The Bottom

      Euphoria managed to out-run swine flu last week as the epidemic-du-jour, with "consumer" confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the Nascar oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.
      For now, the "bottom" is in -- that is, the bottom of this society's ability to process reality. It may continue for a month of so, even after the "stress test" for banks is finally let out of the massage parlor with a "happy ending." But events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:
      1. The revolving credit economy is over. It's over because we can't increase energy inputs to the system, which is one way of saying "peak oil." Of course hardly anybody believes this right now because the price of oil crashed nine months ago, along with global manufacturing and trade. But nothing has changed on the peak oil scene -- except perhaps that ever more new oil projects have been cancelled for lack of financing, which will boomerang on us (even if swine flu doesn't) in the form of much lower future oil production. In any case, the credit fiesta is over, and the "consumer" economy with it, because industrial growth as we have known it is over. It's over globally, too, though all regions of the world will not experience its demise the same way at the same rate.
      The Asian nations may swap things around a while longer but China is basically screwed. They have less oil left than we have (which is saying, not much at all) and they won't corner the rest of the global oil market without starting World War Three. Meanwhile, they're running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.
       Credit will not vanish everywhere overnight -- even in the USA -- because it is not distributed equally everywhere. But it will vanish in layers, and here in the USA a very broad layer of the lower and middle classes are now losing their access to it in one way or another -- personally, in small business -- and they will never get it back. Anyone who intends to thrive in the years just ahead had better plan on doing it on the basis of accounts receivable -- and what they receive might not even necessarily come in the form of US dollars. It may come in the form of gold or silver or in the promise of reciprocal services rendered.
       This has enormous implications for two of the items in which our credit-dispensing operations are most deeply vested: houses and cars. Unfortunately, these are exactly the things that economic life has been based on for decades in our nation, which leads to the next categories:
     2.) The suburban living arrangement is over, along with all its accessories and furnishings. Taken as "all of a piece," the suburban expansion was one sixty-year-long orgasm of hypertrophy. We did it because we could. We won a world war and threw a party. We had lots of cheap land and cheap oil. It made lots of people lots of money and all its usufructs have become embedded in our national identity to the dangerous degree that the loss of them will provoke a kind of national psychotic breakdown. In fact, it already has. The completely unrealistic expectation that we can resume this way of life is proof of it.
      The immediate problem is that we can't build anymore of it. The next problem will be the failure of the stuff that already exists. The first stage of that is now palpable in the mortgage foreclosure fiasco and, just beginning now, the tanking of malls, strip centers, office parks and other commercial property investments. The latter will accelerate and become visible very quickly as retail tenants bug out and weeds start growing where the Chryslers and Pontiacs once parked. The next stage, which involves large demographic shifts in how we inhabit the landscape, has not quite gotten underway.
     3.) The Happy Motoring fiesta is over. You'd think that with Chrysler crawling into the bankruptcy court, and GM just weeks away from the same terminal ceremony, the news media would begin to suspect that the foundation of everyday life in this country was cracking. Instead, all we hear is blather about "market share" shifting to Toyota. News flash: not only will we make fewer automobiles in the USA, but Americans will buy far fewer cars made anywhere. We'll keep the current fleet moving a while longer, but when it's too beat to repair, we won't be changing it out for a new fleet -- despite all the fantasies about hybrids, plug-and-drive electrics, and so on. The masses will be too broke to buy these things. What's more, they will be very resentful of the shrinking economic "elite" who can afford them. And, anyway, our roads and highways are destined to fall apart very quickly because there is no way we can sustain the necessary rate of normal maintenance. Meanwhile, we remain completely un-serious about public transit -- even about fixing the vestiges that still exist. The airline industry, of course, will be toast inside of five years.
      4.) Our food production system is approaching crisis. There's no way we can continue the petro-agriculture system of farming and the Cheez Doodle and Pepsi Cola diet that it services. The public is absolutely zombified in the face of this problem -- perhaps a result of the diet itself. President Obama and Ag Secretary Vilsack have not given a hint that they understand the gravity of the situation. It is probably one of those unfortunate events of history that can only impress a society in the form of a crisis. It also happens to be one of the few problems we face that public policy could affect sharply and broadly -- if we underwrote the reactivation of smaller, local farm operations instead of shoveling money to giant "agribusiness" (or Citibank, or Goldman Sachs, or AIG...). I maintain that this may be the year that the crisis gets our attention, because capital is suddenly harder to get than fossil-fuel-based fertilizer.
     All these epochal discontinuities present themselves, for the moment, as a season of muted "hope" and general apathy. The days are suddenly mild. We've resumed old and happy habits of grilling meat outdoors and motoring to those remaining places that were not blanketed with franchised food huts and discount malls. We have a new, charming president with an appealing family. Newly-minted dollars are flowing to the "shovel-ready." The new bad news is less bad than the old bad news (or seems to be). And the year just past has been such a bummer that our hard-wired human nature tells us that good things must be just around the corner.
       Personally, I think a lot of good things await us, but not the ones we're expecting -- not a return to buying slurpees on credit cards. It will be very salutary to leave behind the junk empire we've accumulated and move into an epoch of quality and purpose. For the moment, though, our hopes reside elsewhere.
____________________________________

