts are so stringent that the only way to qualify for them is to be in the situation where you don't need them.

And Obama seems to be walking hand-in-hand with the right wingers in trying to astroturf us all:
http://bit.ly/ZG83

[Tenth Jager]

"there is a real whiff of revolution in the American air"

Yeah, right. I think that whiff you're catching is from the collection ankle-grabbing exercise the nation is engaging in.

[biff]

Presenting the James Howard Kunstler drinking game...

Drink every time JHK mentions "happy motoring lifestyle." Or "happy motoring fiesta."

Drink every time JHK writes "we cannot run Walmart (or Disneyland or chain stores or the suburbs) by some other means than oil."

Drink every time JHK mentions "fry pits, fast food huts, McMansions, granite counter tops, flat screen TVs, salad shooters, Wall Street playaz", and of course "peak oil."

Drink every time JHK compares the American railroad system to Bulgaria's. Or Bolivia's.

Drink every time JHK proclaims something is "over" with. Examples: revolving credit, industrial growth, suburban living arrangement, the airline industry, the auto industry, our way of life, etc.

Drink twice every time JHK describes Americans as "chesse doodle munching, diet Pepsi slurping, NASCAR watching zombies."

Drink twice every time JHK spits out one of his breathless, fetishistic doomer predictions. Examples: everything in America will be liquidated by Memorial Day or shortly thereafter; we'll be lucky if we're still speaking english and celebrating Christmas eighteen months from now; Chinese pirates will invade the west coast of the United States; we will ermerge from the winter of 2005-2006 living in another country full of monsters, etc. (Actually, a prediction along the lines of invading Chinese pirates merits a triple drink)

One can imagine JHK using some cut and paste template with the same, tired words and phrases with a couple artfully worded metaphors thrown in about the latest story of the week- swine flu, geopolitical tensions, Bernie Madoff or whatever name is in the news- all geared towards imminent disaster which is always right around the corner, or six months out, or eighteen months out, or several years out depending upon what amount of time JHK feels like hedging against that particular week. Each weekly entry, of course, is titled with some portentous, foreboding phrase- "The Rapture," "The Abyss Stares Back," "Forget About Recovery," and on and on.
Gotta sell those books and speaking engagements, eh Jimmy? Well we all need a way to pay the mortgage somehow, right? Oh wait, isn't that supposed to be over with?

[Hank]

What is Obama supposed to do?

Tell everyone to "suck it up" and not spend?

Telling people to sit on their money is like giving a 7 year old $10 and bringing him to the candy store, to look.

Obama is indeed in a corner. If the consumer doesn't spend, the economy dives. If they do spend, the economy rebounds but resources are used up, and the old way of borrowing too much continues.

The price of oil has gone up in the last few months. As the economy improves, the price of oil will rise. It is actually a control valve, since the price of oil will hold down the economy from going nuts.

I expect more of the same. I have learned that change is slow.

Jim has been talking about the "end of the world, as we know it" for months and months.

Change is in your pocket, not on the minds of the politicians.

[David Mathews]

* "All this is to say why it is so dispiriting to see Mr. Obama's White House mount a campaign to sustain the unsustainable in the economic realm. "

What other choice does the President have? When an entire economy and civilization are built upon lies and mass delusions (such as infinite growth and wealth for everyone) there isn't any other option except to sustain the unsustainable until it collapses and dies forever.

If the President were at all honest about America's situation this nation would collapse immediately and there would be no recovery, only chaos and bloodshed and sedition.

Americans aren't ready to hear this message ... perhaps they never will be ready.

Since it is taking longer than I expected for this world to collapse, I spend my time with the ospreys, dolphins, eagles and manatees instead:

http://www.flickr.com/dmathew1

I'm in favor of our civilization collapsing. It may do so at its own pace, though.

Until it does, though, I'll spend my time on the beach waiting. There is no better place to wait for civilization's collapse than the beach.

***

Someone please tell The Oil Drum that those people seriously need to create some more graphs. I have a feeling that The Oil Drum has suffered Peak Graphs and therefore those oil shills have nothing left to say.

The Oil Drum has become irrelevant since November 5th, 2008. Thank God for President Obama!

The oil industry should collapse and cease to exist. If the oil industry wants to do humankind any favors that is precisely what it should do.

Peak Oil ... where are you?

