Kunstler: The Uncomfortable Hiatus.
And so the sun seems to stand still this last day before the resumption of business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in the ominous late summer heat, and the people across this land marinate in anxious uncertainty. What can be done?
Some kind of epic national restructuring is in the works. It will either happen consciously and deliberately or it will be forced on us by circumstance. One side wants to magically reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible outcome. Most of the arguments ranging around them are what Jordan Peterson calls “pseudo issues.” Let’s try to take stock of what the real issues might be.
Energy: The shale oil “miracle” was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday (The Next Financial Crisis Lurks Underground). For all that, the shale oil producers still couldn’t make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course — say, to rescue the stock and bond markets — then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we’re out of tricks. It will affect everything.
The perceived solution is to run all our stuff on electricity, with the electricity produced by other means than fossil fuels, so-called alt energy. This will only happen on the most limited basis and perhaps not at all. (And it is apart from the question of the decrepit electric grid itself.) What’s required is a political conversation about how we inhabit the landscape, how we do business, and what kind of business we do. The prospect of dismantling suburbia — or at least moving out of it — is evidently unthinkable. But it’s going to happen whether we make plans and policies, or we’re dragged kicking and screaming away from it.
Corporate tyranny: The nation is groaning under despotic corporate rule. The fragility of these operations is moving toward criticality. As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale.
Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods. The implosion of national chain retail is already underway. Amazon is not the answer, because each Amazon sales item requires a separate truck trip to its destination, and that just doesn’t square with our energy predicament. We’ve got to rebuild main street economies and the layers of local and regional distribution that support them. That’s where many jobs and careers are.
Climate change is most immediately affecting farming. 2018 will be a year of bad harvests in many parts of the world. Agri-biz style farming, based on oil-and-gas plus bank loans is a ruinous practice, and will not continue in any case. Can we make choices and policies to promote a return to smaller scale farming with intelligent methods rather than just brute industrial force plus debt? If we don’t, a lot of people will starve to death. By the way, here is the useful work for a large number of citizens currently regarded as unemployable for one reason or another.
Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. Both are destined to be severely downscaled. A lot of colleges will go out of business [Note: I'll keep track of colleges going defunct.--P.Z.]. Most college loans will never be paid back (and the derivatives based on them will blow up). We need millions of small farmers more than we need millions of communications majors with a public relations minor. It may be too late for a single-payer medical system. A collapsing oil-based industrial economy means a lack of capital, and fiscal hocus-pocus is just another form of racketeering. Medicine will have to get smaller and less complex and that means local clinic-based health care. Lots of careers there, and that is where things are going, so get ready.
Government over-reach: the leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens. It will resist at all costs being dismantled or even reined in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries.
As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. It’s happening already, whether we like it or not, as geopolitical relations shift drastically and the other nations on the planet scramble for survival in a post-industrial world that will be a good deal harsher than the robotic paradise of digitally “creative” economies that the credulous expect. This country has enough to do within its own boundaries to prepare for survival without making extra trouble for itself and other people around the world. As a practical matter, this means close as many overseas bases as possible, as soon as possible.
As we get back to business tomorrow, ask yourself where you stand in the blather-storm of false issues and foolish ideas, in contrast to the things that actually matter.
Showing posts with label shale oil. Show all posts
Showing posts with label shale oil. Show all posts
Monday, September 03, 2018
Thursday, March 03, 2016
Monday, August 17, 2015
Kunstler: True Believers
Kunstler: True Believers.
August 17, 2015
True Believers
There is a special species of idiot at large in the financial media space who believe absolutely in the desperate and tragic public relations bullshit that this society churns out to convince itself that the techno-industrial high life can continue indefinitely, despite the mandates of reality — in particular, the fairy tales about oil: we’re cruising to energy independence… the shale oil “miracle” will keep us driving to WalMart forever… our wells doth overflow as if this were Saudi America… don’t worry, be happy…!
