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Americans
gathered around the hearth of CBS's 60 Minutes must have been bemused
to hear reporter Scott Pelley announce
self-importantly that the US Department of Justice is investigating Lance
Armstrong's bicycling team for performance-enhancing drug use. Does it really
matter if any pro athlete takes drugs? Why not throw Babe Ruth out of the
Baseball Hall of Fame for drinking sixteen beers the night before a World
Series opener? Or Ditto Mickey Mantle for that, plus smoking two packs of
Marlboros in the dugout during every game.
Notice
that Scott Pelley did not announce that the US DOJ
is investigating Goldman Sachs, or Citi, or Merrill
Lynch, or Bank of America or several other so-called banks for looting the
American public and influence-peddling in the halls of government. Or the SEC
and the CFTC for failing to regulate the trade in frauds and swindles. The
window for that sort of action is closing, and with it the reasonable hopes
of citizens in the legitimacy of institutions that manage things.
The
failures in journalism are now so stupendous that there are only a few
possible explanations.
1. The
major media, hard pressed by declining revenues and the extremes of
competition on cable TV and the Internet, are in thrall to corporate
advertisers who expect cheerleading for the status quo in return.
2. Major
media editors and producers - the officer corps of journalism - are not smart
enough to tell the difference between what's important and what's not and
can't run their newsrooms.
3. Mainstream
media only reflects the cognitive dissonance that pervades the collective
imagination of a culture - too much noise to think coherently.
4. We
really don't want to know what's going on - it's too scary.
5.
Sometimes
a generation of leaders just fails.
For
those of you interested in a digest of reality, here's what's going on:
• The
global energy predicament really is a crisis, even though nobody is currently
lining up at the gasoline pumps. It's a crisis because peak oil is for real
and oil is the primary resource of advanced economies, and there are no
miracle rescue remedies ("drill, drill, drill," shale oil, shale
gas). Peak oil means that we can't increase supply in relation to
still-growing demand, which creates disturbances in the energy markets. Peak
oil also leads directly to a crisis of capital (money), because a nation (an
economy) that can't get increasing energy "inputs," can't create
more wealth, can't generate more loans (debt), and most importantly can't
expect what we've come to think of as normal economic growth. This creates further
disturbances and distortions
in financial markets.
• Without
that sort of growth you get stagnation and then contraction. We're probably
past the stagnation phase and into contraction. We tried to compensate for
stagnation (and conceal it) by allowing the financial part
of the economy grow from 5 percent of all activity to over 40 percent
of all activity. In the process, banking changed from a boring utility aimed
at directing capital into legitimate investment (highly regulated) to a
swashbuckling realm of unregulated swindles having nothing to do with real
capital allocation but rather aimed at the sales of worthless
"innovative products" (CDOs, et cetera), the creaming off of huge
transaction fees, the use of computers to game exchanges, colossal carry
trades between banks and public treasuries (you borrow money at zero percent
- for free! - and invest it in paper that pays, say, 2.5 percent and keep
rolling it over), and let's not forget pervasive accounting fraud practiced
by government and private business to the degree that money matters are now
completely opaque and dishonesty can run rampant. After a while, nobody can
have faith in the way things work, and that is a dangerous situation because
it leads to political problems. The ultimate question is: how does a
society manage contraction?
• One
way to think about it is to stop using the word "growth" and
substitute the term "economic activity." There are lots of useful
things we can do to rearrange daily life in the USA that would put people to
work, but they would tend to defy the status quo. We could recognize that
peak oil means that we have to grow our food differently and make local
agriculture a more up-front piece of the economy. We could rebuild the
railroads so that people don't have to drive everywhere. We could rebuild our
inland ports to move more bulk freight on boats. Notice these are very
straightforward activities, unlike the manipulation of financial paper and
markets. We're not interested in focusing on agriculture and transport
reform. Business and political interests are arrayed against changing
anything. Something's got to give.
• Political
problems arise when many people in a society lose faith that their
institutions are competent, trustworthy, and fair, and seek ways to bring
them down. We're in a political crisis and we don't know it. Other parts of
the world know it, and more of them are finding out every day. Yesterday was
Spain's turn, as the governing party took a beating in local elections and
unemployed young people moiled in the city squares. Many of them probably
expected to work in corporate jobs. They may end up back on the farm or in
the cork orchards. The rest of Europe has a lot to sort out, too, and after a
half-century of being the world's fairly-tale theme park, the terms of daily
life have suddenly changed. The tensions between the requirement to adjust to
change and the resistance to change will produce all kinds of disorder within
and between the different nations of Europe. It will be hard to believe as it
occurs, but essentially each nation, or region, will be thrown back on
whatever resources it can muster, and that will be very difficult.
• The
trouble in the Middle East and North Africa (MENA) is probably not so much
over abstract ideas about "freedom" and "democracy" (we
flatter ourselves to think so) as food scarcity and the pressures of
exploding populations. The OCED nations might not care so much if this region
didn't produce so much of the world's precious oil - but it does, of course,
so we can't help but meddle in the politics there. I would not bet on
continued stability of the type that has prevailed for decades, and by that I
just mean the expectation that regular supplies of oil will get to the
market. The USA is pissing away vast money resources to keep these supply
lines open. We've made an enemy of Persia (Iran) and they want to rule the
region, so we are trying to make a baloney sandwich out of them with
garrisons east and west in Afghanistan and Iraq. It's not working so well.
Now, Persia is making noises about establishing missile bases in Venezuela.
They may overstep on that one. Pay attention. China has a deep interest in keeping
the oil supply lines open, and it's possible, if the wells, pipelines, and
terminals are not wrecked by whatever happens next in MENA, that China will
get some oil even if we don't. They offer engineering aid; we just send guys
in desert camo with night-vision goggles and guns.
Japan, you can possibly forget about. I maintain that they will be going
medieval, especially now that they've foresworn further nuclear power
development.
• If
the US is politically nervous, it is not showing a whole lot at the moment,
but there is so much potential for financial havoc and economic hardship that
I have a hard time imagining the 2012 election will play out as many suppose
- another red-blue pie-eating contest bought-and-paid-for by Wall Street.
We're cruising straight into some kind of money crisis that is going to spin
heads. This isn't the first time I've said we could wake up one morning and
find a Pentagon general in charge of things. If US economic history is any
rule, Barack Obama would just be plain un-reelectable.
But would anybody really vote for such a bumbling, glad-handing Babbitt
non-entity as Tim Pawlenty? The things that really
could tip the USA over are boring issues like interest rates and currency
values - and the rule of law in money matters. They can't compete for sex
appeal with Lance Armstrong and whoever the latest incarnation of Lindsay Lohan is these days.
James
Howard Kunstler
James
Howard Kunstler’s new novel of the post-oil future, World
Made By Hand, is available at all booksellers.
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