A friend of mine recently commented that multiple hammers are simultaneously inflicting damage on the U.S. economy, specifically mentioning three: rising gas prices, falling home values, and the federal deficit. Not only is he correct, he is also gently understating the precariousness of our situation.
No matter how you delineate between these intertwined headwinds, we can identify far more than three hammers at work, both now and in the future. I will list a few here.
Hammer #1: Peak Oil
Mountains of data indicate that daily, world-wide extraction of oil from the planet has reached its all-time peak at around 85 mbd. Additionally, it is statistically clear that 85 mbd is not the cap on world thirst. Around the globe, heavily populated nations are giving every indication that, they too, would like a piece of the American Dream. During recent months, consumption of oil has been roughly 87 mbd. This should clearly explain the "surprising" drawdowns of crude inventories we have seen as of late.
If you are the thinking sort, you might see how this does not look good for our immediate and long-term future.
Hammer #2: Peak Oil Becomes Household Word
Think "Tickle-Me Elmo."
Right now, I find that about 1 out of 25 people at the local Little League field has heard of the term "peak oil." When I gently ask the few who have to define it, the most common answer is "it means gas prices are getting too expensive." I don't attempt to hone it any further.
The fact that so few have any clue about the impending energy crisis is one great, big, scary "uh-oh." The phrase "they don't know what hit them" will soon be applicable. But, before the word finally reaches the street, gas will probably cost over $7/gallon; coal, natural gas, and heating oil will have probably doubled (thus electricity doubling as well); food prices will be up dramatically; and the civil unrest arising from a simple choice (feed my kids... heat my home... or buy gas and drive to work) will have shot skyward.
When the masses of middle and low income realize what is happening, they are not going to be happy. And then, they'll "learn" that the trader boys of Wall Street, the politicians, and seven-digit CEOs have already made their exit. At that point, all bets are off regarding our ability to police ourselves.
Hammer #3: Personal Debt
Housing values and currency/commodity adjusted stock portfolios are plummeting. With these paper assets go our retirement plans, life savings, college tuitions, hopes and dreams, beliefs in the magnificent destiny of our country, and our easy-going, peaceful nature. Even more sickening: we are going to have to slow our consumption. It's true. We must begin to sacrifice.
Even if our tax codes penalize us, even if our President urges us, we simply cannot go on shopping. We must sacrifice. Our HELOC's have been withdrawn, our credit cards are maxed, and the hardship withdrawals from our 401k are committed to the utility company.
But sacrifice is easier when shared, right? Well, we'll soon find out.
As we lay-up on our spending, struggling businesses will lay-off their employees. Hopefully, it won't be you or me.
Many who are currently right-side up on their mortgage won't be for long. We are seeing year-over-year depreciation that eclipses the former records set during the first Great Depression. There is no end in sight, only false bottoms and sucker bounces from this point forward. Everyone is going to feel the pain.
Hammer #4: Public Debt
I won't bore with you with statistics that proove that the U.S. Federal Government is broke... and without legitimate options. In short, we have a $57 trillion debt that now grows between $2 and $3 trillion per year.
What's that you say? Those aren't the figures you're familiar with?
True. Our politicians don't include the entitlements to retiring baby-boomers in the official story. They've cooked the books. Social Security, Medicare, and Medicaid are not represented. On January 1, 2008, the first of the bulge generation are expecting their just dues. For the next 30 years, we aim to fulfill our promise to them with... what? Thin air?
It may not matter.
Our more immediate worries are the state governements, local municipalities, school districts, home-owners associations, etc. The problem will occur when the times get tough, then tougher, tougher still, and on into the long emergency. Police, fire, and rescue crews will be reduced; roads will pot-hole into oblivion; and school buses will carry only memories of early morning naps, mid-day field trips, and after-school athletic competitions. Once manicured communities will be forced to rely on the collective initiative of residents to clean the pool, re-roof the clubhouse, and beat back the weeds in the playground. Volunteer neighborhood patrols will become more and more dangerous as those from less fortunate neighborhoods go about foraging for all things of value.
Hammer #5: The Fed's Catch-33
Raise Interest Rates: Further decimate the housing industry and stifle business investment.
Lower Interest Rates: Further decimate the dollar.
Hold Steady: Get lynched by both camps.
Hammer #6: The rest of the world doesn't really care for us.
Remember how much sleep you lost when the Soviet Union collapsed? Can you recall the pain that you felt and the tears you shed for those poor communists? Have you been able to recover the boatloads of cash you sent them so that they could at least feed themselves?
Here's the rub: We represent 5% of the world's population, but we consume about 25% of its energy. When they come up short at the pump, can you imagine them thankful that at least the American's had a good time? They might even feel a little pity that our party is over, no?
Whether we truly were on a mission to "bring Democracy to the Middle East," or we were just making a rather hostile oil grab, the vast majority of the world has long ago decided for themselves.
Point: I don't think we should be counting on any relief from abroad.
Hammer #7: Dollar Collapses
OPEC has been considering a move away from the dollar for many years. With all the world's oil trading in U.S. dollars, a switch to any other currency would tank the U.S. for good. We would experience hyper-inflationary depression almost immediately. Every oil-consuming country in the world buys, holds and spends petrodollars. If OPEC goes to the Euro, for instance, what would China do with all their U.S. currency? Answer: Try to beat India to the bank, who happens to be trying to outrun every other civilized country in the world.
Tough times ahead right?