[Rock Trueblood]

Just posted the news to www.a1anews.com that 20% of Americans with mortgages are now underwater:

http://a1anews.blogspot.com/2009/05/monday-18-may-09.html

Meanwhile, in my personal life, I've just received my second foreclosure notice for a rental in the past 12 months. Yep, I'm moving again, but as last year's move, I'm moving to cheaper, bigger digs:

http://rocktrueblood.blogspot.com/2009/05/my-second-notice-of-foreclosure-for-key.html

[LaughingAsRomeWasBurningDown]

Laughing as NASCAR was shutting down:

http://www.tricities.com/tri/sports/motor_sports/article/economy_taking_its_toll_on_bristol_dragway/24073/

Several drag racing teams were forced to suspend operations in the off-season. Fans have trimmed their travel plans, prompting dragway officials to increase their advertising budgets.

Bristol Dragway is feeling the pinch, too.

Ticket sales are down for this weekend’s NHRA Thunder Valley Nationals. For the first time in a decade, the event also lacks a corporate sponsor.

[steve]

Notre Dame University is about as Catholic as Billy Graham. No bravery involved for him going there. The next move for Notre Dame is a Touchdown Barack to replace Touchdown Jesus. And since we continue to obsess about politicians and their "reawakening" to the facts of American existence, Barama knows exactly what he wants to do with his power and that is "progress" toward more welfare statism in a vain attempt to equalize results for all. Oh, and, at the same time, continue to fund the warfare state. He and his ilk could care less about the "happy motoring public", as long as everybody is strung out on "entitlements".

[FARfetched]

Revolution? Heh. The earth revolves on its axis; that's about the only serious revolution I'm seeing around here. The pod people on Planet Georgia are most excellent mouth-runners, but (just like Iraq) they're all for having someone else catch the bullets.

First off, most people haven't given much credibility to bankers for a couple of decades. If I had to pick a date, or at least a decade, I'd peg it on the rash of family farm foreclosures during the 1980s. At best, the banks were (then as now) turning a blind eye to long-term viability in favor of closing a deal. At worst, they were like drug pushers, hooking farmers on easy credit. As for Obama's role, I could be wrong but I think he's trying a kind of rope-a-dope — to mix metaphors, he's giving the bankers enough rope to hang themselves, and a few more feet just to make sure. Look at the way he campaigned… he let first Hillary then McSame pound away ineffectively until they wore themselves out, then pwned them at the ballot box.

As far as whatever the "next economy" is going to be, Obama *can't* tell us what it is — *we* have to tell *him*. If we've learned anything from the excesses of the last nearly-30 years, it's that top-down doesn't work. The Soviet Union collapsed under the weight of central planning; likewise, our own economy is collapsing under the weight of the fat cats who have enriched themselves at our expense.

Suburbia, likewise, has to find its own way forward. There's simply too much infrastructure there to abandon it, but with a few truly minor tweaks the 'burbs can become the new derelict towns and small cities. They won't be the pretty New Urbanist duhtopias that JHK gets himself off over, but they'll freeking get the job done (or die). It would even be an easy sell to the burb-dwellers, who have been trained to put personal convenience above all else; why waste time & gas driving to Super Dooper when they can walk up to the corner and get their six-pack, beef jerky, and creamed corn? For that matter, the corn might be in their own back yard, tended by a gardener who sharecrops the block.

Revolution might not be in the air in 2009, but in the FAR Future there is unrest in the coastal refugee camps of 2036: http://is.gd/AY0g The Boy is in a position to hear it from all sides and even from the opt-outs.

[asoka]

JHK said: "it's another thing for the public to lose confidence in... their own currency..."

Do you know of anyone who has lost confidence in their own currency? If so, please have them send theirs my way... I still value the currency.

Somehow I doubt anyone is ready to part with their currency and give it to me.

[FARfetched]

Biff, your drinking game is pretty generous:

One tequila,
Two tequila,
Three tequila,
FLOOR!

And move on to the third paragraph after we come to.

[bud4wiser]

"Its Morning in America - Status Quo"

“-- Major demographic shifts are inevitable as it becomes necessary to let go of suburbia and reactivate our derelict towns and smaller cities (and allow our giant metroplexes to contract)” says JK in his article.

JK - You’ve hit on the most pertinent aspects of the crisis facing the “happy motoring republic” of America and distilled them to a few pages of text. Well done!

I’m too muddled in my thinking to put much of a handle on the rifts that continue to grow in the social fabric of America. The axis of these diametrically opposed realities being experienced by Americans are skewed all over the map in directions and intricacies to intertwined to be sectioned, sliced or diced for a spreadsheet or “at a glance” graphic.

Is it Washington against the rest of us? Is it North versus South? Or is it rural versus urban, West (wide open spaces) versus east (new urban design), profits over people?

Can it simply be described as the “status quo” versus taking-the-chance to “make other arrangements?” When our current situation is examined from this perspective it is easy to understand why the “haves” are all in for maintaining the current course and blind to see any eventual calamity involving their own little slice of paradise.

