Replaying 1929?
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Replaying 1929? |
A MAJOR SPECIAL REPORT: THE REAL LONG-TERM OUTLOOK
Scenarios: Which of the Four Horsemen?
It struck me the other day, that a good definition of irrational markets might be to notice when people start stretching out their payments on things, such that the payments will be around, long after the thing has served its purpose and been retired, obsoleted, or just simply thrown out. It's like buying a bag of ice cubes for a party. You'd never walk into a store and say, give me the ice, and I will pay you off over the next 16-months. Yet, in a real sense, and on a large scale, I sense that the market is pricing today's equities like buggy whip makers. There's an assumption that they will keep operating at 1870 levels - and grow 15% a year from there, right out till the end of time. Shear nonsense, of course, and the buggy whip makers have pretty much disappeared from the NYSE. But the approach to pricing, while not quite developing a second derivatives market for ice cube futures, has come pretty close.
Now, prophecy is an interesting area to study. I contemplate the field no & again with a proper beverage (and some of the aforementioned ice cubes) now and again. Regardless of what your personal feelings are on the topic, the human brain can, and does, draw some pretty interesting conclusions and presents them to us in various altered mental states. I've had some personal experience with the stuff, having the odd precognitive dream about things like car accidents, surgery or trauma involving my kids, and so forth. Nothing earth-shaking or religiously inspiring, just useful, forward "warnings" of things that come to pass 24-hours later.
This is not an article about religion. Far from it. It is an attempt to look forward some distance, and assess what Kaplan describes as the "Coming Anarchy". How is it likely to play out, what's the timing? And, most important, perhaps, what does it do to my wallet?
So, my notion this week is that we're seeing the foreshadows of the "four horsemen" running around right now, precursors to the "real deal" four horsemen of the of apocalypse, or what Jay Hanson calls the dieoff. period.
Horsemen of the Dieoff Period:
This is the "macro view". Let's start with the assumption that we run out of oil, and this means we run out of food for the billions of starving people in the world. We're already consuming more than is being discovered, and frankly the people who control the oil, don't really like us, the U.S. very much at all. (In some cases, with good cause too, I'm afraid.) In surveying the "energyscape" a few years out, one could logically ask, "are there any markers out there that might indicate when the Dieoff event could or would occur? The Mayan Calendar, which, if you don't have one around the house, ends in December of 2012, seems to me like a pretty good estimate.
So, what will lead up to the Dieoff event? Well, a quick little review of other descriptive sources, and specifically the Bible, suggest that there will be seven years of "tribulations". During these years, which ought to get seriously underway in 2005, the "Four Horsemen" of the Apocalypse ride roughshod over the earth.
Who are the Horsemen? Well, according to the Biblical view, the Horsemen are War (the white horse), Plague (the red horse), Famine (the black horse), and general Death (the pale horse).
Now, when you think about it a little bit, this view seems pretty rational. At some point between now and 2005, a war seems pretty darned likely. It will become obvious to almost everyone as the economy has now entered the long skid down, and oil consumption continues to outpace oil discovery, that the world's economies will need something to "jump start" them. A review of history shows that following economic problems, the most common solution to getting things moving again has been a war. Check off the white horse.
Now, it's also become clear that the next war is not going to be sharp sticks. It'll probably go nuclear and/or chemical or biological and that will leave us with what? Plagues. So, OK, check off the red horse.
Now, if you've had a good-sized war, a break down of society is getting underway, and is fueled by a plague, what would logically come next? Does famine make sense about here? Perhaps the plague will be something that kills off farm animals, or worse, unleashing the pox or some other aggressive agent, taken as the ultimate "poison pill" by a regime that's seriously pissed at the West. Regardless of motivation, once the plague happens, famine isn't far behind. Especially if the plague comes in several flavors - aimed at human and our food mammals. Check off the black horse.
If you buy that the 7-year tribulation period works out in this manner, and that war leads to plague and plague leads to famine, then a period of general death in what's the shambles of the formerly ordered world, doesn't seem like much of a stretch. So this rounds out the horsemen in the macro view.
What do the shadows of the approaching horsemen look like today? What's the micro view that we can use in formulating our plans for today forward over the next year or two?
The foreshadow of the approaching War Horseman is pretty obvious. We've had literally dozens of books written about the increasing availability of chemical and biological weapons, plus throw in nukes to boot, to terrorists and rogue regimes. The escalating tensions between the U.S. and China, the continuing and barely sub-nuclear tensions along the India-Pakistan border, and the re-arming of Iraq and Israel, are probably the three most likely flash points.
The foreshadow of the approaching Plague Horseman is also there. You've got only to pick up the newspaper and read about foot and mouth disease, the arrival of West Nile virus in the U.S., the spread of AIDS, particularly in the Third World, to get a sense of how ugly things could become.
The approaching shadow of generalized famine has been shown in dozens of places that you may not wish to recall. Ethiopia, North Korea, and well, the list goes on. As energy dries up, and the process of desertfication speeds up, things snowball.