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

Comments

[Tangurena]

It appears that more than a few of Chrysler's bond-holders bet heavily on CDS, so Chrysler is worth far more dead to them than alive. And of course the taxpayers will have to bail out AIG some more because AIG gambled on those credit default swaps.

And I note with some more bitter irony that the UAW pension fund got suckered into significant ownership of Chrysler, which was yet another way to pound a wooden stake through the hearts of unions. This will end up sinking the UAW's pension fund to the point it will need to be bailed out by PBGC, and thus bailed out by taxpayers yet again.

[Tenth Jager]

Good thing we've got plenty of natural gas. As the price of oil rises over the next decade or two, we will gradually transition our vehicle fleets to CNG. First buses, then the tractor-trailer fleet, than part of our passenger car fleet. We should be okay given decent tax and refund incentives. Price will also pave the way for more fuel efficient vehicles.

[JJackson]

"As the price of oil rises over the next decade or two, we will gradually transition our vehicle fleets to CNG."

You must be new to the concept of PO, because that's not going to happen universally, or as JHK says, "It doesn't scale."

[Tenth Jager]

Just a few months ago you were saying the airline industry would be dead in 18 months. Now it's five years? Why the change of heart? I'm guessing your predictions aren't based on anything one might call data, or even theory. Just kind of a gut feeling, huh?

And if Americans won't be buying cars, they won't be driving, which means no problem with peak oil. Why does this logic escape you?

[timetobike]

Along with JHK's fine article, the Wall Street Journal had an editorial today about how the FHA is still providing subprime loans with essentially zero percent down, and mortgage brokers/lenders are still scamming the system -- old habits die hard.

Also I believe in each of the first four months of this year, more cars have been sold in China than the old USA, which is a huge reversal from previous years.

So start growing your tomatoes and other crops.

[Tenth Jager]

20% of the US bus fleet is already CNG. There are 1600 retail stations in the US selling NG according to something I read on The Oil Drum.

The infrastructure is already there as in the system that currently brings the product to people's homes.

I'm quite familiar with the concept of peak-oil. Thank You. I'm also quite aware of Jim's piss-poor record of predicting the details of the near future.

[WMT477]

Dear James, Do you think people who have survived this spring H1V1
will be immune against the late summer mutated H1V1? It's coming, just like in 1918. I hope you and yours stay well.

[FARfetched]

By some measures, the bottom has been in for a while now. Gardening seems to be the quiet craze this year — a sure sign people are concerned about food security, for the first time in 70 years here in the UPL.

Local banks here in Sector 706 put on a "customer appreciation day," usually the first weekend in May. Traditions being what they are, they went on this year as usual, grilling hot dogs and giving way small packs (3 to 6) of tomato plants. The cost to put these on is probably less than a low-level manager's yearly bonus. Way-ell, people usually come for the hot dogs, and a minority accepts the tomato plant offerings. Not this year — they were lining up for the plants! One of the banks in Blairsville had such a huge line that the cops had to come to direct traffic. Yup, there was a bank run on Planet Georgia this weekend, but they're all coming home with tomato plants!

DoubleRed picks up a co-worker from her apartment on the way to their job in the morning. Even(?) they are part of this tomato run on the banks this spring — the landlord has given the tenants permission to plow up the landscaping beds and a big patch of yard for a community garden.