In contrast all those “other folks” – who now admit and can understand that there is something wrong, are reaching for what ever quick fix or false hope that, is offered.

And so until there is some unifying force, some definable, clearly discernable “other arrangements” that makes sense to this growing of population of “have-nots” – the status quo will rein supreme. Clearly, the status quo is winning the day with innumerable false hopes and promises that “things are getting better” through rigged accounting and laughable government approved chicanery. While the population of have-nots begin to swell silently, their millions of voices relegated to the scope and meaning of a few decimal places or percentage points of the “status quo’s” latest bogus economic forecast.

There’s something going on here but you don’t know what to do – do you Mr. Reagan, Mr. Clinton, Mr. Bush and of course you – Mr. Obama…….

[bweengman]

@biff,

Great post. Except you forgot Lloyd Blankfein's cappuccino machine.

I'd like to see a graphic analysis of his essays that would look like this:

http://vote2008.thetakeaway.org/2008/09/05/common-words-graphic-analysis-of-the-acceptance-speeches/

[free_way_4_life]

@ Biff - If I played that game this time of day it'd be with coffee - but I'll pass because I'm not trying to be out running around the block with the dog all day :P

@ Steve - JHK's question of "Obama can face up to abortion so why not the economy" overlooks the fact that we as a society like to distract ourselves with moral issues (especially those involving private decisions) when we are too scared/lazy to face up to logical issues. I could say more, but I'm trying to work at keeping blog length posts restricted to my own blog.

@FAR - Good points on moving away from top down and retrofitting. Makes me ask "OK, so people are fed up, so why is there so much apathy/laziness/anger and so few proposals for tweaking?" I think it has to do with our culture's valuing of aggression over imagination. "Island Asylum" takes that notion to its extreme, which will become more clear once the editing is done (halfway through) and I write further.

(sorry ZSA ZSA, but you'll have to wait another week for new "Island Asylum" material to troll)

[dale]

Bob and Scott,

This will be my FINAL Reply, I've leave the last word to you on this NG supply topic. What you stated is in quotes followed by my reply:

“The estimates by the EIA are not simply pulled out of the air.” --- (Really? Well those estimates might as well be pulled out of somewhere, based on their accuracy over just about any given time frame you care to examine. By this I mean the history of estimating NG reserves and resources, including EIA's attempts)
“You are willing to simply accept that the supply is "unknown". --- (Willing?. ......I look at the NG data, even over just a few years and see enormous, “clueless-like” (to borrow a term Nudge might like) discrepancies. If that's the best we got, in terms of factoring every thing into the evaluation, then we have nothing. Hence, to me “unknown” is the only rational conclusion to come too based on evaluation of past predictive performance. We do have reason to believe, or maybe I should say hope, that AT LEAST what reserves we currently think we have do exist, since AT LEAST that amount has consistently been the baseline, for revisions upward, ever since attempting to estimate reserves or resources first began. Hence, it seems NG's use as a bridge fuel at current presumed levels is valid. Lastly, Remember, .......Pickens isn't grabbing numbers out of thin air either, that should tell you that there is legitimate disagreement about measurement methodology.)

“you had better run some numbers with the best available data on the total ng supply, in order to make sure that your idea is feasible in the first place.” (Yeah...Granted. I guess, as mentioned above, I'm giving Pickens credit for dusting off his calculator before spending millions publicizing his “Plan”. If you are looking for conspiracies however, I'm sure that will be a great red herring for you.)
Scott,
To quote you; “For example, dale see's the difference from a positive perspective in that he looks at resources as being ultimately recoverable based on his faith in technology, never mind that in many cases the technology has not been invented yet.”
My perspective in neither positive or negative. IF I had any “faith” in engineering, which I do not, I might have more belief in the “technology will save us” category you are trying to jam me into. I see YOU as the one with a bias, mesmerized by the engineering community (or a few of their members, anyway) Since when have their estimates of “reserves” or “resources” proven to be anything but laughable just a few years later? What should be in question here is not so much their mathematics, but perhaps more fundamentally, their imagination. What you should be asking yourself is; “is it possible, within the reach of our scientific and predictive expertise, to forecast ultimate NG supply levels?” The answer is apparently, “No”.

[AndrewRyan]

Biff - What a wonderful drinking game. However I don't think anyone could feasibly finish it without having to go to the hospital for alcohol poisoning.....

[Helen Highwater]

Hey Biff, if you're so bored with Kunstler's rap, why the heck do you bother to spend so much time reaching it and commenting on it??

[Helen Highwater]

oops, meant reading it, not reaching it.

[Riddick]

I found Jim's "World Made by Hand" at our local library's book sale Saturday and paid 50 cents for it!! Now I can finally read it. It still had the $14.50 Borders price tag sticker on the back.

