More Kunstler

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Damnthematrix's picture
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More Kunstler

and this time, at his best!


What Next?

      Isn't that a question, though....
      The Peak Oil story was never about running out of oil. It was about the collapse of complex systems in a world economy faced by the prospect of no further oil-fueled growth. It was something of a shock to many that the first complex system to fail would be banking, but the process is obvious: no more growth means no more ability to pay interest on credit... end of story, as Tony Soprano used to say.
     There was a popular theory among Peak Oilers the last decade that the world would enter a "bumpy plateau" period when the global economy would get beaten down by peak oil, would then revive as "demand destruction" drove down oil prices, and would be beaten down again as oil prices shot up in response -- with serial repetitions of the cycle, each beat-down taking economies lower -- the only imaginable outcome being some sort of quiet homeostasis. This scenario did not play out as expected. It was predicated on a mistaken assumption that all systems would retain some kind of operational resilience while ratcheting down. Anyway, the banking system was mortally wounded in the first go-round and the behemoth is dying hard.
     The last desperate act of the banking system in the face of Peak Oil's no-more-growth equation was to engineer species of tradable securities that could produce wealth out of thin air rather than productive activity. This was the alphabet soup of algorithm-derived frauds with vague and confounding names such as credit default swaps (CDSs), collateralized debt obligations (CDOs), structured investment vehicles (SIVs), and, of course, the basic filler, mortgage backed securities. The banking system is now choking to death on these delicacies.
     The trouble is that the EMT squad brought in to rescue the banking system -- that is, governments -- can't remove these obstructions from the patient's craw. They don't want to drown in a mighty upchuck of the alphabet soup.
     The collapse of complex systems is actually predicated on the idea that the systems would mutually reinforce each other's failures. This is now plain to see as the collapse of banking (that is, of both lending and debt service), has led to the collapse of commerce and manufacturing. The next systems to go will probably be farming, transportation, and the oil markets themselves (which constitute the system for allocating and distributing world energy resources). As these things seize up, the final system to go will be governance, at least at the highest levels.
     If we're really lucky, human affairs will eventually reorganize at a lower scale of activity, governance, civility, and economy. Every week, the failure to recognize the nature of our predicament thrusts us further into the uncharted territory of hardship. The task of government right now is not to prop up doomed systems at their current scales of failure, but to prepare the public to rebuild our systems at smaller scales.
     The net effect of the failures in banking is that a lot of people have less money than they expected they would have a year ago. This is bad enough, given our habits and practices of modern life. But what happens when farming collapses? The prospect for that is closer than most of us might realize. The way we produce our food has been organized at a scale that has ruinous consequences, not least its addiction to capital. Now that banking is in collapse, capital will be extremely scarce. Nobody in the cities reads farm news, or listens to farm reports on the radio. Guess what, though: we are entering the planting season. It will be interesting to learn how many farmers "out there" in the Cheez Doodle belt are not able to secure loans for this year's crop.
      My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world's most productive places -- California, northern China, Argentina, the Australian grain belt -- are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.
      This will, of course, require a re-allocation of lands suitable for growing food. Our real estate market mechanisms could conceivably enable this to happen, but not without a coherent consensus that it is imperative to do so. If agri-business as currently practiced doesn't founder on capital shortages, it will surely collapse on disruptions in the oil markets. President Obama at least made a start in the right direction by proposing to eliminate further subsidies to farmers above the $250,000 level. But the situation is really more acute. Surely the US Department of Agriculture already knows about it, but the public may not be interested until the shelves in the Piggly-Wiggly are bare -- and then, of course, they'll go apeshit.
     The recent huge drop in oil prices has left the public once again convinced that the world is drowning in oil -- if only the scoundrelly oil companies were forced to deliver it at reasonable prices. The public has been consistently deluded about this for decades. What's missing so far is for the president of the US to lay out the reality of the situation in a dedicated TV address. I know a lot of you think that Jimmy Carter already tried this and failed to make an impression (and ruined his presidency in the process). I guarantee you that Mr. Obama will have to do this sometime in the next few years whether he likes or not, and he'd be well-advised to get it done sooner rather than later. And by this I don't mean just vague allusions to "energy independence" or "renewables" in speeches devoted to many other issues. I mean telling the public the plain truth that we'll never offset oil depletion and the intelligent response is to do everything possible to transition to walkable towns and public transit, not to sustain the unsustainable.
      The alternatives -- i.e. what we're trying now -- is to further delude ourselves into thinking that we can run WalMart and the suburbs by some other means than oil. Despite all our investments in these things, we won't be able to run them by other means, and the news about this had better get out before enormous disappointment turns into titanic rage. If Americans think they've been grifted by Goldman Sachs and Bernie Madoff, wait until they find out what a swindle the so-called "American Dream" of suburban life turns out to be.
     On this blizzardy Monday in the power centers of America, attention is fixed on the never-ending fiasco of AIG -- a company whose main product turned out to be credit default swaps, and is now choking on them. Kibitzers on the sidelines of finance are forecasting a king-hell bear market suckers' rally in the stock markets followed by a belly flop to Dow 4000 or lower. I myself called for Dow 4000 two years ago -- and was obviously a bit off on my timing. All this is surely trouble enough. But while your attention is focused on Rick Santelli in the Chicago trader's pit, or Larry Kudlow desperately seeking "mustard seeds" of new growth in financials, try to let one eye stray to the horizon where these other complex systems are working out their next moves. Farming. The oil markets. These are the coming theaters of alarm and distress.

