Kunstler: ..."kindergarten ethos of entitled happy endings"...

Things are getting very weird very fast -- and will probably get even weirder, faster, as the train wreck of bad debt meets the Saint Paddy's Day Parade of bacchanalian excess at the grade-crossing of destiny. The train is carrying America's financial system, but the engine driving it is peak oil, because declining energy resources necessarily means declining capital wealth -- and declining value of all the institutions, instruments, and markers that denote that wealth or hope to profit by trading in it. The fiasco leads straight to the necessary reinvention of American life on other terms and by other means.

I've maintained for a long time that, even among those who recognize we have a big problem, there are many impediments to imagining a credible outcome. One thing I've noticed is that in any given public meeting (or lecture hall) you can divide participants into two groups: those who believe we will 'high-tech' our way out of this predicament; and those who believe we'll organize our way out.

I don't subscribe to either point of view, strictly speaking. Both POV's assume that there will be an orderly transition between where we're at now and where we're headed. They're tainted by the kindergarten ethos of entitled happy endings and outcomes, which has been the chief operating system for the Baby Boomers, a therapeutic bias for placing 'good feelings' ahead of reality -- which also has obliterated the tragic sense of life that acts as the only brake on humanity's inherent hubris.

Ultimately, in my view, the issue of what happens next will be settled not by the fantasies of the algae-biodiesel geeks or the wishful thinking of the sustainable futures organizers, but by the natural, self-organizing properties of a society responding 'emergently' to new circumstances. One of the implications of destiny-as-emergence is the probability that we will try any damn fool thing besides the right things to keep the old game going for a while -- even in the face of obvious failure.

I'm sure our political leaders will mount a campaign to rescue the futureless infrastructure of suburbia. It will necessarily be an exercise in futility. But it has already started. That's what the swindle of ethanol has been all about. And the touting of hybrid cars, and the flimflam of "energy independence." Even the "environmental" crowd" squanders most of its attention these days on how to keep all the cars running on something other than gasoline. They don't question the assumption that we will remain a car-dependent society.

[We need to start thinking about a world that is not dependent on cars; walkable communities plugged into sustainable organic systems...]

As much as I loathe the suburbs in their grotesque late-stage efflorescence, I can understand why those stuck in them would wish to defend their misinvestments. I just hate to think of the political consequences when their disappointment catches up to the reality that the suburbs will not be rescued. And by that I mean not just the houses but the way-of-life associated with them and all its accessories, furnishings, and activities. Bewilderment will soon turn to rage out in the highway-strip-and-cul-de-sac empire.

Now, apparently, we'll also opt for a bail-out of all those who tried to become rich by getting something for nothing at both ends of the Ponzi scheme called the housing bubble -- the "little guys" who signed mortgage contracts they could never hope to pay off, and the Wall Street playerz who bundled these hopeless contracts into fraudulent securities (and their enablers in the ratings agencies, plus the hedge fund smoothies who tried to cash in by using recondite algorithms to dissolve the risk associated with imprudent lending.) The bail-out is likely to accomplish nothing except the more rapid bankruptcy of government at all levels and a second Great Depression at ground level (worse than the first one).

Over the weekend, the Federal Reserve engineered a $30-billion dollar Saint Paddy's day present for the JP Morgan bank by handing them the corpse of Bear Stearns. The object of the game is to prevent the "assets" of Bear Stearns from going to the auction block, on which they would be discovered to be nearly worthless, which would instantly render all similar assets held by the other big banks to be similarly worthless, and would result in a universal margin call that would pretty much unwind the hallucinated "wealth" acquired the past ten years.

Despite the heroics around the fate of Bear Stearns, it looks like the financial system is tottering anyway. Perhaps the last trick left in the rescue bag will be the 100-basis-point drop in the Fed rate rumored to be announced tomorrow. It won't help any of the big banks, since their problem is holding liabilities in excess of assets. Almost certainly it would crater the US Dollar.