Part of the drive might be unfounded rumors. Some friends of ours came up to visit yesterday; they live in Cobb county, the former home of "Eye of Newt" Gingrich and the epicenter for all sorts of crazy-ass CONservative antics. The one they've heard is that Obama, rather than not understanding the situation, is planning to nationalize the entire food production system, and the changeover may disrupt deliveries for up to a month, so their church and individual families are stockpiling food. BWAAA-HA-HA-HAAAA… damn. Wingnuts will believe just about anything if it fits their warped world-view. Then again, getting a personal food bank together is the right move even if for the wrong reason. I explained the energy situation to them and they accepted it pretty readily… perhaps because it didn't impact their decision. (Like I said, right move, wrong reason.)

I have to agree that better things await, precisely because they won't be the same as the old things. In the FAR Future, better things await some coastal refugees who are getting re-settled in what was the office park where I sit this morning: http://is.gd/wzKz

I'm doing a two-fer this week, so if you read today's episode, the next one will be waiting for you tomorrow morning. While you're there, have a guess at where gas prices are going this summer and vote in the poll…

[Riddick]

Significant piece of wit and wisdom as usual Jim; even if we rehash the telling of the inevitable.

The problem this time around is that due to the Electronic Media Age all of us (or many) feel as though we are within the plot of some "summer blockbuster" (though safe in our cushioned seats with cup holders). We are programmed from birth for the happy ending and the fact Amerika can never fail. We are the "Shining Light on the Hill" after all. Who else can dazzle like we do? Hence we still are getting the reluctant "buy-in" from the rest of the globe in the form of continued loans to fund our seemingly endless indulgences. Real sufering? Not yet for most unless you have lost your job, been furloughed or turned into an invisible "discouraged" worker.

Yet everday as I read the veritable Washington Post I read the tales of woe as governments shrink and once workers lament. I live in what remains the wealthiest per capita county in the US and we are seeing pain now. The store shelves remain mostly full but to my eye a little more tattered as the JIT system unravels a tad more each week and month.

Last month I had the opportunity to travel to fair Savannah. The Riverwalk was a bustling as ever with tourists, drunks and SCAD students. However, I noticed that the great container ships plying the river sat high in the water coming in and going out of port. The containers, once stacked to form immense rectangles were now stacked in much smaller irregular piles. The ship's waterline making me believe even the containers were empty.

I also ran into the mega-yacht "Apoise" docked like a Hollywood fantasy along the walk (yacht #59 of the world's top 100). Here be some pics of this vessel:http://yachts.monacoeye.com/yachtsbysize/pages/apoise01.html

Funny, as Joe Sixer and Jane Backseat stared up at the many decks of the yacht you could almost hear their brains working...."This is Amerika, one day I'll have a boat like that if just work harder at Wally Mart." Of course, to me, any system that could permit the construction of such a monstrosity while every minute several children expire of malnutrition is an abomination. You won't hear Joel Osteen condemn such pride and greed though (probably cause he has mega-yacht #60 in hist fleet). The Bible can be easily interpreted anyway one needs to cover a good income and perks. Hallelujah!

Okay Jim, you have nailed our future. Barring an outright revolution which I believe to be impossible for the sheeple, what we will (are) witnessing is the slow, inexorable decline of the vaunted US standard of living as the masses of the world gravitate to the bottom while the elites maintain and prosper.

Perhaps at some point this may be altered by systemic change but in a nuclear world such activity gives me the shakes. I see a sputtering future with ups and then more downs always leading lower individually over time. A personal restructuring that will sweep each of us personally in some fashion over the span of time.

[Mark]

>

Umm, because we are not the only ones in the world using oil, that's why. Jim, is wrong however. Americans will be car addicted until the last drop of oil is sucked out of the ground. Even this "liberal" president does't get it about public transportation. And as China and India's economies improve they will be purchasing and driving cars. etc, etc, etc. Peak oil doesnt' mean it runs out. It means it going to get really f'ing expensive. There is basically no new exploration going on right now as the economy tanked and prices are low now. Wait until the economy improves. Oil will skyrocket again.

[Tenth Jager]

@WMT477 -

Yeah, it's gonna be called "H1V2:Return of the Jedi." But I wouldn't hold my breath for this fall, usually the sequels for blockbusters come out the following summer.

Although word has it that this one bombed at the boxoffice, so they might not bother making part II.

[asoka]

WMT477,

Give it up. CFN is led around by the news cycles. Flu was last weeks story.

JHK says: "The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance."