Such a true believer is John Mauldin, the investment hustler and writer of the newsletter Thoughts From the Frontline, who called me out for obloquy in his latest edition. After dissing me, he said:
Mauldin is going to be very disappointed when he discovers that the vaunted efficiencies in shale drilling and fracking he’s hyping will only accelerate the depletion of wells which, at best, produce a few hundred barrels of oil a day, and only for the first year, after which they deplete by at least half that rate, and after four years are little better than “stripper” wells. The PR shills at Cambridge Energy Research (Dan Yergin’s propaganda mill for the oil industry) must have pumped a five-gallon jug of Kool-Aid down poor John’s craw. He believes every whopper they spin out — e.g. that “Right now, some US shale operators can break even at $10/barrel.”
The truth is the shale oil industry couldn’t make a profit at $100/barrel. The drilling and fracking boom that began around 2005 was paid for with high-risk, high-yield junk bond financing and other sketchy, poorly collateralized financing. Most of the earnings in the early years of shale oil came from flipping land leases to greater fools. Now that the price of oil has fallen by more than 50 percent in the past year, the prospect dims for that junk financing to be repaid. Since that was “bottom-of-the-barrel” financing, the odds are that the shale producers will have a very hard time finding more borrowed money to keep up the relentless pace of drilling needed to stay ahead of the short depletion rates. They are also running out “sweet spots” that are worth drilling.
We will look back on the shale oil frenzy of 2005 to 2015 as a very interesting industrial stunt borne of desperation. It gave a floundering industry something to do with all its equipment and its trained personnel, and it gave wishful hucksters something to wish for, but it never penciled-out economically. Shale oil production turned down in 2015 and the money will not be there to get the production back to where it was before the price crash. Ever.
Some additional uncomfortable truths should temper the manic fantasies of hypsters like Mauldin. One is that we are no longer in the cheap oil age. All the new oil available now is expensive oil — whether it’s Bakken shale or deep water or arctic oil — and it costs too much for our techno-industrial society to run on. That is why the world financial system is imploding: we can’t borrow enough money from the future to keep this game going, and we can’t pay back the money we’ve already borrowed. We have to get another game going, one consistent with contraction and with much lower energy use. But that is not an acceptable option to the people running things. They are determined to keep the current matrix of rackets going at all costs, and the certain result will be very messy collapse of economies and governments.
Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies. We’ve oscillated back and forth between those conditions since 2005. The net effect in the USA is that the middle class is rapidly going broke. All the financial shenanigans aimed at propping up Wall Street and Potemkin stock markets was carried out at the expense of the middle class, now deprived of jobs, incomes, vocations, stability, and prospects. They may already be at the point where they can’t afford oil at any price. That “energy deflation” dynamic, in the words of Steve Ludlum at the Economic Undertow blog, is a self-reinforcing feedback loop that beats a path straight to epochal paradigm shift: get smaller, get local, get real, or get out.
The hypsters and hucksters won’t believe this until it jumps up and bites them on the lips. These are the same idiots who believe we are going to continue Happy Motoring by other means — self-driving, all-electric cars — and who think there is some reason for human beings to travel to other planets when we haven’t even demonstrated that we can plausibly continue life on this one.
As I averred last week, America is at the bottom of a self-knowledge low cycle in which we are incapable of constructing a coherent story about what is happening to us. The techno-industrial fiesta was such a special experience that we can’t believe it might be coming to an end. So, one option is to believe stories that have no basis in reality. As Tom McGuane wrote some forty years ago: “Life in the old USA gizzard had changed and only a clown could fail to notice. So being a clown was a possibility.”
August 17, 2015
True Believers
There is a special species of idiot at large in the financial media space who believe absolutely in the desperate and tragic public relations bullshit that this society churns out to convince itself that the techno-industrial high life can continue indefinitely, despite the mandates of reality — in particular, the fairy tales about oil: we’re cruising to energy independence… the shale oil “miracle” will keep us driving to WalMart forever… our wells doth overflow as if this were Saudi America… don’t worry, be happy…!
Such a true believer is John Mauldin, the investment hustler and writer of the newsletter Thoughts From the Frontline, who called me out for obloquy in his latest edition. After dissing me, he said:
“I have written for years that Peak Oil is nonsense. Longtime readers know that I’m a believer in ever-accelerating technological transformation, but I have to admit I did not see the exponential transformation of the drilling business as it is currently unfolding. The changes are truly breathtaking and have gone largely unnoticed.”