The next thing in store for America, in my opinion, will be a rather new surprise: oil-and-gasoline shortages. While frightened money pours into the oil futures markets, driving the price up, strange behavior will start brewing in the actual physical allocation process. Imports of oil and gas to the US may not be as reliable as it had been when America seemed to be a solvent nation. The exporters may be changing their terms of doing business with us -- and that's nearly two-thirds of all the oil we need. The public would probably suck up oil price increases indefinitely, but shortages are going to be something else. A real freak out.

From www.kunstler.com. Also buy Jim's book, order here.

NVDL: We are stuck in a perception that somehow, somewhere (you know the song) someone out there will make everything all right and we can continue...well...with what exactly? The rat race? We are already off the tracks, we're just too silly to realise it. And when we wise up to the fact that suburbia is going to implode, and eating breakfast and going to work the way we do is going to change...well...what else will we be doing? Roll up your sleeves. Find the nearest tract of farmland and convince the farmer you're a laborer worth having around. For the rest, ball your fists. The neighbours are about to turn nasty. All this will happen when the next round of dry pumps start belching around the world, and commuters race again to get this season's last drops first* - meanwhile the world, northern and southern hemisphere, slips into The Next Winter For Mankind.

*Repeat this game ad homicidum.

Kunstler: Financial Climate Change

Behind all the blather and bullshit about the Federal Reserve's rescue gambits and the machinations of the ratings agencies, and the wiles of foreign sovereign wealth, and the incomprehensible mysteries of markets, and the various weather forecasts of a gathering "recession" is the simple fact that the USA is a way poorer nation than we imagined ourselves to be six months ago. The American economy has been running on the fumes of "creatively engineered" finance (i.e. new-and-improved swindling) for years, and now these swindles are unraveling. In their aftermath, they leave empty wallets, drained bank accounts, plundered retirements funds, boiled away capital reserves, worthless stocks, bankrupt companies, vandalized housing tracts, ruined families, and Wall Street executives who are still pulling down multimillion-dollar pay packages despite running their companies into the ground.

We're burning down the house and kidding ourselves that there is a remedy for it. All the rate cuts and loans to big banks and bank-like corporate organisms, and "monoline" bond insurers, and mortgage mills amount to little more than a final desperate shell game to conceal the radioactive pea of aggregate loss. The losses are everywhere, and when you add up seven billion here and eleven billion there they probably amount to something like a trillion dollars in sheer capital evaporation -- not counting the abstract "positions" that the capital was leveraged onto by the playerz and boyz who mistook algorithms for productive activity.

The shell game may run a few more weeks but personally I believe the timbers are burning. The losses are no longer "contained" or concealable. A consensus has now formed that we're in for a "recession." The idea is that, yes, this seems to be the low arc of the business cycle. Fewer Hamptons villas will be redecorated in the interim. We'll gird our loins and get through the bad weather and when the sun shines again, we'll be ready with new algorithms for new sport-with-capital.

Uh-uh. Think again. This is not so much financial bad weather as financial climate change. Something is happenin' Mr Jones, and you don't know what it is, do ya? There has been too much misbehavior and it can no longer be mitigated. We're not heading into a recession but a major depression, worse than the fabled trauma of the 1930s. That one occurred against the background of a society that had plenty of everything except money. Back then, we had plenty of mineral resources, lots of trained-and-regimented manpower, millions of productive family farms, factories that were practically new, and more than 90 percent left of the greatest petroleum reserve anywhere in the world. It took a world war to get all that stuff humming cooperatively again, and once it did, we devoted its productive capacity to building an empire of happy motoring leisure. (Tragic choice there.)

This new depression, which I call The Long Emergency, will play out against the background of a society that has pissed away its oil endowment, bulldozed its factories, arbitraged its productive labor, destroyed both family farms and the commercial infrastructure of main street, and trained its population to become overfed diabetic TV zombie "consumers" of other peoples' productivity, paid for by "money" they haven't earned.

