2006: The Year of Oil Collapse?

This could be the year that the hardships and difficulties I lump together as the ‘long emergency’ get some serious traction.

The sheer weight and inertia of American life kept our systems on their feet through 2005, despite a worsening economic climate and some harsh body blows, like the hurricanes that pounded oil and gas production in the Gulf of Mexico. In a way, some perverse law of sociopolitical physics seemed to concentrate all the year’s destructive potential in the devastation of New Orleans, Biloxi and other Gulf Coast towns — while the mighty din of motoring and cheeseburger sales roared on elsewhere without pause from Cape Cod to Catalina.

First, a little background briefing on where we are at — to use some of the bad grammar now normative in American life — before I make predictions (i.e., guesses) about the year ahead.
You can only introduce so much perversity into an economic system before distortions cripple it. From 2001 through 2005, consumer spending and residential construction had together accounted for 90 percent of the total growth in GDP, while over two-fifths of all private sector jobs created since 2001 were in housing-related sectors, such as construction, real estate and mortgage brokering. Much of the money spent did not really exist except as credit — incomes as yet unearned, hallucinated liquidity, wished-for wealth, all based on the expectation that house values would continue to rise at 10 percent to 20 percent a year, forever. It became a reckless racket, all predicated on sustaining an economy that had lost its other means for generating wealth — foremost its infrastructure for making things besides suburban houses.

This housing bubble economy represented, holistically speaking, the wish to maintain a sense of normality in American life under conditions of disintegrating normality, and it is no symbolic accident that it centered on the images of hearth and home, because fundamental comforts were what many Americans actually stand to lose in a reality-based future. The decay of standards and norms in banking behavior applied to housing started, as in the case of the proverbial rotting dead fish, at the head, the Federal Reserve, and infected every lowly loan officer through the body until, in effect, lending standards ceased to exist.

AlterNet