As to the shadow of an approaching generalized Death? Well, the work Jay's done with Dieoff.org certainly makes the case in an energy-based way, and others, like urban planner Jim Kunstler, mince no words when describing the bankruptcy of shipping something as simple as a shirt 12,000 miles from its point of manufacture in Asia, or carting Caesar greens fixings 3,000 miles.
Their views (that follow) are about what seem to me to be growing shadows. Lest you toss aside this report as the effort of an overactive imagination, I'd like to remind you that in books like the Bible, regardless of your religious beliefs (if any), there are useful facts. Consider the biblical burning bush, for example. It's thought to have been a natural gas leak from the oil reserves found in the area, perhaps ignited by lightning.
Does this mean that biblical prophecy and other indicators (like the Mayan calendar end date) coming together into something that makes sense is anything other than coincidence or projection? No.
But when markets go down, energy dries up, threats of war increase, and another virus gets nasty, you just gotta sit back and wonder.
I became aware of Jay’s work through his www.dieoff.org about a year or so back – and I have been continuously impressed with the caliber of thinking behind the period “Brain Food” mailings that Jay (and numerous contributors) has mailed out. Recently, though, Jay has turned off the “Brain Food” mailings. He feels that we’ve gone past the “point of no return”. I know, on the face of it, that’s a pretty negative stance. But before you dismiss the view, you might want to read it:
Jay Hanson -- www.dieoff.com -- 04/17/2001 [used by permission]
(When I use "politics" or "political" in this post, I simply mean "one coercing another" in the broadest sense. To "coerce" is to compel one to act in a certain way -- either by reward or punishment. )
In 1972, the Club of
Rome (COR) rocked the world with a study called LIMITS TO
GROWTH. The COR called the multitude of
environmental problems facing future inhabitants of planet
Earth the "global problematique".
In
the years since 1972, science has made great progress
in understanding the natural world. Obviously, the
problematique ensemble is a hierarchy of problems. The
fundamental problem in the problematique ensemble is
"H. Sapiens" (or the "critter").
The
critter is an especially important player in this drama
because not only has its activity caused the problematique,
the critter is also called upon to solve the problematique.
Therefore, understanding the nature of the critter is THE
prerequisite to solving the problematique.
Modern
evolutionary psychology and microbiology has now explained
the scientific nature of the critter. The historic inability
of activists to make any progress solving the problematique [
1 ] is partially due to the fact that activists do not want
to hear the scientific truth, and partially because they can
do little -- if anything -- about it anyway.
When
confronted with the "truth" about themselves and about
their unimportance in the political hierarchy, activists
will either become constructivists (take the science
lightly, change it, or abandon it entirely when it becomes
necessary) or fundamentalists (deal with troublesome science
through psychological denial and/or political repression).
So
now we have a nested problem: the "problematique of
the problematique". In other words, the
"truth" concerning the problematique can be
provided by science and political realism, but it is not the
"truth" that activists are looking for. What kind
of "truth" are activists looking for? Science can
answer that question too.
Over
millions of years of evolution, the critter has emerged as
the apex "political predator" -- NOT the engineer,
NOT the problem solver, but THE political predator. When
confronted with a social problem the critter first resorts
to "politics" to insure and enhance
its "inclusive fitness". In fact,
"politics" is the reason why we have such large
brains:
"The
social intelligence hypothesis posits that the large
brains distinctive cognitive abilities of primates (in
particular, anthropoid primates) evolved via a spiraling
arms race in which social competitors developed increasing
'Machiavellian' strategies." [ 2 ]
In
short, our innate goal is genetic reproduction and our
most important tool is "politics". This is easily
seen in other social animals. The dominant male eats first
and has his pick of the females. In our society,
"money" is interchangeable for political power. And
as Kissinger noted, "power" is the most powerful
aphrodisiac. This because women who were attracted to
powerful men were more likely to see their children live to
reproduce their genes.
So
the "real reason" (i.e., the "genetic reason"
instead of the "rationalization") why activists on
this list will not accept the truth from science and
political realism is not because it's wrong, it's because it
doesn't lead to more personal political power. In other
words, the scientific truth about the critter does not
increase the "inclusive fitness" of the activists
themselves.
So
activists keep searching for the "other truth" -- the
Santa Claus or the Good Tooth Fairy "truth" that
will get them laid. Unfortunately, Santa Claus and Good
Tooth Fairy don't exist -- what you see is what you get.
However, I am going to put on my Nostradamus hat and make a
prediction.