Mauldin is going to be very disappointed when he discovers that the vaunted efficiencies in shale drilling and fracking he’s hyping will only accelerate the depletion of wells which, at best, produce a few hundred barrels of oil a day, and only for the first year, after which they deplete by at least half that rate, and after four years are little better than “stripper” wells. The PR shills at Cambridge Energy Research (Dan Yergin’s propaganda mill for the oil industry) must have pumped a five-gallon jug of Kool-Aid down poor John’s craw. He believes every whopper they spin out — e.g. that “Right now, some US shale operators can break even at $10/barrel.”
The truth is the shale oil industry couldn’t make a profit at $100/barrel. The drilling and fracking boom that began around 2005 was paid for with high-risk, high-yield junk bond financing and other sketchy, poorly collateralized financing. Most of the earnings in the early years of shale oil came from flipping land leases to greater fools. Now that the price of oil has fallen by more than 50 percent in the past year, the prospect dims for that junk financing to be repaid. Since that was “bottom-of-the-barrel” financing, the odds are that the shale producers will have a very hard time finding more borrowed money to keep up the relentless pace of drilling needed to stay ahead of the short depletion rates. They are also running out “sweet spots” that are worth drilling.
We will look back on the shale oil frenzy of 2005 to 2015 as a very interesting industrial stunt borne of desperation. It gave a floundering industry something to do with all its equipment and its trained personnel, and it gave wishful hucksters something to wish for, but it never penciled-out economically. Shale oil production turned down in 2015 and the money will not be there to get the production back to where it was before the price crash. Ever.
Some additional uncomfortable truths should temper the manic fantasies of hypsters like Mauldin. One is that we are no longer in the cheap oil age. All the new oil available now is expensive oil — whether it’s Bakken shale or deep water or arctic oil — and it costs too much for our techno-industrial society to run on. That is why the world financial system is imploding: we can’t borrow enough money from the future to keep this game going, and we can’t pay back the money we’ve already borrowed. We have to get another game going, one consistent with contraction and with much lower energy use. But that is not an acceptable option to the people running things. They are determined to keep the current matrix of rackets going at all costs, and the certain result will be very messy collapse of economies and governments.
Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies. We’ve oscillated back and forth between those conditions since 2005. The net effect in the USA is that the middle class is rapidly going broke. All the financial shenanigans aimed at propping up Wall Street and Potemkin stock markets was carried out at the expense of the middle class, now deprived of jobs, incomes, vocations, stability, and prospects. They may already be at the point where they can’t afford oil at any price. That “energy deflation” dynamic, in the words of Steve Ludlum at the Economic Undertow blog, is a self-reinforcing feedback loop that beats a path straight to epochal paradigm shift: get smaller, get local, get real, or get out.
The hypsters and hucksters won’t believe this until it jumps up and bites them on the lips. These are the same idiots who believe we are going to continue Happy Motoring by other means — self-driving, all-electric cars — and who think there is some reason for human beings to travel to other planets when we haven’t even demonstrated that we can plausibly continue life on this one.
As I averred last week, America is at the bottom of a self-knowledge low cycle in which we are incapable of constructing a coherent story about what is happening to us. The techno-industrial fiesta was such a special experience that we can’t believe it might be coming to an end. So, one option is to believe stories that have no basis in reality. As Tom McGuane wrote some forty years ago: “Life in the old USA gizzard had changed and only a clown could fail to notice. So being a clown was a possibility.”
Wednesday, February 25, 2015
Monday, January 26, 2015
Kunstler: The Broken Template
Kunstler: The Broken Template.
T he more detached from reality American culture becomes the more strictly ceremonial leadership gets, as illustrated by the raft of bromides Barack Obama floated past the assembled vassalage of government last week in another grand effort to avoid the necessities of the moment.
