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Page added on June 25, 2013
Kunstler: Where Are We Now? – A World View
Wondering why the money world got its knickers in a twist last week? The answer is simple: the global economy is breaking apart and its constituent major players are doing face-plants on the downhill slope of a no-longer-cheap-oil way of life. Let’s look at them case by case.
The USA slogs deeper into paralysis and decay in a collective mental fog of disbelief that its own exceptionalism can’t overcome the laws of thermodynamics. This general malaise precipitates into a range of specific quandaries. The so-called economy depends on financialization, since it is no longer based on manufacturing things of value. The financialization depends on housing, that is, a particular kind of housing: suburban sprawl housing (and its commercial accessories, the strip malls, the box stores, the burger shacks, etc.). Gasoline is now too expensive to run the suburban living arrangement. It will remain marginally unaffordable. Even if the price of oil goes down, it will be because citizens of the USA will not have enough money to buy it. Lesson: the suburban project is over, along with the economy it drove in on.
But so is the mega-city project, the giant metroplex of skyscrapers. So, don’t suppose that we can transform the production house-building industry into an apartment-building industry. The end of cheap oil also means we can’t run cities at the 20th century scale. That includes the scale of the buildings as well as the aggregate scale of the whole urban organism. Nobody gets this. For one thing, there will be far fewer jobs in anything connected to financialization because that “industry” is imploding. The recent action around the Federal Reserve illustrates this. When chairman Bernanke’s lips quivered last week, the financial markets had a grand mal seizure. He floated the notion that his organization might “taper” their purchases of US government issued debt and mortgage-backed securities — the latter being mostly bundled debt originated by government-sponsored entities and agencies. That’s the “money” that supports the suburban sprawl industry.
If the Fed were to reduce its purchases of this debt paper, nobody else would buy it. The reason the Fed buys the quantity it does in the first place ($85 billion-a-month) is that nobody else would touch it at the offered zero interest rates. The US Treasury and the mortgage bundlers could only sell the stuff if they paid higher interest rates. But the US government would choke to death on higher interest rates because its aggregate debt is so huge and the scheduled interest payments so gigantic that a one percent increase would destroy even the fantasy of economic equilibrium.
Apart from that unhappy equation, entropy never sleeps. Everything in America except the Apple stores and a handful of big banks is falling apart — especially the human habitat and households. Suburbia will only lose value and utility. Big cities will have to get smaller (ouch!). Tar sands, shale oil and shale gas will not ride to the rescue (they cost too much to get out of the ground). The entire declension of government from federal to state to local will be too broke to fix the roads and make “transfer payments” to idle, indigent citizens. This populace will lose faith in their institutions… and disorder will eventually resolve in a new and very different disposition of things on-the-ground. If we’re lucky, this will not include cruel despotic leadership and war.
If the “taper” talk is empty rhetoric, and the Fed continues sopping up issued debt, it will eventually destroy the credibility of its issued money. That is just another way of going broke, though it might beat a shorter path to the general loss of legitimacy of governments and other institutions.
Young people, harken: prepare for careers in agriculture and activities that support it. Consider moving to small towns in parts of the country where farming is possible and get ready to rebuild a very different economy. Also, consider repudiating your college debt en masse, since the fantasy of repayment is but another mental shackle holding you back from your future.
As for the other parts of the global economy, a digest:
Europe doesn’t have enough oil and gas to run itself. Its suppliers (Russia, various Islamic states) are all basically hostile to it. As the late, great Tony Soprano might say, “end of story.” Europe has been playing financial pocket pool with itself for five years with credibility ebbing. Soon Europe will descend into painful economic re-set. Its era as the go-to theme park of advanced civilization is ending. Go there while it’s still possible and take some snapshots of what comfort and artistry used to look like.
China is imploding under the weight of its half-assed crony command economy and banking system. Nice try. Cookie fortune says, “Industrial era entered too late in game.” All else there is desperation: e.g. the idea of moving hundreds of millions of peasants into new cities. As Tony would say, “Fuggeddabowdit.” They’re better off growing bok choy en situ. Anyway, no one should assume that China can remain politically stable. Let’s hope that its economic and political crack-up doesn’t transmute into war.
Russia’s oil production is in permanent decline. It has a lot, but it gets most of its income from selling it to other people. Hence, Vlad Putin’s notion of finding something else to base Russia’s economy on. Like…what? I don’t think they’re going to replace China in making salad shooters. Farming would be the way to go, and Vlad’s government is hoping that global warming improves Russia’s prospects for doing more of that. In any case, Russia might benefit in the long term by not selling off all of its oil and gas — though Western Europe would surely suffer from that decision. On the plus side, Russia’s government is not crippled by idiot squabbles over abortion, gay marriage, and the Bible in schools.
Japan. Sorry to repeat myself. Going medieval. They have no oil and gas. (Cue Tony Soprano again.) In the event, Japan’s financial hara-kiri will drag down the rest of the world’s banking system — or at least hasten the damage already self-inflicted elsewhere around the globe. I’m also informed that much of the essential computer chip fabrication in the world still happens in Japan, and that will go away, too, as the Japanese engine seizes, smokes, and expels its final belch of CO2.