When
blackouts sweep the country (probably < 5 years, certainly
< 10) the political environment WILL change radically,
but not in the way most people hope it will. One day we will
wake up and suddenly the scientific truth WILL serve the
political agenda of the ruling elites. [ 3 ] Let's call that
looming revolutionary day the
"Pythagorean Revolution" in honor of the man who
discovered that the Earth was spherical, and thus finite,
approximately 2,500 years ago. [ 4 ]
After
the Pythagorean Revolution occurs, instead of
selling "negawatts", environmental groups will be
selling "negapeople". "Gosh! Why didn't we
see it before? It's either tigers or people, what choice do
we have? Kill 'em all and let God sort them out!" Instead
of "importing" people for labor, we will be
"deporting" people to labor camps -- if not
"illegals" to their own countries, then
"overbreeders" and undesirables to internal
concentration camps for the next "Final Solution":
"Only
from this distance does one have a full view of the
inferno on the teeming ramp. I see a pair of human beings
who have fallen to the ground locked in a last desperate
embrace. The man has dug his fingers into the woman's flesh
and has caught her clothing with his teeth. She screams
hysterically, swears, cries, until at last a large boot
comes down over her throat and she is silent. They
are pulled apart and dragged like cattle to the truck. I see
four Canada men lugging a corpse: a huge, swollen female
corpse. Cursing, dripping wet from the strain, they kick out
of their way some stray children who have been running all
over the ramp, howling like dogs. The men pick them up by
the collars, heads, arms, and toss them inside the trucks,
on top of the heaps. The four men have trouble lifting the
fat corpse on to the car, they call others for help, and all
together they hoist up the mound of meat. Big, swollen,
puffed-up corpses are being collected from all over the
ramp, on top of them are piled the invalids the
smothered, the sick, the unconscious. The heap seethes,
howls, groans. The driver starts the motor, the truck begins
rolling." [ 5 ]
To
restate the Pythagorean Revolution as succinctly as possible:
At some point (< 10 years) the ruling elites will
discover that, given the nature of the critter, the
"shortage of energy" problem can not be solved. At
that point, the elites will recast the "shortage
of energy" problem as the "longage of
critters" problem, and then proceed to solve it.
After
the Pythagorean Revolution occurs, it will be "us against
them" -- tribe against tribe. It will be a new
"Age of Confrontation" on a global scale:
"Interests
can always be compromised and accommodated
without undermining our very being by sacrificing values.
Under the impact of electronic media, however, this
psychological distance has broken down and now we discover
that these people with whom we could formerly compromise on
interests are not, after all, really motivated by interests
but by values. Their behavior in our very living room
betrays a set of values, moreover, that are incompatible
with our own, and consequently the compromises that we make
are not those of contract but of culture. While the former
are acceptable, any form of compromise on the latter is not
a form of rational behavior but is rather a clear case of
either apostasy or heresy. Thus we have arrived not at an
age of accommodation but one of confrontation." --
Beryl Crowe [ 6 ]
Pythagoras
would have known this day was coming. After all, on a
spherical planet, it's just a matter of time...
Jay -- www.dieoff.org or www.dieoff.com ------------------
[
1 ] a. One hundred and twenty years ago, the social
implications of the Laws of Thermodynamics were understood
and scientists attempted to point out to economists that
energy -- not money -- was the source of the capitalist's
wealth. Social impacts: none that mattered. In other words,
no self-imposed limits to growth.
b.
For seventy years, the Technocracy group has been
complaining constantly about money and energy. Social
impacts: no limits to growth.
c.
In 1970, oil "peaked" in the lower-48 and M. King
Hubbert's prediction came true. Social impacts: no limits to
growth.
d.
In 1972, LIMITS TO GROWTH was published. It was translated
into many languages and sold many millions of copies. It was
right then, and it is right now. Social impacts: no limits
to growth.
e.
In 1973, the first OPEC oil shock struck, as oil prices
quadrupled and the general inflation indexes shot up to 11
percent.
For
six months in late 1974 and early 1975 the GNP fell at
the fastest rate ever recorded. Even the rates of decline in
the Great Depression had been less precipitous -- although
of course longer and deeper. Social impacts: no limits to
growth.
f.
In 1983, President Jimmy Carter printed GLOBAL 2000 -- it sold
25 million copies. Social impacts: no limits to growth.
g.
In 1992, both the US National Academy of Sciences and the
Royal Society of London warned in a joint statement that
science and technology may NOT be able to save us:
"If
current predictions of population growth prove accurate
and patterns of human activity on the planet remain
unchanged, science and technology may not be able to prevent
either irreversible degradation of the environment or
continued poverty for much of the world."
"The
future of our planet is in the balance. Sustainable
development can be achieved, but only if irreversible
degradation of the environment can be halted in time. The
next 30 years may be crucial."
Never
before in history had the two most prestigious groups
of scientists in the world issued a joint statement! Social
impacts: no limits to growth.
h.
Again in 1992, over 1,500 members of national, regional,
and international science academies signed the Union of
Concerned Scientist's WARNING TO HUMANITY. Sixty-nine
nations from all parts of Earth were represented, including
each of the twelve most populous nations and the nineteen
largest economic powers. The full list includes a majority
of the Nobel laureates in the sciences. Social impacts: no
limits to growth.
i.