BSV's picture
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Re: More Kunstler

I find Damnthematrix's postings to be thoughtful and interesting. This website supports a wide range of views under a broad "bell curve" of opinions. Damnthematrix is probably two or three standard deviations from the mean, which makes his postings all the more fascinating. Good on him. 

There are some things over which we as individuals have considerable power and influence. While we may not possess the means to control everyday events, we always have the power to control how we think about and react to those events. Henry Ford once said, "When I find that I cannot handle events, I let events handle themselves." The world around us may or may not be about to crash and burn. Only God knows. Personally, I would prefer that we as a (supposedly) civilized society find ways of muddling through short of a total economic meltdown. Can you imagine a world of soup kitchens, perpetual hunger and mass starvation? There is a real possibility that nuclear explosive devices will find their way into the hands of terrorists within a decade or so. There is an equal -- perhaps greater -- chance that chemical and biological weapons will be used by terrorists within that time frame -- against us. No amount of frenzied preparation will save us from a grim fate like that.

Would you want to live in such a world of misery? I would not. But in the end, we will live in the world as it is, not as we would like it to be. With that in mind, let me offer a few positive thoughts: Do you have a bit of sunny space in your backyard or patio? You can grow a surprising amount of tasty produce in containers or in a small backyard garden. If we somehow manage to dodge the apocalypse, you will still be eating delicious vegetables. Buy a book on vegetable gardening and take it up as a hobby. It's better than brooding on humanity's bleak future. As Lord Keynes once said, in the long run we are all dead.

If you are fortunate enough to have a few acres of arable land, you have some really good options. You can become self-sufficient in food -- at least until the background radiation level rises to the point where it won't matter, heh, heh. Let us be prepared. But let us keep our sense of humor, and above all, our sense of humanity. I do not want to live in a world of misery. That said, I am stocked up on food, ammunition (and PM) and I am prepared to do what becomes necessary. I pray for a better outcome. I suspect that most readers of this website share that hope and prayer.

ceci1ia's picture
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Re: More Kunstler

I like Kunstler's work and visit his website frequently. His podcasts are a weekend ritual for us.

first heard him being interviewed on Coast to Coast AM by Art Bell back
in 2005. He was hilarious and frightening. I couldn't find fault with
anything he said. He's kind of sardonic, but that's just a style. His
research and conclusions are very interesting. I also like hearing him
talk about architecture and town planning. Our local planning
department is a disaster. 

Woodman's picture
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Re: More Kunstler

Thanks for sharing that from Kunstler; I should check his website more often.  That our society has become built on ever more complex systems has become increasingly apparent to me over the last few years, and it's actually brought down the level of happiness in my life and available free time.  The transition back will be rough but building a simpler world may leave something better for our children. 