There is a theory (see Nouriel Roubini's blog) that a reform process will now ensue in the financial realm, new regulation and oversight of the same old familiar activities. This too, I'm afraid, will prove to be wishful thinking. The financial system will not be reformed until it lies in smoking wreckage, and when that "re-form" happens the armature of the re-organizing society will barely resemble the one that the previous burnt-down-house was designed to dwell in. Among other things, it will not support capital enterprise at anything like the scale that we became accustomed to lately.

Globalism will be over.

The great nations of the world will be scrambling desperately for the world's remaining oil supplies. It will not be a friendly contest, and anyone who thinks that current trade relations and capital flows will continue despite that is liable to be disappointed. (Are you reading this Tom Friedman?)

Long before the mathematical projections of oil depletion play out, the oil markets themselves -- and all the complex operations that they comprise, such as drilling and exploration, and the movement of tankers around the planet -- will destabilize and seize up. We will no longer be any oil exporter's "favored customer." Many of the exporters will enjoy watching us suffer. Contrary to the political platitude-du-jour, the USA will never become "energy independent" in the way we currently imagine. Rather we'll become energy independent by being deprived of imported oil, and we'll be thrown back on our own dwindling supplies -- which means that we're not going to run our system of daily life the way it has been set up to run. When Americans can no longer run their cars on a whim, they will simply go apeshit and you can kiss normal politics goodbye.

The financial system that emerges from this cataclysm, and the economy it serves (which is supposed to be the master of its capital deployment "arm," not its servant) will likely be modest to a degree that will shock and embarrass everyone currently connected with what we have lately called finance. If it even trades in paper, that paper will have to stand for something based in reality, either a productive activity or a genuine asset. It may take decades for this society to even regain the confidence necessary to operate such an elementary system -- or it may not come back at all, at least as far as the horizon lies before us. That's how bad the mischief and the damage has been.

It's not hard to understand why the Bernankes, Paulsons, Lawrence Kudlows and other public representatives of capital keep pretending that everything is under control. On the other side of their pretenses lies disorder and hardship. One wonders, of course, what they really see in their private minds' eyes. Do they actually believe that the statistics issued by their serveling agencies amount to a plausible picture of reality? Are they so lost in their fantasies of "management" that they think they're controlling events?

My guess is that their credibility is spent. In the weeks ahead, nobody will know who or what to believe. We may even run out of questions to ask as we just all collectively stand there in a thrall of wonder and nausea, watching the nation's financial house burn down.

From www.kunstler.com

NVDL: For more wishful thinking, go here. We are seeing incredibly volatility now. Peak Oil also coincides with Peak Economics. This means we have breached maximum in almost every way. Thus, if it feels like we've never had more stuff, well that's spot on. This is why no one can believe we are about to have less stuff, and progressively less after that as we start sliding down the other side of Hobbert's Bell curve.

Oil-Rich Nations Use More Energy, Cutting Exports

Luis J. Jimenez for The New York Times

The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

“It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,” said Amy Myers Jaffe, an oil analyst at Rice
University. By CLIFFORD KRAUSS
More.

Opec decision likely to push oil prices above $100 this week

Oil prices could finally breach the $100 barrier this week, deepening fears for the West’s economic prospects, if the Opec oil cartel confirms an expected decision at its extraordinary meeting in Abu Dhabi on Wednesday not to raise crude production, analysts believe.

Opec is under pressure from Western oil-consuming nations to take urgent action to rein back prices from their recent record highs, amid mounting concern that the cost of crude will undercut already faltering growth in developed economies while simultaneously stoking inflation.

Close observers of the cartel believe that it will spurn the West’s pleas and keep its output pegged, because any increase ordered this week would not come through until towards the end of the winter in the northern hemisphere. Opec may fear that by that time any extra crude production could risk oversupplying a market in which demand will be cut not only by warmer weather but by an impending slowdown in leading Western economies.