In 1995, 2,500 climate scientists serving on the
Intergovernmental Panel on Climate Change issued a new
statement on the prospect of forthcoming catastrophe. Never
before had the IPCC (called into existence in 1988) come to
so unambiguous a conclusion. Always in years past there had
been people saying that we didn't yet know enough, or that
the evidence was problematical, or our system of computer
simulation was subject to too many uncertainties. Not
this year. The panel flatly announced that the earth had
entered a period of climatic instability likely to cause
"widespread economic, social and environmental
dislocation over the next century." The
continuing emission of greenhouse gases would create
protracted, crop-destroying droughts in continental
interiors, a host of new and recurring diseases, hurricanes
of extraordinary malevolence, and rising sea levels that
could inundate island nations and low-lying coastal rims on
the continents. Social impacts: no limits to growth.
j.
Various other distinguished authors have brought this matter
to the public. Social impacts: no limits to growth.
[
2 ] p. 240, MACHIAVELLIAN INTELLIGENCE II, Andrew Whiten &
Richard W. Byrne Eds.; Cambridge,
1997; http://www.amazon.com/exec/obidos/ASIN/0521559499
[
3 ] Snip from http://dieoff.com/page185.htm
or http://dieoff.org/page185.htm
If
the anarchy scenario were to reach its natural conclusion,
the global elites would be eliminated by the angry masses.
Those who managed to escape would die more miserably than
the poor since they are unsuited for day-to-day survival
because they lived their lives like queen bees.
But
when the above scenario seems inevitable, the elites will
simply depopulate most of the planet with a bioweapon. When
the time comes, it will be the only logical solution to
their problem. It's a first-strike tactic that leaves the
built-infrastructure and other species in place and allows
the elites to perpetuate their own genes into the
foreseeable future: "War is a male reproductive strategy.
All that is needed for the strategy to evolve, is that
aggressors fight and win more often than they lose".
The
global genocide will be rationalized as a second chance
for humanity -- a new Garden of Eden -- a new Genesis. The
temptation will prove irresistible:
"Strangelove
said, 'Offhand, I should say that in addition to the factors
of youth, health, sexual fertility, intelligence, and
a cross section of necessary skills, it would be absolutely
vital that our top government and military men be included,
to foster and impart the required principles of leadership
and tradition.'
"The
arrow had not missed its mark, and around the table there
was an outbreak of sober, nodding heads. Attention was
concentrated more than ever on Doctor Strangelove.
"Strangelove
went on. 'Naturally they would breed prodigiously, eh? There
would be much time and little to do. With the
proper breeding techniques, and starting with a ratio of,
say, ten women to each man, I should estimate the progeny of
the original group of two hundred thousand would emerge a
hundred years later as well over a hundred million.'"
How
could it be otherwise?
[
4 ] Pythagoras discovered the Earth was spherical about 2500
years ago.
[
5 ] THIS WAY FOR THE GAS, LADIES AND GENTLEMEN, by
Tadeusz Borowski, # 119198; http://dieoff.com/page226.htm
or http://dieoff.org/page226.htm
[
6 ] THE TRAGEDY OF THE COMMON REVISITED, by Beryl Crowe
(1969); reprinted in MANAGING THE COMMONS, by Garrett Hardin
and John Baden W.H. Freeman, 1977; ISBN 0-7167-0476-5
"There
has developed in the contemporary natural sciences
a recognition that there is a subset of problems, such as
population, atomic war, and environmental corruption, for
which there are no technical solutions.
"There
is also an increasing recognition among contemporary
social scientists that there is a subset of problems, such
as population, atomic war, environmental corruption, and the
recovery of a livable urban environment, for which there are
no current political solutions. The thesis of this article
is that the common area shared by these two subsets contains
most of the critical problems that threaten the
very existence of contemporary man." [p. 53]
ASSUMPTIONS
NECESSARY TO AVOID THE TRAGEDY "In passing the
technically insoluble problems over to the political and
social realm for solution, Hardin made three critical
assumptions:
a.
that there exists, or can be developed, a 'criterion of
judgment and system of weighting . . .' that will 'render
the incommensurables . . . commensurable . . . ' in real
life;
b.
that, possessing this criterion of judgment, 'coercion can
be mutually agreed upon,' and that the application of
coercion to effect a solution to problems will be effective
in modern society; and
c.
that the administrative system, supported by the criterion
of judgment and access to coercion, can and will protect the
commons from further desecration." [p. 55]
ERODING
MYTH OF THE COMMON VALUE SYSTEM "In America there
existed, until very recently, a set of conditions which
perhaps made the solution to Hardin's subset possible; we
lived with the myth that we were 'one people, indivisible. .
. .' This myth postulated that we were the great 'melting
pot' of the world wherein the diverse cultural ores of
Europe were poured into the crucible of the frontier
experience to produce a new alloy -- an
American civilization. This new civilization was presumably
united by a common value system that was democratic,
equalitarian, and existing under universally enforceable
rules contained in the Constitution and the Bill of Rights.