What else is there? South America? Think: spreading jungle (or desert, take your pick). Canada? There’s an idea. Maybe Labrador becomes the new Hamptons? Second biggest national land mass… 30 million people (2 percent of China’s population). Only one drawback: the view to the south.
15 Comments on "Kunstler: Where Are We Now? – A World View"
poaecdotcom on Tue, 25th Jun 2013 12:30 am
You have to love Kunstler!
Sad thing is, not much to debate, he has it pretty much nailed down.
Go local!!!
rollin on Tue, 25th Jun 2013 1:45 am
Poor JHK, so stuck in his ways. There has been a lot of new information since 2000 and he needs to update. Sure things are going to change, they always do.
First, get over it, fuel is not expensive in the US. It is at about 1980,s equivalent after inflation.
I almost agree with his assessment of financial job meltdown, it could happen. But how and when?
The US will get what it needs from the world just as China will, the rest of the world will have to suffer.
Suburbia has not been losing value and cities are getting more populated. Suburbia in many places is set perfectly to become small villages and towns. Other places it will fade somewhat. Big cities are in trouble for many reasons, sea level rise and storms will damage them and force reductions. As energy falls they become difficult places to live and work.
Russia has not even started to tap it’s full oil potential.
China is in trouble because it grew too fast, it is in a bubble phase and will cycle like the rest of the world does.
I have always thought Japan was a time bomb waiting to go off, but like much of this world, if it is useful to others it will keep going.
Europe has multiple problems and multiple solutions. They are good at adapting and will have to do so.
Much of the ROW is in trouble because the big boys will grab the energy for themselves and they face drought and floods on a regular basis. As the monsoons shift, so does the food.
I have to give him credit, he does have the stuff to make predictions, just never gives the timing and thinks that peak oil is going to have a sudden drop off everywhere.
I wonder if doom is just a creation of the internet age or if this kind of writing was published during the great depression.
c8 on Tue, 25th Jun 2013 2:19 am
Kunstler is a serial fear monger, Y2K, peak oil, the fed, political conspiracies- you name it, he sells it. Every year, like clockwork, he predicts the complete crash of the stock market and society in general. He doesn’t even bother to offer any evidence any more for his claims, just rants like some old deranged uncle at Thanksgiving. There is some truth of course in what he says, and he will be right occasionally- but the vast majority of his positions are way off.
He doesn’t seem to care at all about his long list of failed predictions. He never seems to find any fault with his judgment. And he has no concern about scaring and depressing a great many people or what damage he may be doing to others. Just selling books I guess.
And if you think this assessment of James is harsh- just go to his website and read his own writing about others- he savages everyone, gets into extreme name calling and runs a low brow blog.
BillT on Tue, 25th Jun 2013 2:24 am
JHK has the best handle on the situation of any other writer on the web.
rollin. get off your “I know more than you do” kick and look around. Cities are time bombs waiting for the explosion. The fuse has already been lit in 2008. They can only exist in a world of cheap, plentiful energy.
I live in a medium sized condo tower. One of maybe 1,000 in Manila. In this building about 1,500 people live. It is served by a water tower on the roof, and 3 elevators, ALL energy eaters. The sewage goes to a treatment plant, another gobbler of energy and chemicals. Then there is lighting, A/C, cooking appliances, fans, TV, and PCs. If the electric went off, this building would be unlivable in a few days at best and maybe not that long. There are no other water sources. Cities would last 3 days to a week after the last truck load of food and supplies stopped. Sooner if the electric went off permanently.
The picture JHK paints of the rest of the world is pretty accurate from the part of it that I live on. But, at least here we still have real news, not propaganda like the Western countries. Nothing happens here that is not on the internet in minutes.
rollin on Tue, 25th Jun 2013 2:34 am
BillT, learn to read. I said big cities were in trouble.
In some of those giant high rises (sometimes 20,000 people – China) they become deadly in a few hours if the sun is shining on a hot day and you must escape immediantly. No cross ventilation, no non-electric ventilation.
Nice that you don’t have to filter the news. The US lost that years ago. The news is generally not worth watching here except for the Daily Show.
I know you are ready to escape but will it be easy getting out of the city if things go bad?
jeyeykei on Tue, 25th Jun 2013 2:50 am
or should we say we’re all doomed, one way or the other, sooner than we all think. Let”s just all enjoy the “NOW”.
bobinget on Tue, 25th Jun 2013 2:57 am
Kunstler surpasses everyone else on the web, his infallible ability to pick the bottom of any market. This rant like others past is a giant BUY signal.
What a relief. How can a person dislike this guy?
DC on Tue, 25th Jun 2013 5:55 am
Always enjoy JHK, but I sometimes wish he would stick to what he does best, and is more important. Taking potshots at Amerikan Suburbia. Its relevant, its timely, and not enough commenters, authors out there giving it the attention it needs. But, when he starts to talk about the international scene, except in very general terms, he sounds very, well….very much like an amerikan. And who gets most of his ‘news’ from CNN international.