That is the story of CFN blog... always a disaster waiting out on the time horizon (like Y2K) and the disaster never happens.

I actually enjoyed JHK this week because I could feel JHK squirming and not being able to admit the obvious: Obama is turning around the economy and there will be no disaster, no TSHTF. I could read the hope between the lines.

[And the band played on...]

That swine flu sure killed millions of people now didn't it. Lucky for us we've got tamiflu! Yeah, rejoice!

[FARfetched]

«The Happy Motoring fiesta is over. … The masses will be too broke to buy these things. What's more, they will be very resentful of the shrinking economic "elite" who can afford them.»

A short story along those lines: http://darksideoffarf.wordpress.com/2009/01/02/fiction-the-brick-thrower/

Can't remember if I ever linked it to from here or not.

Over the weekend, I read Orson Scott Card's "Pastwatch: The Redemption of Christopher Columbus." Many of you would recognize the world of the late 2100s — 90% dieoff, partial recovery before things get even worse, speculation about how civilization could restart without oil, and so on. It covers a couple of different alternate history scenarios that y'all might find interesting.

[vegasbob]

We are in for a long, slow and grueling economic decline.

Talk of economic "recovery" is a cruel joke - it's just another scam so that Goldman Sachs can loot whatever wealth is left in this country.

Any "recovery" will result in $10 a gallon gasoline, and a quick plunge back right into depression.

I laugh when I read about specuvestors buying "bargain" homes in Florida. Those poor 'tards are going to be in for the shock of their lives when they get their property tax and homeowner's insurance bills. And when they turn off the A/C so they can pay the taxes and the insurance, all they'll be left with is toxic mold.

So much for suburban living...

[Joe]

Thomas Malthus is awake in his grave.

[Tenth Jager]

Hey, where do all you guys get your crystal balls? Was there a sale somewhere this weekend?

[upstatebob]

There is, obviously, already a slowdown occurring. It will happen slowly like bringing that frog to a boil. I see society returning to an
environment similar to the 50s. If you were old enough to remember, there were a lot of folks living in old trailers in the swamps. There won't be much in the way of pitchforks and firebrands because they won't accomplish anything. I checked into the Florida property idea with a visit in January. Except for the glitzy edges I saw a desperate and depressing place. I returned, chastened, to my cozy termite free NE cottage.

[dale]

Asoka said: "That is the story of CFN blog... always a disaster waiting out on the time horizon (like Y2K) and the disaster never happens."

Yes, it never fails to amaze me how people here will latch on to the latest negative news and turn it into their biggest gut fear, blowing it way out of proportion. People don't seem to be able to process that the media thrives on this sort of shit, and put it in context. That being said, I don't buy into your rosy future scenario.

As I survey the landscape economically, both on a local and national basis, I continually find myself asking the same question over and over again, “if we are going to have a recovery, where will the jobs come from?” Locally, the building industry has lost over 75% of their employees in the last two years. Micron, (world headquarters here) looks a lot like the rest of techno-America and our industrial base. They employed over 10,000 a couple of years ago and after eliminating another 2,000 jobs over the next few months will be down to 5,000 by the end of the year. Of course, we have already had a couple of car dealerships shut their doors and I have no doubt most of the others have had layoffs during the recent decline. I have been surprised how well retail has held up. I expected to see a lot more for rent signs around in retail areas, and while they are there, it has not happened in the numbers I expected.....yet. The idea that we will all start selling each other real estate and lattes again (and what else is their, in the near term) strikes me as fantasy much as it does JHK. We have real, serious, and chronic economic problems.

I predict a blip up as optimism and false hopes for a quick recovery from a typical recession wash through the country. Then we will see another decline in housing and retail sales. Oil?....I don't see that being a big problem in the next 2-4 years. Higher prices yes.....shortages, not likely. People just haven't got it through their heads yet, we are seeing a major economic event here and not a typical recession.

I'm not quite sure what Obama's strategy is. Does he actually believe we can return to the false economy we have had for the last several years? Or is he hoping that a quick upturn will give him the popularity and momentum to make the real fundamental changes which have to come? I fear if things turn for the worse, we will have a set up for a real wacko right wing junta, in the form of a fraudulent election.

[Tenth Jager]

"Yes, it never fails to amaze me how people here will latch on to the latest negative news and turn it into their biggest gut fear, blowing it way out of proportion.

...