"In
the United States today, however, there is emerging a new set
of behavior patterns which suggest that the myth is either
dead or dying. Instead of believing and behaving in
accordance with the myth, large sectors of the population
are developing life-styles and value hierarchies that give
contemporary Americans an appearance more closely analogous
to the particularistic, primitive forms of
'tribal' organizations in geographic proximity than to that
shining new alloy, the American civilization." [p. 56]
"Looking
at a more recent analysis of the sickness of the core
city, Wallace F. Smith has argued that the productive model
of the city is no longer viable for the purposes of economic
analysis. Instead, he develops a model of the city as a site
for leisure consumption, and then seems to suggest that the
nature of this model is such is such that the city cannot
regain its health because the leisure demands
are value-based and, hence do not admit to compromise and
accommodation; consequently there is no way of deciding
among these value- oriented demands that are being made on
the core city.
"In
looking for the cause of the erosion of the myth of a common
value system, it seems to me that so long as our perceptions
and knowledge of other groups were formed largely through
the written media of communication, the American myth that
we were a giant melting pot of equalitarians could be
sustained. In such a perceptual field it is tenable, if not
obvious, that men are motivated by interests. Interests can
always be compromised and accommodated without undermining
our very being by sacrificing values. Under the impact
of electronic media, however, this psychological distance
has broken down and now we discover that these people with
whom we could formerly compromise on interests are not,
after all, really motivated by interests but by values.
Their behavior in our very living room betrays a set of
values, moreover, that are incompatible with our own, and
consequently the compromises that we make are not those
of contract but of culture. While the former are acceptable,
any form of compromise on the latter is not a form of
rational behavior but is rather a clear case of either
apostasy or heresy. Thus we have arrived not at an age of
accommodation but one of confrontation. In such an age
'incommensurables' remain 'incommensurable' in real life."
[p. 59]
EROSION
OF THE MYTH OF THE MONOPOLY OF COERCIVE FORCE "In the
past, those who no longer subscribed to the values of
the dominant culture were held in check by the myth that the
state possessed a monopoly on coercive force. This myth has
undergone continual erosion since the end of World War II
owing to the success of the strategy of guerrilla warfare,
as first revealed to the French in Indochina, and later
conclusively demonstrated in Algeria. Suffering as we do
from what Senator Fulbright has called 'the arrogance of
power,' we have been extremely slow to learn the lesson in
Vietnam, although we now realize that war is political and
cannot be won by military means. It is apparent that the
myth of the monopoly of coercive force as it was first
qualified in the civil rights conflict in the South, then in
our urban ghettos, next on the streets of Chicago, and now
on our college campuses has lost its hold over the minds of
Americans. The technology of guerrilla warfare has made
it evident that, while the state can win battles, it cannot
win wars of values. Coercive force, which is centered in the
modern state, cannot be sustained in the face of the active
resistance of some 10 percent of the population unless the
state is willing to embark on a deliberate policy of
genocide directed against the value dissident groups.
The factor that sustained the myth of coercive force in the
past was the acceptance of a common value system. Whether
the latter exists is questionable in the modern
nation-state." [pp. 59-60]
EROSION
OF THE MYTH OF ADMINISTRATORS OF THE COMMONS "Indeed,
the process has been so widely commented upon that one
writer postulated a common life cycle for all of the
attempts to develop regulatory policies. The life cycle is
launched by an outcry so widespread and demanding that it
generates enough political force to bring about
establishment of a regulatory agency to insure
the equitable, just, and rational distribution of the
advantages among all holders of interest in the commons.
This phase is followed by the symbolic reassurance of the
offended as the agency goes into operation, developing a
period of political quiescence among the great majority of
those who hold a general but unorganized interest in
the commons. Once this political quiescence has developed,
the highly organized and specifically interested groups who
wish to make incursions into the commons bring sufficient
pressure to bear through other political processes to
convert the agency to the protection and furthering of their
interests. In the last phase even staffing of the regulating
agency is accomplished by drawing the agency
administrators from the ranks of the regulated." [pp.
60-61].
If you want to read some real eye-opening material about the price we’ve paid for suburbanism gone wild, read some of Jim Kunstler’s work. Jim’s a practical, down-to-earth guy who doesn’t speculate into the esoteric aspects of life, at least to the extent that I do. I may have more ice. Rather, he looks at what is right out there in front of us and sees it through something other than rose-colored glasses:
by Jim Kunstler Author of "Home From Nowhere" and "The Geography of Nowhere" [used by permission]
It's customary when composing scenarios like this to say up front that nobody can predict the future and only fools attempt to, blah blah. It seems true that history is anything but linear. Events unfold fractally, so to speak, with surprising zigs and zags, with unexpected amplifications, resonances, and outcomes, showing up would-be smartypants prophets like me.
But it strikes
me as more foolish, in the face of what may be epochal and
disruptive change in how we live, to put on a show of excessive
humility and pretend that we can't make any sense of our
unfolding circumstances. Hence. . . I see
several major trends / events / stories that are apt to severely
affect "normal" American life in the years ahead.
One is the financial mess that lies under the immense and rickety credit structure that two decades of relative world stability has allowed us to erect. I saw the whole gruesome picture in microcosm illustrated in four commercials that played during a half-hour segment of CNN when I was visiting Atlanta to write a chapter for my next book.
First commercial
was for the DiTech "125 percent Dream Loan."