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Alex Szczech
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Re: More Kunstler

For years Kunstler has been one of the most important voices of reason. I wish he could get a column in the New York Times so that more folks could be exposed to his ideas.  

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Re: More Kunstler

If you have not read "The Long Emergency" and "World Made by Hand", (Kunstlers two latest books) I urge you to!

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Even More Kunstler

Forget About "Recovery"

At the risk of confirming my critics' dumbest charge -- that I am a
"doomer" -- the mandate of clarity requires me to ask: to what state of
affairs do we expect to recover? If the answer is a return to an
economy based on building ever more suburban sprawl, on credit card
over-spending, on routine securitized debt shenanigans in banking, and
on consistently lying to ourselves about what reality demands of us,
then we are a mortally deluded nation. We're done with that, we're
beyond that now, we've crossed the frontier and left that all behind,
and we'd better get our heads straight about it.

      I maintain
that there are countless constructive tasks waiting to occupy us on a
long national "to do" list for rebuilding a national economy, but they
are way different than the ones currently preoccupying government and
the mainstream media. The Obama White House, Congress, and The New York
Times are hung up on exercises in futility -- "rescuing" banks and
insurance companies that cannot be rescued (because they are hopelessly
trapped in "black hole" credit default swaps contracts), and
re-starting a "consumer" binge that was completely crazy in the first
place, based, as it was, on a something-for-nothing standard-of-living.
if the buzz on the blogosphere is a measure of anything -- and I think
it is -- then a new consensus is forming out there about where to start
doing things differently. Unfortunately after less than two months in
office, President Obama finds himself awkwardly behind-the-curve
on this. It begins with the understanding that a general bank rescue is
hopeless and, going a step further, that the people who caused the
train wreck of "innovative" securities have to be prosecuted. The
public's collective voice on this is muted but growing. It has been
muted by the general air of blackmail that the banks have used to
enthrall policy and opinion -- the "too big to fail" idea -- in effect
holding the nation's future for ransom.
      Last week, New York
State Attorney General Andrew Cuomo hauled Bank of America chief Ken
Lewis into his office to explain who, exactly, received an aggregate
several billion dollars in bonuses late in 2008 after the US Treasury
forked over billions of dollars in TARP money to his bank. That was a
good start. Mr. Lewis, being lawyered-up to the max, had the temerity
to reply that answering the question would compromise his ability to
keep talented people in his employ. For that impertinence alone, Mr.
Lewis ought to be dragged over fifteen miles of broken chardonnay
bottles behind a GMC Yukon -- but that is not how we do things in
American jurisprudence. To be more realistic, a simple indictment would
be in order, and then Mr. Lewis can answer this question, and a few
others, in the comfort of an air-conditioned courtroom.
Ultimately, that might lead to Mr. Lewis becoming the wife of a
bodybuilder in one of New York State's houses of correction -- a just
outcome that would go far in rejiggering the nation's expectations
about how people in authority ought to behave. And such an outcome
might lead to the conviction of many other brides-to-be from the Wall
Street debutante pool.
      Now it has come to light, just last
week in the wake of AIG's latest bail-out, that previous AIG bail-out
money to the tune of $50 billion was distributed to a set of banks
including Goldman Sachs (former employer of then Treasury Secretary
Hank Paulson and then New York Federal Reserve Governor Tim Geithner),
plus Morgan Stanley, Merrill Lynch, Mr. Lewis's Bank of America, and a
long list of European banks with operations in the USA. Since the
transactions took place in New York State, the investigation of these
irregularities alone could solve the unemployment problem here if NY
Attorney General Cuomo were given a free hand in hiring staff to depose
everyone involved -- including the hiring  of caterers to bring in
coffee and meals for round-the-clock proceedings.
      All of
this raises another awkward question: where is United States Attorney
General Eric Holder in this situation? Surely the federal statutes
offer some grounds for inquiring about the misuse of Treasury funds --
and many other issues arising from Wall Street's stupendous orgy of
misbehavior. What I'm hearing out in the blogosphere is a growing
clamor to call people to account before we are really able to move on
to the massive task-list that awaits us in rebuilding our economy.
bigger question for now is whether any of these authorities will act
effectively before the public simply goes apeshit and starts burning
down Greenwich, Connecticut. The dangerous shift in public mood is
liable to occur with shocking swiftness, in the manner of "phase
change," where one moment you see a bewildered bunch of flabby
clown-citizens vacuously enraptured by "American Idol," and the next
moment they are transformed into a vicious mob hoisting flaming brands
to the window treatments of a hedge funder's McMansion. The moment of
opportunity for avoiding that outcome is looking sickeningly slim right
      Another thing that President Obama can set into motion
anytime -- and pull himself back to the head of the curve of leadership
-- is to either by executive order or by proposal to congress, shut
down the credit default swap system for a period of time while
procedures are drawn up to place all these dubious contracts in a
"clearing" market, where the holders of them will have to come clean
about what they're sitting on. The lack of this procedure is allowing
zombie banks to hold the United States hostage for never-ending
bail-out ransoms. None of these banks are going to survive another six
months anyway, so the basic blackmail motif that the whole money system
will collapse if ransoms are not paid is a bluff that has to be called
sooner or later in any case. So Mr. Obama might as well get on with it.
these two matters are dealt with -- an earnest start-up of prosecutions
and disabling the credit default swap blackmail racket -- then perhaps
a stressed-out and impoverished public might be induced to not go
apeshit and instead get on with the mighty task of rebuilding our
nation along lines that have a plausible future.