Those necessities include freeing a hostage public from the tyrannical clutches of corporate despotism — the evil empire of big boxes, big burgers, big pharma, Big Brother — and the atrocious rackets fostered by them that masquerade as an economy. The template of the life we have known is broken and the pieces within are flying apart, and no amount of wishing or promising can keep them going. If this society is even going to survive, the people have to smash their way out of this template prison, probably against the efforts of the people and organizations now running it merely for their own benefit.
The future is telling us very clearly: get smaller, get finer, get more local, get less complex, get less grandiose, do it now. Do you want to eat food in the years ahead? Better make sure you live in a part of the country where small-scale farming and backyard gardening is possible because the General Mills Agri-Biz GMO Cheerios model will be folding its big tent along with its financing agents in the debt Ponzi banking system.
Do you want to have a personal economic future? Think about what you can do to make yourself useful in a local economy made up of your neighbors. And if you live in one of the thousands of soulless, neighborless suburban wastelands that amount to nothing but big box and big burger plantations, you better get out and find a real town in some other part of the country.
Do you believe that computers and robot factories will define the years to come? Maybe you have failed to notice that the US electric grid is decrepit and in need of at least a $1 trillion upgrade-and-rebuild, which, by the way, is not going to happen. What is all that crap going to run on? America’s disappointment with the broken promises of technology will be so epic that we’ll be lucky not to slide back into a world ruled by superstition and ghosts.
Do you think that $50 oil is going to make the world safe for WalMart, Walt Disney World, and Happy Motoring? In fact, $50 oil is going to crush what is left of the US Oil industry, especially fracking for shale oil and deep water drilling. And guess what — everything else is depleting at about 5 percent a year. The frackers will never again get access to the sort of junk bond financing that allowed them to ramp up their Ponzi demonstration projects in the Bakken and Eagle Ford. And they will never again regain their current level of production — which is the net result of past Ponzi financing, now ending in tears. So, forget “Saudi America” and “energy independence,” unless you mean living in a walkable community near a navigable waterway.
Do you want to be an educated person, that is, someone capable of comprehending reality and functioning within its demands? In the USA, that means you must learn how to speak and write English correctly, especially if you are in a “low performing” ethnic minority group. If you can’t conjugate verbs, you will have a hard time distinguishing the past, the present, and the future in your daily activities. Among other things, you’ll be incapable of showing up on time. And that, of course, is only the beginning. It’s that simple. These abilities used to be the result of an eighth-grade education in the United States. We would be lucky to get back to that high standard, and our knucklehead fantasies about universal access to community college be damned. It’s only a new layer in the current racket that pretends to be education.
That is the current state of the union and a glimpse of the trajectory it’s on, which the inept leaders of our country do not comprehend and cannot communicate.
T he more detached from reality American culture becomes the more strictly ceremonial leadership gets, as illustrated by the raft of bromides Barack Obama floated past the assembled vassalage of government last week in another grand effort to avoid the necessities of the moment.
Those necessities include freeing a hostage public from the tyrannical clutches of corporate despotism — the evil empire of big boxes, big burgers, big pharma, Big Brother — and the atrocious rackets fostered by them that masquerade as an economy. The template of the life we have known is broken and the pieces within are flying apart, and no amount of wishing or promising can keep them going. If this society is even going to survive, the people have to smash their way out of this template prison, probably against the efforts of the people and organizations now running it merely for their own benefit.
The future is telling us very clearly: get smaller, get finer, get more local, get less complex, get less grandiose, do it now. Do you want to eat food in the years ahead? Better make sure you live in a part of the country where small-scale farming and backyard gardening is possible because the General Mills Agri-Biz GMO Cheerios model will be folding its big tent along with its financing agents in the debt Ponzi banking system.
Do you want to have a personal economic future? Think about what you can do to make yourself useful in a local economy made up of your neighbors. And if you live in one of the thousands of soulless, neighborless suburban wastelands that amount to nothing but big box and big burger plantations, you better get out and find a real town in some other part of the country.
Do you believe that computers and robot factories will define the years to come? Maybe you have failed to notice that the US electric grid is decrepit and in need of at least a $1 trillion upgrade-and-rebuild, which, by the way, is not going to happen. What is all that crap going to run on? America’s disappointment with the broken promises of technology will be so epic that we’ll be lucky not to slide back into a world ruled by superstition and ghosts.