People could finance a new house plus get a premium
amounting to 25 percent of the mortgage, and use the extra money
to buy furniture, or a bass boat, or go to Vegas and play
the slots, if that's what they liked.
The second
commercial was for a debt consolidation service.
The third was
for bankruptcy lawyers.
And the fourth
was for a local bail bondsman "because bad things even
happen to good people."
You could see
the whole Sunbelt mentality in this sequence
of advertisements, and, in a way, you could infer the whole
story of the surreal, reckless 1990s boom in it: all the
traditional notions of lending and banking suspended to fuel an
orgy of spending. My sense is that this will lead shortly
to a fiesta of default and repossession such as the world
has never seen before.
The most ominous
sign lately is the huge increase in home equity loans in a
real estate market that had been inflating wildly and is
now leveling off and even deflating in some places such as
the San Francisco Bay Area. (DiTech, by the way, has moved
aggressively into this home equity loan market, too.)
The bottom
line is that enormous numbers of people have been induced to
trade in the equity value of their houses for lump sums of
cash, while the market value of their houses is poised to
plummet. We can assume that some of them are already
in trouble with credit card debt.
Connect the
dots.
This is only a
piece of what I consider the greatest single act of national
misinvestment ever made: the construction of the suburban
American drive-in utopia as a substitute for towns and
cities, an armature for daily life composed of buildings
designed not to outlast their depreciation periods and an
automobile infrastructure of inconceivable cost that is destined
to fail systemically when the cheap oil fiesta comes to an
end (more on that shortly). We've thrown away our
national wealth on free parking, cul-de-sac housing subdivisions,
strip malls, fried food huts, and the other
ridiculous accessories of the system.
What will become
of it all? A fraction of it will be retrofitted for
sustainable living, the rest is apt to become materials
salvage operations (steel, aluminum, copper), and ruins.
I'll defer
elaboration of the macro global banking clusterf**k,
to those better qualified -- except to say that the
extraordinary leveraged dealings in highly abstract
"creative" financial instruments (futures,
arbitrages, re-bundled mortgages, etc.) combined with the
unprecedented velocity of transactions, has reached the
point where global banking is certain to implode into the
black holes of misplaced faith in hallucinated wealth that
such "creativity" represents. Read Doug Noland on
this:
PrudentBear.com.
The next event /
story is the destabilization of the global oil and gas
markets now underway. The American people have been
sleepwalking into this mess since the 1979 OPEC price jackup
faded away in our national imagination. Of course, we must
look at the oil picture through the frame of the Hubbert
Curve (The Coming
Global Oil Crisis) but I will not elaborate on
that aspect of it, which we should accept as axiomatic.
The crucial
element of this story is that the United States does
not have to run out of gasoline or natural gas in order for
our "normal" way of life (i.e., the fiasco of
suburban sprawl and all its furnishings) to become
completely dysfunctional. All that's necessary to
upset the system is for the markets to destabilize
mildly-to-moderately, that is, for the price and supply of
oil and gas to become a little unpredictable. California is
a nice illustration of the damage that can occur when events
run their fractal pathways.
North America
has not run out of natural gas, but the markets are
sufficiently queered to put California is jeopardy of a
major energy crisis. Under conditions of oil market
instability, Wal-Mart can run its vaunted "warehouse on
wheels" only so long before Wal-Mart dies as a way
of doing retail. Of course, it should die, because the
scale of operation it achieved, and the economies of scale it
enjoyed, were a product of a highly abnormal cheap oil
economy and had a highly toxic side-effect on local economies and
communities in every corner of the nation. (The upshot
as national chain retailing fades into history is that
America will have to reorganize how it does commerce.)
You can say the
same thing about industrial-style agriculture, as embodied by the
3000-mile Caesar salad that travels from the San Joaquin Valley
to your table in Scranton, Pa.
America better
prepare itself for more localized farming -- and, of course,
one of the disastrous consequences of suburbia is that we've
paved over so much of the best agricultural land in the world
east of the Mississippi. The scale of farming will have to
be smaller, the labor probably more intensive, and the
markets much closer. Get ready for serious home
gardening.
Also, the
knowledge gap implied by such a transition in practice
suggests that food may be actually hard to come by for a
while and that many Americans may suffer from hunger.
Don’t believe that alternative fuels will come to the
rescue.
They exist,
and they have uses both current and potential, but nothing known
right now has the versatility to replace petroleum
products. Airplanes will not run on hydrogen fuel cells
as we now know them, or on plutonium, etc.
To some
degree -- probably greater rather than smaller --
"normal" life in America will not continue without
cheap oil.
All of this
tells me that America will have to re-condense its everyday life
into coherent towns, villages, neighborhoods, and even cities
with authentic agricultural hinterlands.
Personally, I
believe that there will be many collateral benefits to this, and
you can read about them yourself in my books if you're
interested. Suburbia is yesterday's tomorrow. Forget
the hundred-mile daily commute. Forget those
eleven-trip-per-household-per-day excursions to the
SuperDuperMart for all of life’s daily necessities.