ceci1ia's picture
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Re: More Kunstler

to what state of affairs do we expect to recover?

I go to his site early every Monday morning to read his essays. That one question really pins it down for me. I see people all around who assume we're going to recover back to what we had. I think that's the scariest thing for me. I am afraid of the unknown. We're going straight into it!

ceci1ia's picture
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Re: More Kunstler

I'm currently reading JK's World Made By Hand. I am riveted and
impatient to keep reading. It's good, but I think also depressing. To
me, anyway. Reading my comment up there about what state do we expect
to recover to, reading this book makes me realize I expected some kind
of recovery keeping modern conveniences. The future he writes about is
downright medieval. American medieval. urg  


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Re: More Kunstler

Too Stupid To Survive

     Coming home from the annual meet-up of the New Urbanists, I was already agitated from the shenanigans of United Airlines -- two-hour delay, blown connection -- when I waded into this week's New York Times Sunday Magazine for further evidence that our ruling elites are too stupid to survive (and perhaps the US with them).  Exhibit A was the magazine's lead article about California's proposed high-speed rail project by Jon Gertner.
     The article began with a description of California's current rail service between the Bay Area and Los Angeles. A commission of nine-year-olds in a place like Germany could run a better system, of course. It's never on schedule. The equipment breaks down incessantly. A substantial leg of the trip requires a transfer to a bus (along with everybody's luggage) with no working toilet.  You get the picture: Kazakhstan without the basic competence.
      The proposed solution to this is the most expensive public works program in the history of the world, at a time when both the state of California and the US federal government are effectively bankrupt.  By the way, I wouldn't argue that California shouldn't have high-speed rail.  It might have been nice if, say, in the late 20th century, some far-seeing governor had noticed what was going on in France, Germany, and Spain but, alas....  It would have been nice, too, if the doltish George W. Bush, when addressing extreme airport congestion in 2003, had considered serious upgrades in normal train service between the many US cities 500 miles or so apart. The idea never entered his walnut brain.
     The sad truth is it's too late now.  But the additional sad truth, at this point, is that Californians (and US public in general) would benefit tremendously from normal rail service on a par with the standards of 1927, when speeds of 100 miles-per-hour were common and the trains ran absolutely on time (and frequently, too) without computers (imagine that !). The tracks are still there, waiting to be fixed.  In our current condition of psychotic techno-grandiosity, this is all too hopelessly quaint, not cutting edge enough, pathetically un-"hot." The fact that it is not even considered by the editors of The New York Times, not to mention the governor of California, the President of the United States, and all the agency heads and departmental chiefs and think tank gurus and university engineering professors, is something that will have historians of the future rolling their eyes.  But for the moment all it shows is that we are collectively too stupid to survive as an advanced society.
     Ironically (if you go for gallows irony) a sidebar in the same issue of The NY Times Sunday Magazine featured the latest architect's wet dream of an airport-of-the-future (p.35). Note to the editors and architects: commercial aviation is toast (we just don't know it yet). We're back in the $70-plus a barrel-of-oil aviation death-zone for airlines.
