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VK2AAB > FUEL 11.04.09 15:46l 126 Lines 7872 Bytes #999 (0) @ WW
BID : 890_VK2AAB
Read: GUEST
Subj: The Doomer View of PO
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Sent: 090408/0048Z @:VK2AAB.#SYD.NSW.AUS.OC #:890 [SYDNEY] FBB7.00i $:890_VK2AA
From: VK2AAB@VK2AAB.#SYD.NSW.AUS.OC
To : FUEL@WW
Hello All,
What follows has a US slant but there are similar so called Doomer
views in most other countries.
I thought I would "expose" you to these views as it does illustrate one the
range of scenarios that can follow the advent of peak oil last year.
There appears to be a buffer of some five million barrels a day of oil
production. The world is using about 81 million barrels a day, down by 5Mbd
at present due to the global financial crash.
Once there is some recovery that buffer will be used up very quickly.
There is an opinion that depletion has already started and production
depletion may meet demand on its way up.
James Kunstler is an author with a remarkable gift for words and in many of
his ideas he is not far off.
73 Barry VK2AAB
---------------------------------------------
April 6, 2009
Strange Days
Even while a wave of reflex nausea washed over America last week, and the
unemployment rolls swelled by much more than another half million, the
greatest stock market suckers' rally in seventy years pulled in the last of
the credulous. These are strange days. The earth is heaving and the buds
swelling again -- at least north of the equator, where most of the action is
-- and the global economy, which was supposed to be a permanent new add-on to
the human condition, is sloughing away in big horrid gobs. But no one in
charge of anything can believe it. The banking fiasco has introduced so much
noise into the system that world leadership can't think straight.
What they're missing is real simple: peak oil means no more ability to
service debt at all levels, personal, corporate, and government. End of story.
All the other exertions being performed in opposition to this basic fact-of-
life amount to a spastic soft-shoe performed before a smokescreen concealing a
world of hurt. If the "quantitative easing" (money creation) and fiscal
legerdemain (TARPs, TARFs, et cetera) happen to jack up the "velocity" of the
new funny-money, and the world resumes its previous level of oil use, the
price of oil would rise again -- this time astronomically because the previous
crash of oil prices crushed the development of new oil projects to offset
depletion -- and the global economy will crash again. Only the next phase of
the disease is liable to move beyond the financial and into the social and
political realms. Disorder of various kinds will rule -- toppled governments,
civil unrest, international tension and conflict.
The US is doing everything possible to avoid these awful realities, but
probably the worst self-deception is the idea that everything would be okay if
we could just "re-start lending." That's just not going to happen. There is no
more capacity to service the debt we've already piled on. Americans borrowed
too much, and the bankers who made obscene fortunes in fees and bonuses in
fraudulent lending managed to leverage this unpayable debt into the greatest
collective swindle the world has ever known. The swindle has sent poison into
every cell of the macro socio-economic organism, and further swindles are
unlikely to revive it.
The rally in stocks, the financials in particular, could go on for
another month or two. In the meantime, banks are striving desperately to avoid
calling in more bad loans -- especially in commercial real estate, malls,
strip malls, Big Box power centers -- because they don't want any more losses
on their balance sheets. That can only go on for so long, too. Sooner or later
the daisy chain of credibility in the fundamental transactions of business
lose legitimacy and something's got to give.
My guess is it will first take the form, sometime after Memorial Day (but
maybe sooner) of wholesale liquidations of everything under the North American
sun: companies, households, chattels, US Treasury paper of all kinds, and, of
course, the S & P 500. We'll soon find out whether an organism the size of the
United States can run an economy based on one family selling the contents of
its garage to the family next door. My guess is that this type of economy
won't support the standards of living previously enjoyed in places like Dallas
and Minneapolis.
The socio-political fallout from the inherent anger and disappointment
in all this is liable to be severe. The public is already warming up for it,
with cheerleaders such as Glen Beck on Fox TV News calling for the formation
of militias, and gun sales moving out-of-sight. One mistake that the banking
elite and their lawyer paladins made the past decade was their show of
conspicuous acquisition -- of houses especially -- in easy-to-get-to places
where anyone can see them, for instance an angry mob in Fairfield County,
Connecticut, or Easthampton, New York. Unlike the beleaguered elites of South
Africa (where I visited recently), who live behind layers of fortification,
the executives of Citibank, Goldman Sachs, J.P. Morgan, and a long list of
hedge funds, will be found cringing in their wine-lockers behind a measly
layer of privet hedge when the tattooed minions of Glen Beck come a'calling.
This could perhaps be avoided if someone in authority like US Attorney
General Eric Holder took an aggressive interest in the multiple swindles of
the decade past, and commenced some prosecutions. But the window of
opportunity for this sort of meliorating action may close sooner than the
government and the mainstream media believe. Social phase-change, as in the
formations of mobs, is nothing to screw around with. Once the first window is
broken, all bets are off for social stability. My guess is that the various
bail-out gifts to the bankers are long past having gone too far in the eyes of
this increasingly flammable public.
We have no previous experience with this type of social unrest. The
violence of the Vietnam era will look very limited and reasonable in
comparison -- in the sense that it was an uprising on the grounds of
principle, not survival. And the Civil War was a wholly regimented affair
between two rival factions. This time, people with little interest in
principle beyond some dim idea of economic fairness, will be hoisting the
flaming brands out of sheer grievance and malice. By the time Lloyd Blankfein
sees the torches flickering through his privet, it will be too late to defend
the honor of his cappuccino machine.
President Obama will have to starkly change his current game plan if this
outcome is to be avoided. I think he's capable of turning off the mob -- of
preventing the grasshoppers from turning into ravening locusts -- but it may
take an extraordinary exercise in authority to do it, such as the true (not
pretend) nationalization of the big banks, engineering the exit of Ben
Bernanke from the Federal Reserve, sucking up the ignominy of having to
replace failed regulator Tim Geithner in the Treasury Department, and calling
out the dogs on the swindlers who had the gall to play their country for a
sucker.
As I've averred more than a few times in this space before, the standard
of living in America has got to come way down. We mortgaged our future and the
future has now begun. Tough noogies for us. But the broad public won't accept
the reality of this as long as the grandees of finance and their myrmidons
appear to still enjoy the high life. They've got to be brought down hard,
perhaps even disgraced and humiliated in the courts, and certainly parted from
some of their fortunes -- if only in lawyer's fees. Mr. Obama pretty much
served notice to this effect last week, telling a delegation of bankers in the
White House that he was the only thing standing between them and "the
pitchforks." It's possible he understands the situation.
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