Do you think that $50 oil is going to make the world safe for WalMart, Walt Disney World, and Happy Motoring? In fact, $50 oil is going to crush what is left of the US Oil industry, especially fracking for shale oil and deep water drilling. And guess what — everything else is depleting at about 5 percent a year. The frackers will never again get access to the sort of junk bond financing that allowed them to ramp up their Ponzi demonstration projects in the Bakken and Eagle Ford. And they will never again regain their current level of production — which is the net result of past Ponzi financing, now ending in tears. So, forget “Saudi America” and “energy independence,” unless you mean living in a walkable community near a navigable waterway.
Do you want to be an educated person, that is, someone capable of comprehending reality and functioning within its demands? In the USA, that means you must learn how to speak and write English correctly, especially if you are in a “low performing” ethnic minority group. If you can’t conjugate verbs, you will have a hard time distinguishing the past, the present, and the future in your daily activities. Among other things, you’ll be incapable of showing up on time. And that, of course, is only the beginning. It’s that simple. These abilities used to be the result of an eighth-grade education in the United States. We would be lucky to get back to that high standard, and our knucklehead fantasies about universal access to community college be damned. It’s only a new layer in the current racket that pretends to be education.
That is the current state of the union and a glimpse of the trajectory it’s on, which the inept leaders of our country do not comprehend and cannot communicate.
Monday, January 19, 2015
Kunstler: A Solemn Pause
January 19, 2015
A Solemn Pause
Events are moving faster than brains now. Isn’t it marvelous that gasoline at the pump is a buck cheaper than it was a year ago? A lot of short-sighted idiots are celebrating, unaware that the low oil price is destroying the capacity to deliver future oil at any price. The shale oil wells in North Dakota and Texas, the Tar Sand operations of Alberta, and the deep-water rigs here and abroad just don’t pencil-out economically at $45-a-barrel. So the shale oil wells that are up-and-running will produce for a year and there will be no new ones drilled when they peter out — which is at least 50 percent the first year and all gone after four years.
Anyway, the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. Uh Oh….
In short, enjoy the $2.50-a-gallon fill-ups while you can, grasshoppers, because when the current crop of fast-depleting shale oil wells dries up, that will be all she wrote. When all those bonds held up on their skyhook derivative hedges go south, there will be no more financing available for the entire shale oil project. No more high-yield bonds will be issued because the previous issues defaulted. Very few new wells (if any) will be drilled. American oil production will not return to its secondary highs (after the 1970 all-time high) of 2014-15. The wish of American energy independence will be steaming over the horizon on the garbage barge of broken promises. And all, that, of course, is only one part of the story, because there is the social and political fallout to follow.
The table is set for the banquet of consequences. The next chapter in the oil story is more likely to be scarcity rather than just a boomerang back to higher prices. The tipping point for that will come with the inevitable destabilizing of Saudi Arabia, which I believe will happen this year when King Abdullah ibn Abdilaziz, 91, son of Ibn Saud, departs his intensive care throne for the glorious Jannah of virgins and feasts. Speaking of feasts, just imagine how the Islamic State (or ISIS) must be licking its chops at the prospect of sweeping over an Arabia no longer defined as Saudi! The Saudis are so spooked that they announced plans last week for a kind of super Berlin-type wall to be constructed along the northern border with Iraq. But that brings to mind a laughable Maginot Line scenario in which the masked invaders just make an end run around the darn thing. In any case, Saudi Arabia will already be disintegrating internally as competing clans and princes vie for control. And then, what will the US do? Rush in there shock-and-awe style? Bust up the joint? That’ll make things better, won’t it? (See American Sniper.) [Or don't. Paddington or The Wedding Ringer are better worth your time.--P.Z.]