     Also ironically proving that America is not alone in techno-triumphalist mental illness was another big article in the same magazine featuring French President Nicolas Sarkozy's neo-Modernist fantasies for vast new construction projects in Paris.  Note to Sarko: the developed world's metroplexes are headed for shocking contraction, not further expansion. I know this is counter-intuitive, but a little applied prayerful research will bear it out.  And, by the way, the last thing any city on earth needs is more skyscrapers -- i.e. buildings that have no chance of ever being renovated when they reach the senility stage of their design-life.  For really mind-blowing statements, this one from that article is a standout: "Paris's current problems as a city can be traced to the very thing that makes it most delightful -- its beauty."  Right.  So, the solution will be to make it more like Houston.
     Actually, I doubt the French people consider these schemes anymore plausible than ur-Modernist Le Corbusier's 1924 proposal to bulldoze half of the Right Bank and replace it with dozens of identical skyscrapers. The French people laughed at Corbu, and put their vertical slums outside the city center, but notice that we Americans actually did it, replacing our old human-scaled center cities with priapic arrays of glass-and-steel tubes surrounded by parking lagoons. Anyway, nobody in the OECD world will have the energy to carry out anything like this again, not even France with its nuke plants.
      Which brings me back to the New Urbanist annual meet-up last week in Denver. Given the gathering conditions of what I variously call The Long Emergency or the economic cluster****, they have had to shift their focus starkly. For years, their stock-in-trade was the greenfield New Town or Traditional Neighborhood Development (TND), a severe reform of conventional suburban development.  That sort of reform work was only possible when 1.) the continued expansion of suburbia seemed utterly inevitable, requiring heroic mitigation and 2.) when they could team up with the production home-builders to get their TND projects built.  To the group's credit, they realize that these conditions are no more. Suburbia is now cratering, both as a repository of wealth in real estate and as a practical matter of everyday existence.  They get that the energy crisis and all its implications are real and that our response to it had better be deft.  They understand that the capital resources we thought we had for Big Projects are flying into a black hole at the speed of light. Mostly they see that he time for "cutting edge" fashionista techno-triumphalist grandiosity is over.
     To put it bluntly, the Congress for the New Urbanism (CNU) is perhaps the only surviving collective intelligence left in the United States that is producing ideas consistent with the reality.  They recognize that our survival depends on down-scaling and re-localization. They recognize the crisis we will soon face in food production, and the desperate need to reactivate the relationship between the way we inhabit the landscape and the way we feed ourselves. They recognize that the solution to the liquid fuels crisis is not cars that can run by other means but on walkable towns and cities connected by public transit.
     This is exactly what you will not find in the pages of The New York Times or the political corridors of power.  Oh, by the way, the Obama administration contacted one of the leading lights of the New Urbanism in the weeks after the inauguration.  He never heard back from the White House.  I guess they're not interested.

P.S. (Added 2:45p.m. Monday):
     Some commentors here have got the mistaken idea that I am against "urban density" or cities per se.  This is a very dumb mis-reading of what I have said many times.  I am strongly in favor of the urban human habitat at all levels, from village to city, and indeed I am in favor of "tight" urban design at the fine grain.  I just don't believe that our giant "metroplex" cities will continue to exist in their current form.  They are not scaled to future energy realities.  They may well re-densify at their old centers and waterfronts even while they contract in population and total area of governance.  Now, why is this so hard to understand???

[Ed. profanity]

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

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