I will finish throwing hammers around when I return to my keyboard later.
Then... for my final trick... I will explain why I think this is all going to be ok.
Unprecedented Crisis
Dads:
I'm issuing you a challenge that you'd be wise to take.
For the next seven days, I ask you to suspend your current "understandings" of economies, national security policies, real estate values, and the overall themes that govern the actions of industry, money, and government.
For the next seven days, I urge to read the links found in the right hand column entitled "Daily News -Energy & Economy."
Peak Oil has arrived.
In place of your "understandings," substitute the following fact: the world has reached peak oil - a period where our ability to supply additional oil to meet increasing demand has reached its all-time, upper-limit maximum, and that each passing day will now bring an ever-widening shortfall gap between supply and desire (demand doesn't work here anymore).
This is not about the falling dollar, speculation, greedy big-oil companies, oilfields off-limits to production, demand destruction, etc., etc.
It is much bigger.
If the world's demand for oil (now at 87 million barrels/day) continues to outstrip supply (now at 85 mil bbl/day) AND we have no possible way of increasing supply... what do you suppose will happen?
Just look at the past year. Crude oil has doubled from $60/bbl to $120/bbl. This doubling of price will now start to accelerate.
We are in a heap of trouble.
Why this challenge?
It is my firm belief that your views of the daily news events will begin to sharpen in focus. Your fuzzy understandings of the forces that are shaping our current and future world will begin to fade, and be replaced by a stunning and intuitive ability to assemble the puzzle of world energy markets.
Seemingly loosely related matters of war policy, foreign investment, humanitarian efforts, strategic alliances of government and industry, commodity trades, border security, government entitlements, and even the current and future value of your home will begin to mesh in your mind to form a solid bond of interconnectedness.
Take the challenge and I'll make you 10 promises:
1) You will become overwhelmed with varying emotions of fear, anger, and despair.
2) You will acquire substantially unpleasant and unpopular viewpoints and convictions.
3) You will encounter urges to make radical and drastic changes to the plans for your future.
4) You will find yourself isolated amongst family and friends.
5) You will survive.
6) You will find an altogether new level of "truth."
7) You will gather new appreciation for the phrase "the truth shall set you free."
8) You will regain your emotional footing and find yourself with an exhilerating new ability to think more clearly, make wiser decisions, and plan more effectively for your family's future.
9) You will develop compassionate attitudes, language sensitivities, and infectious convictions that will be much appreciated in the near future.
10) You will become a leader for countless individuals, families, and communities.
If you accept this challenge, then this site is for your use. Here you will find mountains of information, research, insights, and warnings that have failed to reach the average Joe American - but are critical for you to know.
I'll begin rather abruptly.
We have allowed the Gerber news networks and the Pravdas-of-print to shape our understanding of the world - and lull us to sleep.
This is what they're not telling us:
We are in the middle of a national and world-wide crisis of unprecedented and possibly unstoppable proportion. At the core of this crisis is peak oil and per capita energy use. Just as our populations turn hockey-stick skyward, our allotment of cheap energy is reaching the bell-curve peak. As we witness these two graphs interact with one another, we will begin to witness structural changes - of biblical proportion - to our world.
Humanity will now endure a slow-motion train wreck. The first wheels leaving the track are already identifiable: shrinking asset values (home, auto, stocks, cash), rapidy rising food & energy prices, escalating public and private debt, among others.
The next wheels to go are the industries relying heavily on cheap transportation fuels such as airlines, tourism, manufacturing, and - most critically - pizza delivery.
This all leads to loss of employment, collapsing economies, insolvent governments, resource scarcities and volatilities, environmental degradations, food shortages, and increasing geopolitical hostilities.
Unfortunately, this band of death is no longer on the horizon, down the street, or even knocking on the door. Rather, they've slipped into our living rooms and they've come for our lives. With our children at play upstairs unaware, the cathode-ray face with surround-sound mace hastily suffocates a brief flash of primordial instinct and call-to-arms intuition... "This just in, Britney Spears shaves her head."
With delusion secure by attention detour, a drumbeat of varied pitch sound-bites roll in to overwhelm our fragmented minds. The truth of our fate never reaches us. We accept - without question - the manufactured tide of common understanding with its counterfeit problems and sophistic solutions.
Our secular religion of "exponential growth" is a Pied Piper, and he has us marching toward the cliff in a drunken stupor. Wave after wave of us, unaware of our fate and/or unable to retreat through the weighted masses, are being shoved over the edge. Try as we might, it's too late. There is no Hollywood ending to this story. Our near-term future (dare I say... even here in the U.S.?) will include mass-scale famine, disease, war, and death unlike the world has ever seen.
We're at Peak.
If this age is remembered at all by the ensuing centuries, the 50 years either side of 2,000 a.d. may well be remembered as the "Peak Era."
Peak Era of __________... what?
Just fill in the blank and we are correct.
Life - Death
Health - Disease
Wealth - Poverty
Faith - Fear
Hope - Despair
Comfort - Pain
Abundance - Scarcity
Peace - War
Feast -Famine
Security - Terror
Love - Hate
Truth - Deception
For better - and for worse - the peak era of civilization is at hand. We are living it right now. If we've been gathering our "understandings" from the New York Times and CNN, then we are probably unaware that our children will face a world far more dangerous than we've ever imagined.
Up for the challenge?
You're family is counting on you.
Tuesday, June 3, 2008
Subscribe to:
Posts (Atom)