Meanwhile, there will be plenty to contend with state-side. The next time there is a pratfall in the stock and bond markets and the TBTF banks — and there is sure to be — the rescue tricks are liable to be a whole lot more severe than the TARP, ZIRP, and QE hijinks of 2008-2015. Next time around, the federals are going to have to confiscate stuff, break promises, take away things, and rough some people up. The question is how much of this abuse will the public take? I take a certain comfort knowing how heavily armed America is. And not just the lunatic fringe. The thought of Hillary and Jeb out there beating the bushes for big money makes me laugh. They are so not going to happen. Just wait. For now, take this MLK holiday break to reflect on the fragility of our own country, and gird your loins for the week to come.
A Solemn Pause
Events are moving faster than brains now. Isn’t it marvelous that gasoline at the pump is a buck cheaper than it was a year ago? A lot of short-sighted idiots are celebrating, unaware that the low oil price is destroying the capacity to deliver future oil at any price. The shale oil wells in North Dakota and Texas, the Tar Sand operations of Alberta, and the deep-water rigs here and abroad just don’t pencil-out economically at $45-a-barrel. So the shale oil wells that are up-and-running will produce for a year and there will be no new ones drilled when they peter out — which is at least 50 percent the first year and all gone after four years.
Anyway, the financial structure of the shale play was suicidal from the get-go. You finance the drilling and fracking with high-yield “junk bonds,” that is, money borrowed from “investors.” You drill like mad and you produce a lot of oil, but even at $105-a-barrel you can’t make profit, meaning you can’t really pay back the investors who loaned you all that money, a lot of it obtained via Too Big To Fail bank carry-trades, levered-up on ”margin,” which allowed said investors to pretend they were risking more money than they had. And then all those levered-up investments — i.e. bets — get hedged in a ghostly underworld of unregulated derivatives contracts that pretend to act as insurance against bad bets with funny money, but in reality can never pay out because the money is not there (and never was.) And then come the margin calls. Uh Oh….
In short, enjoy the $2.50-a-gallon fill-ups while you can, grasshoppers, because when the current crop of fast-depleting shale oil wells dries up, that will be all she wrote. When all those bonds held up on their skyhook derivative hedges go south, there will be no more financing available for the entire shale oil project. No more high-yield bonds will be issued because the previous issues defaulted. Very few new wells (if any) will be drilled. American oil production will not return to its secondary highs (after the 1970 all-time high) of 2014-15. The wish of American energy independence will be steaming over the horizon on the garbage barge of broken promises. And all, that, of course, is only one part of the story, because there is the social and political fallout to follow.
The table is set for the banquet of consequences. The next chapter in the oil story is more likely to be scarcity rather than just a boomerang back to higher prices. The tipping point for that will come with the inevitable destabilizing of Saudi Arabia, which I believe will happen this year when King Abdullah ibn Abdilaziz, 91, son of Ibn Saud, departs his intensive care throne for the glorious Jannah of virgins and feasts. Speaking of feasts, just imagine how the Islamic State (or ISIS) must be licking its chops at the prospect of sweeping over an Arabia no longer defined as Saudi! The Saudis are so spooked that they announced plans last week for a kind of super Berlin-type wall to be constructed along the northern border with Iraq. But that brings to mind a laughable Maginot Line scenario in which the masked invaders just make an end run around the darn thing. In any case, Saudi Arabia will already be disintegrating internally as competing clans and princes vie for control. And then, what will the US do? Rush in there shock-and-awe style? Bust up the joint? That’ll make things better, won’t it? (See American Sniper.) [Or don't. Paddington or The Wedding Ringer are better worth your time.--P.Z.]
Meanwhile, there will be plenty to contend with state-side. The next time there is a pratfall in the stock and bond markets and the TBTF banks — and there is sure to be — the rescue tricks are liable to be a whole lot more severe than the TARP, ZIRP, and QE hijinks of 2008-2015. Next time around, the federals are going to have to confiscate stuff, break promises, take away things, and rough some people up. The question is how much of this abuse will the public take? I take a certain comfort knowing how heavily armed America is. And not just the lunatic fringe. The thought of Hillary and Jeb out there beating the bushes for big money makes me laugh. They are so not going to happen. Just wait. For now, take this MLK holiday break to reflect on the fragility of our own country, and gird your loins for the week to come.