Russia is not hostile to Europe. In fact, most Russians do regard themselves as a ‘European’ people and the Putin gov’t has tried to have good relations with the rest of Europe. Now its not been easy, with the US trying to sabotage that at every turn, convincing European nations to host Offensive uS missile bases aimed at Russia. That is not hostility, its the US forcing peoples to do things against there own interests. Even Europe’s relations with Islamic countries were not that bad. until about 10-15 years ago, when…well, you know what happened about that time.
His other comments about the rest of the world come off as snarky and ill-informed. He is at his most eloquent and forceful and convincing, when he speaks out against trying to sustain the amerikan drive-shop-consume-sprawl economy. He is far less convincing generally, when he speaks about the state of the world outside amerika itself.
BillT on Tue, 25th Jun 2013 6:34 am
DC, I think he has generally, a good handle on the world. Maybe you just don’t want to see that Europe is in the crapper with the US? How long do you think that people can be unemployed before government heads roll? Especially the age group most likely to physically rebel, the 18-30 group that is now well over 25% unemployed in Europe.
When the first domino falls, there will not be a safe place in the world to run. Will it happen this year? 2016? 2020? Who knows, but I think it will not be longer than that.
rollin, I plan to be out of the city long before the first domino goes over. Things will happen that give advance warning. It is not likely to collapse over night. All governments will do all they can to keep it going, and that will give me the hours needed to go. At that time I plan to abandon all that is in my condo except what I can carry. Stuff can be replaced.
Arthur on Tue, 25th Jun 2013 7:05 am
Agree with DC. There is no hostility between Europe and Russia. Russia is driven into the arms of China, because of US geopolitics, but it is an uneasy love affair. Germany gets all its fossil from the east and Russia gets most of its stuff from Europe. They are building one pipeline after the other. True, it will be shortlived, this fossil thing but 10-15 years will be enough to replace a part of the energy base to avoid total collapse. Most will not drive cars anymore by that time, growth will be a joke, most women will be out of the workforce and I would not be surprised if some form of Kibutz socialism or Greeks Golden Dawn national socialism will replace defaulting and collapsing capitalism. We should have started 40 years ago for a smooth transition, for that it is now to late. Now it is all about managing decline and the rush into renewables. It is going to be a rough ride and an exciting time.
Stephen on Tue, 25th Jun 2013 2:01 pm
If the domino falls, and the food shipments stop, and the lights all go out, what will happen is the entire system will eventually fail, and after a period of anarchy (and probably famine and riots), there would be a total rewrite of social rules and order. A long term or permanent outage will likely reduce the population [and survival will depend on skills, proximity to farms or areas to hunt, etc, as opposed to wealth at this point due to the stores will be empty]. If the power grid fails, the shadow banking system will likely fail with it, as well as cashless systems such as credit cards, debit cards, and check processing. Things will be so much of a crisis that trying to foreclose or seize property for unpaid debts will a very low priority, especially if the banks computer systems lose power permanently. Unemployment would be so high after this crisis that the current Greece and Cyprus crises pale in comparison.
Arthur on Tue, 25th Jun 2013 3:24 pm
There is not going to be a real collapse before 2030 (but severe decline, yes), according to the most pessimistic energy prognosis to date:
http://deepresource.files.wordpress.com/2013/03/ewg-conclusion.png
(does not include nano and methane hydrates)
Until then we can compensate substantially for the loss of fossil. The winners of tomorrow will be those who start transitioning now.
ToDo list:
– building of large hydro storage facilities in Norway and Rockies
– obligatory solar panels on every roof
– installation of smart grid/metering/rationing hardware in every household
– soft discouragement of car ownership, blocking access city centers; obligation to take paying hikers during long range travel on highways
– every town needs to present a plan for substantial local electricity production from wind/solar, as well as allocation of soil for local Kibbutz style food production to be run by those on welfare.
Kristen on Tue, 25th Jun 2013 3:47 pm
Finances will still be good for some, but less for more. Housing prices are up 12 percent, but I think this is kind of unrealistic. Most assets assigned nominal values are vague as to how they’re priced.
I like Kunstler’s writing style, but don’t understand why he lets the result of our society rile him up. I just got back from Europe and it was so relieving to turn off my phone for two weeks and not have to check anything or worry about meaningless social interactions. Germany and Austria are really going to town with solar. Driving by villages with solar panels on each building (only having a population of a 10,000) was quite inspiring. Electricity is more expensive there, but I would be willing to pay more knowing that I was contributing for the betterment of the human race.
As Arthur pointed out, having a “pedestrian only” town center is a great idea. As was on display in Vienna and Prague.
Arthur on Tue, 25th Jun 2013 6:09 pm
“Germany and Austria are really going to town with solar. Driving by villages with solar panels on each building (only having a population of a 10,000) was quite inspiring.”
Yes, like this:
http://deepresource.wordpress.com/2012/12/30/wilpoldsried-makes-millions-from-renewables/
I wish we had this in Holland.
Newfie on Tue, 25th Jun 2013 6:29 pm
Bill, wouldn’t it be cheaper to live out in a rural area, maybe near a nice beach ? Maybe have a garden in the back yard. When Manila collapses you won’t even know it.