The multi-dimensional meltdown underway in the finance sector illustrates perfectly how the complex systems we depend on start to wobble and fail as soon as peak oil establishes itself as a fact in the public imagination.
Mainly what it shows is that we don't have to run out of oil -- or even come close to that -- before the trouble starts. Just going over the peak and heading down the slippery slope of depletion is enough. Peak oil, it turns out, is also peak money. Or should we say, peak "money?"
First of all, what is finance exactly? I'd bet that a lot of people these days don't know, including many working in the financial "industry," as it has taken to calling itself. Finance, until very recently, was the means by which investment was raised for useful economic activities and productive ventures -- in other words, the deployment of capital, which is to say accumulated wealth. Historically, this accumulated wealth was pretty meager. There wasn't a whole lot to deploy and the deployment was controlled by a tiny handful of people statistically greater only than the number of Martians in the general population. They operated as families or clans, and everybody knew who they were: the Medici, the Rothschilds.
Even the Roman Empire was a kind of financial Flintstones operation compared to what we see on CNBC these days...
...The innovation of mutant financial "products" is a symptom of the "crack-up boom" that characterizes society's response to peak oil. The main implication of peak oil for an industrial economy is that the 200-odd-year-long expectation for continued regular growth in combined energy-activity-and-productivity at roughly 3 to 7 percent a year under "normal" conditions -- that expectation is now toast. Under the new regime of peak oil and its aftermath, regular energy depletion, society can expect no further industrial growth but only contraction, and all the certificates, instruments, and operations associated with the expectation for further industrial growth lose their legitimacy.
Seen in this light, one can then understand the temporary value of these mutant financial derivatives. They allowed participants to conceal the fact that these "investments' were not directed at productive enterprise. They also provided a cohort of sharpies with "vehicles" for converting the leftovers of the industrial economy into assets for themselves -- a form of looting, really. Hence, the employees of Bear Stearns, Goldman Sachs, and Merrill Lynch gave themselves $50-million Christmas bonuses for trafficking in these inscrutable non-productive financial gimmicks, and were able to acquire fifty-room East hampton houses, Gulfstream jets, and impressionist paintings.
Of course, the aftermath might not be so pretty for these guys, since the next thing they may acquire could be long prison sentences. If they flee prosecution in their Gulfstream jets, they will not be able to take their Hamptons estates aboard with them. Those who remain my live to see mobs with flaming torches outside their windows, as in the "Frankenstein" movies of their suburban childhoods. But this has yet to play out.
For the moment it appears that we have entered the climax of the crack-up. The slick and inscrutable derivative vehicles infesting the ledgers of the investment banks, are now being systematically revealed as frauds of one kind or another, and, self-evidently lacking in worth. The process now underway is gruesome. The sheer dollar losses involved are almost as incomprehensible as the phony operations and instruments that they are derived from -- twelve billion here, nine billion there. As the late Senator Everett Dirkson once quipped, "sooner or later you're talking about real money...." Or are we? Is it money or "money." And if it's "money," what will become of it? And of us? How will it allow us to live?
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