Monday, December 15, 2014
Monday, November 17, 2014
Kunstler: The Instability Express
Kunstler: The Instability Express
The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. [There's a lot about gas prices.--P.Z.] Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.
Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.
The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.
One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.
When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.
When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.
The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.
The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. [There's a lot about gas prices.--P.Z.] Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.
Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.
The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.
One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.
When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.
When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.
The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.
Monday, November 10, 2014
Kunstler: The Fate of the Turtle
Kunstler: The Fate of the Turtle.
Anybody truly interested in government, and therefore politics, should be cognizant above all that ours have already entered systemic failure. The management of societal affairs is on an arc to become more inept and ineffectual, no matter how either of the current major parties pretends to control things. Instead of Big Brother, government in our time turns out to be Autistic Brother. It makes weird noises and flaps its appendages, but can barely tie its own shoelaces.
The one thing it does exceedingly well is drain the remaining capital from endeavors that might contribute to the greater good. This includes intellectual capital, by the way, which, under better circumstances, might gird the political will to reform the sub-systems that civilized life depends on. These include: food production (industrial agri-business), commerce (the WalMart model), transportation (Happy Motoring), school (a matrix of rackets), medicine (ditto with the patient as hostage), and banking (a matrix of fraud and swindling).
All of these systems have something in common: they’ve exceeded their fragility threshold and crossed into the frontier of criticality. They have nowhere to go except failure. It would be nice if we could construct leaner and more local systems to replace these monsters, but there is too much vested interest in them. For instance, the voters slapped down virtually every major ballot proposition to invest in light rail and public transit around the country.* The likely explanation is that they’ve bought the story that shale oil will allow them to drive to WalMart forever.
That story is false, by the way. The politicos put it over because they believe the Wall Street fraudsters who are pimping a junk finance racket in shale oil for short-term, high-yield returns. The politicos want desperately to believe the story because the background reality is too difficult to contemplate: an American living arrangement with no future.
The public, of course, is eager to believe the same story for the same reasons, but at some point they’ll flip and blame the story-tellers, and their wrath could truly wreck what remains of this polity. When it is really too late to fix any of these things, they’ll beg someone to tell them what to do, and the job-description for that position is dictator.
It’s certainly remarkable that the years since the troubles of 2008 have been so seemingly placid and uneventful, at least here in the USA — not so much if you live in the Middle East or Ukraine, or in the decaying economies of southern Euroland, or the septic failed states of Africa. The many formerly-middle-class Americans living in economic ruin apparently blame themselves when, for instance, they’re billed tens of thousands of dollars for some routine surgery performed “out of network” by a bureaucratic happenstance. They must be punch-drunk with cable news, or over-medicated. Don’t expect this national mood of paralysis and surrender to last indefinitely.
What troubles me at the moment is that when that mood snaps, it will be for a bad reason in the wrong way. Ferguson, Mo., is still sitting there like an unattended back-pack on the courthouse steps. Before Christmas, some kind of grand jury decision is going to come down. All the reality-based chatter points to the probable exoneration of Darren Wilson, the policeman who shot teenager Michael Brown. I expect the trouble arising out of that to be a lot worse than most people currently suppose, and then we’ll literally be off to the races. If that happens, it will be a huge and tragic diversion from the things that really matter to keep the project of civilized life going. In a way, it will be the true beginning of the end. The end of what? Of pretending that the people in authority know what they are doing.
If you think that President Obama is lonely and bereft now, just wait. Some excuse will be found to try an impeach him and then the nation will spend another two years conducting a three-ring circus while the shale oil “miracle” crashes and burns and the banking system melts away to nothing. It’s been fun watching Mitch McConnell get ready to preside over all of this. History could not have found a less sympathetic patsy.
-----------
* See "6 Transportation Ballot Initiatives to Watch Next Tuesday", Streetsblog USA. Also on Streetsblog, a roundup of articles on what happened to some of those initiatives. For example, "Voters Reject Greenlight Pinellas", Tampa Bay Times).--P.Z.
Anybody truly interested in government, and therefore politics, should be cognizant above all that ours have already entered systemic failure. The management of societal affairs is on an arc to become more inept and ineffectual, no matter how either of the current major parties pretends to control things. Instead of Big Brother, government in our time turns out to be Autistic Brother. It makes weird noises and flaps its appendages, but can barely tie its own shoelaces.