I see virtually
every activity in America having to be downscaled, from commerce
and farming to schools. We're going to have to live
locally.
I believe that
the implosion in the value and utility of suburban real estate
(merging neatly with the debt clusterf**k), will amplify to make
for a severe and fantastic fire sale free-for-all.
You could call
it a fight over the table-scraps of the 20th century.
According to
those strange, complex, fractal resonances, I fear that
this battle will sooner rather than later express itself
politically. A corn-pone fascist may appeal to distressed,
dis-entitled suburbanite Americans with promises that he or she
can make the nation just like it was back in 1997.
Of course, no
one will be able to really do that, so the upshot would probably
be even more political extremism with the usual menu of civic
disorder, economic hardship, scapegoating persecution, and
international military mischief. I'll return to that final
point later.
The third event
/ story that I believe will play a major role in our lives is
climate change. Even mild-to-moderate climate change will
cause more severe weather, will start to put pressure on coastal
areas where the majority of the earth's people live, will affect
agriculture catastrophically, will prompt huge movements in
populations from the impoverished third world.
Sea levels only
have to rise a tiny bit before the aquifers of the Florida
coast are invaded by salt water, destroying wells, and
making these areas uninhabitable. The harbor towns of the world
are in jeopardy. Even the Gulf Stream is subject to
disruptions with relatively minor changes in water temperature
differentials between it and cold Arctic currents that drive it.
The potential political amplifications are too huge to even
address here -- and to some degree obvious, anyway.
A fourth event /
story, related to the preceding, is the runaway population
growth in precisely those nations that are already suffering
horribly from poverty, disease, and ecological devastation,
and social breakdown. In the United States, both ends
of the political spectrum have recklessly ignored the issue of
overpopulation -- the right wing with its anti-birth-control
propaganda, and the left with its kindergarten gestalt therapy
celebration of "multiculturalism."
Putting aside
the obvious current catastrophes of Africa and the potential ones
of Asia, we face serious problems close to home. The
fact is that the Southwest United States is becoming culturally
an outpost of Mexico. Read Robert
Kaplan's "An Empire Wilderness.")
Americans are very conflicted about controlling our
borders. (And even more conflicted about dealing with
immigrants who crossed the border illegally.) My guess is
that we'll continue to fudge it until Texas, California, Arizona,
and New Mexico become demographically and culturally Mexican,
with all the political ramifications implied.
By the way, this
should not be taken as a racialist view, but simply a reflection
of how things really stand. And keep in mind it’s not
ordained by God that the United States maintain its present shape
in perpetuity anymore than Dynastic Egypt or the Holy Roman
Empire of Frederick Barbarossa maintained their boundaries
forever.
It seems to me
that sooner or later these events will lead to military mischief
and potentially to major war. War may unfortunately be part
of the natural order of things, one of nature's thermostats.
I'm not saying
it's a good thing, but neither from a social point view are
earthquakes, hurricanes, forest fires, and other cataclysms, yet
they exist.
Leaving aside
that debate, what can we say about the international political
situation?
Right now, the
low-grade war between Israel and the Palestinians has high
potential to escalate. The entire Muslim world is arrayed
against Israel (note the conference in Teheran this past week
affirming that). We are Israel's longtime backer. Even if
we manage to stay out of it militarily, how long will the Saudis
continue to sell us cheap oil?
A lot of people
fantasize about the US militarily occupying the Arabian
Peninsula. This must be regarded as a dangerous fantasy.
We could never protect the complex infrastructure of the
oil industry on the ground -- the pipelines, wellheads, and
harbor terminals -- even if we deployed the entire American armed
services there.
There is also
the chance that a militant Muslim maniac could walk into the
royal presence with a bomb strapped to his kishkas. The
Saudi regime is weak and unpopular. Its Muslim allies are
not fond of it, and have not forgotten that it took the American
side against Iraq ten years ago. The Saudis have plenty of
homegrown Muslim militant maniacs of their own, too.
George Ure views
Russia as a potential threat in the instabilities to come. I
doubt that they have the resources to make much mischief, or that
they will be free from trouble with their own fractious neighbors
(including former Republics of the old Soviet Union). It's
true that they have a nuclear arsenal. I would be inclined
to wonder whether they might sell it off to all comers, or
whether they will lack the resources to even maintain it in
working order. Nuclear devices corrode rapidly.
Russia is
disintegrating internally at a shocking rate. The average
life-span is falling steeply and even the plumbing infrastructure
is being disassembled for sale as scrap by desperate citizens.
It's certainly ripe for another "savior" in
the Tsarist / Lenin mold, and God knows what kind of trouble that
could lead to. For a worthy angle on this view, see the May
Atlantic Monthly article, "Russia is Finished."
Personally, I
worry about China. For all its opaque solidity the regime
strikes me as potentially psychotic. Apart from their
presumed missile capabilities, they can muster ground forces in
Asia until the cows come home, and I believe they will. My
sense is that they will engage in the coming worldwide struggle
to secure oil resources, and that they will go adventuring
militarily in the oil-rich former Soviet republics and north into
a Siberian frontier that is being systematically abandoned by
dissolving Russia.