Veronica Smart, an analyst with the Energy Information Centre, a leading consultancy, said that this delayed effect meant that a move this week by Opec to boost output would probably be viewed as “too little, too late”.

She said that the cartel generally disliked raising production ahead of the second quarter because it tries to avoid any build-up of oil stockpiles around that time as part of its pricing strategy.

Simon Wardell, of Global Insight, an independent analysis group, shared Ms Smart’s view: “With the economic problems hanging over the global economy now, Opec’s probably thinking that demand [for oil] is more likely to go down than up in terms of current forecasts, and they will probably want to keep things steady [on output].” Expectations that Opec will stay its hand were reinforced by comments from senior cartel figures.

Rafael RamÍrez, the Venezuelan Oil Minister, said yesterday: “We expect that the market will maintain the same prices that we have seen this year. Probably, if there is not geo-political tension, prices should be around $100 a barrel.”

Ali al-Naimi, the Saudi Arabian Oil Minister, said that present oil stocks were in a “very comfortable range”.

by Gary Duncan, Economics Editor for The Times Online (UK)

NVDL: Is oil at $100 as much of a brou ha ha as the Y2K bug? You'd think so based on the disdain stock markets have for fuel prices. Unfortunately, reality is much more simple. Essentially every time there is a hike in petrol prices (that's prices you pay to fill up your tank), the money you have left for everything else gets less. Not only that, everyone else has less money, and the costs also get transferred to everything else: food, transport and all the rest. We keep forgetting that cheap oil underpins EVERTHING THAT WE DO. Thus, every change in these prices have critical impacts, particularly for those in debt, and the poor.

When the number of poor (economic losers) increases, so do social ills such as unemployment and crime. That's not good for anyone.

HURRAY: Oil falls more than $3 on increased Saudi output - But then...

Fire shuts key Canada-U.S. pipeline, oil leaps $3

We're going to see this trend a lot over the near term. There's going to be this incredible demand for good news (on the energy theme), and each and every time there will be bad news to counter it. This is inevitable in the Peak Oil era, where supply is on an unassailable downward curve. It is a feature of delusion that you wish for something other than the inevitable, but it is still very human. It's the same thing believing there is life after death. Sure, we wish it were true, but wishing and wanting doesn't make dreams come true.

Oil Prices Rebound in Asian Trading

At the very least, we'll soon see a world with more bicycles, or at least, I hope we will.

Oil at $91

Oil Briefly Rises Above $91 a Barrel on Supply Worries, Mideast Tensions
BANGKOK, Thailand (AP) -- Crude oil prices rose in Asia Friday -- climbing above $91 a barrel at one point -- on renewed concerns about oil supplies and news that OPEC won't further increase output.

Prices were also lifted on news that Lebanese troops had fired on Israeli warplanes Thursday. A conflict between Israel and Lebanon would not directly affect oil supplies, but traders worry any hostilities in the Middle East would draw in oil producers such as Saudi Arabia and Iran.

Prices first jumped sharply Wednesday after the Energy Information Administration reported that oil inventories fell 5.3 million barrels last week when analysts had expected them to grow 300,000 barrels.

For morte click here.

NVDL: Yahoo News says 'December Brent crude rose 54 cents to $88.02 a barrel on the ICE futures exchange in London.' Right now it is $86.35.

I Had A Dream

The last thing I did before I went to bed was glance through October 26's Financial Mail article (we get them a day before everyone else) that I'd left specifically on my pillow. The article was on page 75, UP TO NO GOOD; a feature on oil prices. I know I talk a lot about Peak Oil. I'm used to people saying I'm being 'negative' or 'pessimistic' or 'doomsaying'. It's reassuring in a way to hear this, because people aren't dumb, and if they need further convincing, it must mean there's a lot of contradictory evidence out there. Believe me, I'd love to be wrong. It will be better for you, me, everyone.