The one thing it does exceedingly well is drain the remaining capital from endeavors that might contribute to the greater good. This includes intellectual capital, by the way, which, under better circumstances, might gird the political will to reform the sub-systems that civilized life depends on. These include: food production (industrial agri-business), commerce (the WalMart model), transportation (Happy Motoring), school (a matrix of rackets), medicine (ditto with the patient as hostage), and banking (a matrix of fraud and swindling).
All of these systems have something in common: they’ve exceeded their fragility threshold and crossed into the frontier of criticality. They have nowhere to go except failure. It would be nice if we could construct leaner and more local systems to replace these monsters, but there is too much vested interest in them. For instance, the voters slapped down virtually every major ballot proposition to invest in light rail and public transit around the country.* The likely explanation is that they’ve bought the story that shale oil will allow them to drive to WalMart forever.
That story is false, by the way. The politicos put it over because they believe the Wall Street fraudsters who are pimping a junk finance racket in shale oil for short-term, high-yield returns. The politicos want desperately to believe the story because the background reality is too difficult to contemplate: an American living arrangement with no future.
The public, of course, is eager to believe the same story for the same reasons, but at some point they’ll flip and blame the story-tellers, and their wrath could truly wreck what remains of this polity. When it is really too late to fix any of these things, they’ll beg someone to tell them what to do, and the job-description for that position is dictator.
It’s certainly remarkable that the years since the troubles of 2008 have been so seemingly placid and uneventful, at least here in the USA — not so much if you live in the Middle East or Ukraine, or in the decaying economies of southern Euroland, or the septic failed states of Africa. The many formerly-middle-class Americans living in economic ruin apparently blame themselves when, for instance, they’re billed tens of thousands of dollars for some routine surgery performed “out of network” by a bureaucratic happenstance. They must be punch-drunk with cable news, or over-medicated. Don’t expect this national mood of paralysis and surrender to last indefinitely.
What troubles me at the moment is that when that mood snaps, it will be for a bad reason in the wrong way. Ferguson, Mo., is still sitting there like an unattended back-pack on the courthouse steps. Before Christmas, some kind of grand jury decision is going to come down. All the reality-based chatter points to the probable exoneration of Darren Wilson, the policeman who shot teenager Michael Brown. I expect the trouble arising out of that to be a lot worse than most people currently suppose, and then we’ll literally be off to the races. If that happens, it will be a huge and tragic diversion from the things that really matter to keep the project of civilized life going. In a way, it will be the true beginning of the end. The end of what? Of pretending that the people in authority know what they are doing.
If you think that President Obama is lonely and bereft now, just wait. Some excuse will be found to try an impeach him and then the nation will spend another two years conducting a three-ring circus while the shale oil “miracle” crashes and burns and the banking system melts away to nothing. It’s been fun watching Mitch McConnell get ready to preside over all of this. History could not have found a less sympathetic patsy.
-----------
* See "6 Transportation Ballot Initiatives to Watch Next Tuesday", Streetsblog USA. Also on Streetsblog, a roundup of articles on what happened to some of those initiatives. For example, "Voters Reject Greenlight Pinellas", Tampa Bay Times).--P.Z.
Tuesday, January 14, 2014
Fracking and Cracking
I just found Resilience.org, via a tweet by Richard Heinberg. "Next Oil Sands Threat: Cracking Caprock."
And the French energy company Total, banned from fracking in its own country, has invested heavily in the emerging British oil-shale industry.
And the French energy company Total, banned from fracking in its own country, has invested heavily in the emerging British oil-shale industry.
Sunday, December 29, 2013
Peak Oil is Real, Says a Former BP Geologist
Peak oil doesn't command public attention the way it did ten or even five years ago, especially as the fracking boom and extraction of oil from shale and tar sands, lulls people into a false sense of petro-abundance. But as a former BP geologist recently said, it poses a real threat.
Peak Oil is Real and Can Break Economies
Peak Oil is Real and Can Break Economies
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