I fear if things turn for the worse, we will have a set up for a real wacko right wing junta, in the form of a fraudulent election."

couldn't resist, could you?

[LaughingAsRomeWasBurningDown]

Nervous messed up marionette
Floating around on a prison ship

http://www.youtube.com/watch?v=UJkeVkYq8Es

[tituspullo8780]

None of JC's dire predictions are pre-destined to happen. None of this is set in stone, and I believe that a societal transfer to an alternate transportation and energy regime is possible.

The dollars currently being wasted on bank and auto industry bailouts could be redirected to converting cars to natural gas, building coal-fuel processing plants, getting electric cars on the road and spending the rest of public transport infrastructure, nuclear, wind, tidal and solar energy production.

However, I will admit that it's looking less and less likely by the minute that we are going to make it. The president sets the agenda, and the decision has already been taken to try and prop up the old economic system - while make the existing energy system that the old economy runs on impossibly expensive through the deployment of "cap and trade". they see the crisis as 'global warming' and not of peak oil.

If cap and trade goes through, and Chinese/Indian/European demand for fuel combine with lower oil production to send prices above $200 barrel - we are toast. The economy will be so massively wounded that it won't have the capacity to reorganize into other than black market-driven chaos. This could be similar in the US, to what we saw in Russia after the collapse of the Soviet Union.

I must say, I have a hard time myself believing what I'm seeing.

[msjanket]

Obama doesn't know about, gasp!, the energy future? The omniscient being doesn't know what readers of CFN do? I'm just amazed at Michele's high heel sneakers, bare arms, and high approval ratings. What more do you'se guys want, anyway?
Ideally, we just have to hope that cold fusion cars come around real soon. It's our only hope. For the meanttime, though, watch for Obumnuts to come up with a deal where purchasers of cars from the wards of the government are given various bennies and sundries that make Ford wish they could have gotten in on the money train.
We have to think about the future, but we have to appease those who voted for this guy. You really think Larry Summers has the answers this time around? Once energy flows slow to a crawl, we'll all be doing Victory Gardens in earnest.

At every level of the country, problems stemming from reduced energy supplies and crippling, devastating legal complexities will make it damn near impossible to have business as usual ever again. End coal usage? Fine, say goodbye to electricity. Eliminate air pollution? Fine, say goodbye to many industries and pleasure activities. Al Gore and his conglomerate will be the way to go. There's always more money in telling folks how to do things than to do those things yourself. We are screwed and this president will be Mr. Big Balls until reality sets in. Then, he'll fold like a cheap paper box, another victim of hyperbole and elitism bereft of practicality.

[Conchscooter]

I never cease to be amazed by the anger Kunstler's predictions dredge up. The future is invisible and because Kunstler sees it going one way doesn't mean it will, but the actual numbers, such as we are allowed to see, indicate he has a valid point. Getting angry with him about his point of view validates it, rather than the reverse.
If the airlines are still holding on it's because something has happened to help them stay in buisness and it doesn't take a genius to figure out that bailouts have been their lifelines.
The question then is, who pays for the stimulus money? Happy motorists who think Kunstler is a freak don't have an answer.
Thus, while I agree I most likely wouldn't want to have dinner with the Internet persona of Kunstler and his obsessive negativity, I don't much want to have dinner with his Internet critics who show they have no answers to his critiques of modern living.
Stalemate perhaps, but Kunstler writes better than his critics so this is still a good place to come Monday mornings.

[tituspullo8780]

I don't think it's unrealistic to think that CIA, and most of the military are quite aware of Peak Oil is real and likely, happening now. Their main mission for the last 40 years has been to protect US business interests and access to key energy channels. You also see branches of the military engaged in schemes to diversify there energy inputs - airforce planes that run on coal-fuel, the investment in nuclear power, ect.

So it's not unrealistic to think that these folks have already explained the broad contours of the energy issue to President. You don't need to be 'omniscient' to get briefed by people who's job it is to worry about trifles such as peak oil. Clinton mentioned the problem after his presidency, and implicitly - so has the former head of CIA. There were aware.

So, if we assume that the current administration aware of the problem - then we can assume some rational reaction to these problems. So, what rational policies could be put in place, or are being put in place, that they would not want to disclose to the general public? I think that's a reasonable topic to cover - rather than endlessly repeating that we are 'screwed'. thanks, but that's not very insightful.