This is why this article on oil prices was a tremendous shock. The pull quote is from Barclays Capital: 'The course is set for the market to take out US$90, &100 and $110 in fairly quick succession.' They see a $300 price happening overnight if the US attacks Iran. $300 a barrel is essentially R27 per litre of petrol.

The same article shows how rapidly things have changed. Between 1970 and August of this year, says the article, oil prices average $32/bbl. In the 1985 to 2003 period, 'they breached $30/bbl only once.' The article assers that 'real acceleration started in 2003.

The good news is, although South Africa is not immune to these energy changes, we are far more so than say the USA, Australia and the United Kingdom. We also have SASOL, which ameliorates our exposure somewhat, and fantastic amounts of coal. But before we start opening up the champaigne, it's prudent to note that many other countires are less fortunate, and will jealousy look on as we get a party styarted, and their's come to an absolute dead end. What is to prevent the US, for example, from annexing our resources, as it has in Iraq. I should qualify that though. For now the US has just, as Jim Kunstler puts it, built a large police station in Iraq to 'protect and ensure access to oil'.

Meanwhil a $1 Brent crude price change translates, the article goes on, to a 6c change. Not a lot at small increments, but these are starting to add up now. You can feel it in food prices, in the energy bill, and soon, we'll see air travel start to feedback these costs and many other industries.

Kak

What really burst my bubble though, late last night, was reading about Jeremy Wakeford of ASPO - yes, this bunch of alarmists and fringe soap box broadcasters are now making it into mainstream magazines. My Peak Oil article in HEARTLAND was published almost 18 months ago (I may get paid for all that this month), and although some people raised an eyebrow, most - including my dad - were dismissive. And then there was this front page headline in the UK paper; The Independent. But to see even the likes of Peak Oil's mascot, M King Hubbert quoted in this magazine, and the admission that oil is a 'finite reserve', I don't know...I felt chills. Because it means we are there. And that means kak.

Crunch

Wakeford puts the post-Peak depletion rate (the total amount of oil supplied to the world after peak) at a 3% year on year decline. Consensus has been coming in from all over - believe me, I have trawled the web - that we're right at, or just past Peak. Some writers feel we hit peak last year. Meanwhile the International Energy Agency forecasts boldly that we'll go to 88 million barrels oil supply a day (worldwide). It seems as though world oil supplies weren't able to go over 85 last year. We're already down from that figure. So what we're essentially seeing, is Crunch Time.

The Dream

But let me share the dream I had. I was driving in my car along a seaside, and was attempting to turn up a road that climbed along a series of steep cliffs. Except, the road had fallen into the sea. I slowed down, and parked on the side of the road, my car immediately getting stuck in thick beach sand.

I followed a flock of people who were enjoying the new coastline. Their children were boogey boarding in impressive surf. I watched from the rocky edge, with the parents. I admired the courage of these children, because some of the waves were truly monsters. It made me get a sense of the incredible potential of our species; that small children had the strength to battle and swim and have fun in the powerful muscles of bending seawater.

But then something happened. The waves got a little bigger, and the kids decided to come in. The problem was, because the shore was a jagged edge, it wasn't a matter of just strolling onto the beach. Once again I was impressed that the kids were able to control their motion as a giant wave rolled towards the cliffs, them crumbled to roiling foam. I watched them grope for purchase. They came close, but then sank down into the churning waters.

Even in my dream I remembered: "I'm an excellent swimmer", and I've swum between rocks and breakers before. The thought flickered through my mind to 'save them', except, as I saw them struggling now, descending again and again under the bending ribs of blue then snowy water, that it was impossible in such a powerful sea. And that's where it ended; with these enormous waved filled with children, rising up higher and higher, breaking and chisseling against the cliffs we were standing on, while the children in them fought for air. It was a battle you implicitly knew they would lose.

And then I woke up.