The sale was busy with folks buying books for pennies on the dollar and then later bags of books for a buck. The Library Citizen Board sells books to pay for the increasingly large amount of things the County now can't pay for. I noticed that the County also appears to have given up on cutting the grass. And I'm told FY 11 will be worse??

Jim may be somewhat repetitious at times but if you haven't noticed he is right as are many others who once were voices in the wilderness. It is folly to place an exact timetable on a systemic unraveling. It will happen at its own pace as circumstances dictate, in fits and starts with ups, green shoots and big downs. It will hit us each individually over time in unique ways based on our personal circumstances.

Will suburbia up and die? I have no idea, I live in exurbia and right now we are growing food like crazy and re-localizing in Community Sustained Agriculture. I am a coop member of a very productive 200 acre farm just east of the Blue Ridge in Virginia. Next week we pick strawberries until we drop, then each week comes more and more bounty. Hard work but much more fun than the grocery.

The place is absolutely packed on the weekends and the CSA shares sell-out so fast now that only long timers get the chance to participate anymore. So times do change and slowly we look around and realize everything on today's table was grown 50 feet away or up the road at the farm. Dam it tastes so good then.

As for protection, we are all armed out here and as a retired cop myself I am well-armed indeed with extra special "Buffalo Bore" in my .380 greeting card for any useless thug who decides to risk their life invading my turf. I survived an entire LE career without shooting anyone despite numerous justifiable instances. However, I know I can double tap center mass in a heart beat if required without flinch or compunction. The burial might be a bit messy though.

Yeah, Jim is right, change is here in front of our eyes and now many pundits from Jim Bogle to Schiff realize things will never ever be the same again. Our standards of living must decline as they were needlessly high to begin with. It is gravity at work and a return to the norm. We can rail against it, print money, fight wars and cry but the inevitable will happen in the end.

If we wait long enough the trees, weeds and roaches win in the end every time. We just won't be around to see it. Perhaps the sharks and alligators will if we don't get jealous and exterminate them or desperate for meat as we decline.

[bweengman]

And she meant crap, not rap.

[bud4wiser]

Does this mean anything? Does it say anything about whether this nation is ready for change?

http://s3.mediamatters.org/static/images/oped/bal-within-paper.gif

[Jynx]

I'm surprised Jim didn't mention the car buy back program Congress is considering. A $4,000 or so voucher from the government to trade in your current SUV for one that gets a few more MPG. WHAT A JOKE!

[dale]

"I am well-armed indeed with extra special "Buffalo Bore" in my .380 greeting card for any useless thug who decides to risk their life invading my turf. I survived an entire LE career without shooting anyone despite numerous justifiable instances. However, I know I can double tap center mass in a heart beat if required without flinch or compunction." -Riddick

OK....you can turn loose of your cock now, it's over.

[Lucius_Quintius]

I don't believe the American people have it in them for a violent revolution - one Timothy McVeigh episode and there'll be another round of hyper-fear about security. And that's a good thing, because the last thing we need is for citizens to start killing each other anymore than they already do with handguns, drunk driving, etc.

We live in a post-industrial plutocracy, with an economy skewed toward the production of fake wealth, and not enough tangible things.

Unfortunately, the solutions we need in order to recover are also harmful to us - production of things is all well and good, but not the things we use right now. Making more doodahs and bells and whistles will not make our lives more sustainable, if that possibility even exists.

A health care revolution that cuts its costs, an 'alternative energy' revolution that re-powers the economy and our daily lives - those are great ideas. But ultimately at least the latter will only be a temporary source of growth, and potentially the inflating of a new kind of bubble that will crash as the infrastructure comes up against 1) the resource shortages that are inevitable due to the heavy fossil-fuel and water usage involved in producing the materiel of an alternative energy economy; and 2) the transformation to such an economy, if successful, would eventually be accomplished and the growth that resulted from doing it would peter out.

Rather than violent revolution, rather than Glenn Beck and all the other Fox blowhards, we just need more people talking about and bringing into reality transition towns, cooperative urban agriculture, teardowns of foreclosed properties (a lot of them get stripped before the banks can sell them anyway) and local currency and time banks in their stead.

Everyone has something to offer to their neighbors, whether they know it or not. Even the suburbs could be more sustainable with better use of the land they're on.

Is it all sustainable as is, or can sustainability truly mean finding some other way (say, new technology) of perpetuating business as usual? Well obviously not.

Does that mean we don't try to preserve what's good? Again, well obviously not.

Lucius Quintius

[georgedunbar]

key west sounds cool. maybe i'll move down there next winter. what's a good complex to rent in?