I don't see how
the United States could do anything about these movements, short
of a nuclear strike -- and crazy as we may be capable of
becoming, I reserve some hope that even a corn pone American Nazi
would not start such a terrible war.
Finally we must
consider the question of epidemic disease, which can be thought
of as a consequence of many of the problems mentioned above:
overpopulation, population movements due to climate change,
poverty, military mischief, even destabilized oil markets.
A worldwide
influenza epidemic on the order of the 1918 Spanish Flu is
overdue. The world barely missed one such catastrophe two
years ago when a chicken flu broke out in Hong Kong and was
contained only by mass extermination at the giant factory farms
where the disease spawned. Factory farming itself may be a
menace to human life. I know intelligent people who believe
that mad cow disease and other Transmissible Spongiform
Encephalopathies (TSEs) will decimate the human population of
Europe over the next forty years.
Global warming
is sure to increase the range and lethality of current malaria
strains, and other diseases (e.g., west Nile virus). People
who are starving tend to process a lot of rats.
Bubonic plague still exists. AIDS is obviously
rampant in sub-Saharan Africa and becoming worse in Asia.
Drug-resistant tuburculosis runs wild in Russia.
This is how I
see things developing.
I'm unwilling to
put a timeline on any of these events, except to say that I
expect the financial implosion sooner rather than later, and that
the Hubbert Curve states pretty precisely (within a decade or so)
the range when we can expect chronic, grinding problems with
global oil extraction to intensify (we've entered the zone,
actually).
For everything
I've said, I also have to stick my neck out and say that the
human race has proved to be both ingenious and resilient.
"Normal” life has fallen pretty low before and
mankind has recovered.
The scale of all our problems today is greater than, say, the problems of the decaying Roman Empire, but our knowledge base is also broader than theirs was.
Maybe this means we only have more to lose.
A Dark Age is a possibility we ought to face.
Jim ---- www.kunstler.com ----
Is this going somewhere?
Yes, indeed my friend, it is. Although the main focus of www.urbansurvival.com has been to document on a weekly basis, how the present Replay of the last Depression is working out, sleight of hand by the Fed and all, there are some important – and even larger issues, if you can believe it – in play here, than just a cyclical downturn in the economy.
What could be more important than sinking into Depression II as the markets seem set to resume their downward work next week?
For openers, if the world continues to consume energy faster than new power sources are brought on line, the energy deficit will cause a worldwide Dieoff at some point. And, if that doesn’t wipe out humanity? Well, then you’ll have a vastly different set of economics and energy “rules” [think of this as enernomics] to contend with.
Specifically, even if you have a massive investment in clean coal technology that started yesterday (which, by the way, it didn’t), there will still need to be dramatic shifts in how we do business and how we live. Electricity won’t launch a 747. Coal won’t run the Ford wagon.
In this longest of views, therefore, some important areas of research and investment come into focus. Ask yourself before your next trade, or next investment policy board meeting, what will really make sense in the kind of a world this forecast envisions?
Recycling, development of coal and oil shale, and the creation of plastics and high quality lubricants from vegetable oils are some no-brainers. Hydroponics going large-scale for consumers would make sense, as would cisterns and rainwater catchments for residential use to grow more of our own food. Light but high quality plastic mirrors to move daylight indoors would look, if you’ll pardon the pun, interesting. Anything in the area of ultra-efficient vehicles makes sense. Low power, long-range wireless communications systems would be required. In this area, it’s somewhat disheartening that Motorola’s Iridium™ (low earth orbit satellite constellation) project went tango uniform. Iridium is symptomatic of the problem.
But before running into the research department to bone up on the potential of these survival enabling technologies, there’s the flip side to consider. The research is done and widely available: The return on investment is high and relatively safer in defense and arms stocks.
Looking past whatever we’re in right now, call it Recession, Bump, Dip, or maybe it will spiral into Depression II, as the Fed tries desperately to find the middleground between the Weimar Inflation and the 1930’s deflation, there will be a “backside”.
Once we get there, and at that crucial moment, things will come down to lots of “little investors” (like you & me) putting our bets on the table through our investment decisions. As Jay has pointed out, it’s a crooked table – and that’s being generous. But, when you read Jim’s view, there is some reason for hope and perhaps prayer that, “yeah, maybe we could learn to cope differently”.
But, in the end, the underlying system of economics, and its underpinning, debt, haven’t changed, so at best, the outcome is seriously in question.
To build on a phrase from the old cartoon character Pogo:
“We’re going to be doing a little trading with the enemy here shortly, and the enemy is us."
When you jump into the market this week, remember, in the long term, we're dealing, for the most part, in 10 year payments on ice cubes. A few hundred years from now, those Dutch folks and their Tulip Bulb Mania, will seem more rational than us.
Treasury's Office of the Public Debt (Click here to get there): These folks in Treasury are one of the last bastions of candor in the federal government!
All contents (c) 1998-2001 by George A. Ure, MBA, except authors as linked or noted