October 29, 2007
|It's All Downhill From Here||Economy Future Politics War and Peace|
Technocrats are technocrats because they like measurable things. Thus there is a great deal of discussion of peak oil, because oil production is a measurable thing. As someone who has written about peak oil longer than most, and understood its implications better, I would be the last person to diminish the importance of physical scarcity and lessening bandwidth as a problem for the global economy. Particularly in the light of our dependence on petroleum and other carbon based forms of energy. However our present spike in oil has nothing to do with peak oil directly, but instead everything to do with a gush of dollars. Peak dollar capacity, not peak production capacity, is what is making $100/bbl the new "over/under" number among the oil traders I talk to. [...]
The present spike of oil is, to some extent, driven by offshoring and demand. This decade is really like the 1920's not the 1930's. While prosperity has not reached many in the developed world, this has been a boom time for the developing world. When America was a developing nation, we profited from similar consumption binges in the then core nations of France, Great Britain and Germany. We are making the same mistakes they did in their time in the sun.
The real reason for the spike in oil prices is the pouring of dollars into the global economy meant to bail out the banking sector without imposing any accountability on the people who run it.
The coming World War
So Bernanke pumps dollars into the system, those dollars go elsewhere, and the difference - we stagnate while others advance - makes inevitable, and at this point I say inevitable - that there will come a point where military conflict will be used by those others to evict the United States from the privileged position of having 6% of the world's population and using 25% of the world's oil. That day is coming and the question now is how many millions of people will die when it arrives. Americans have declined, and will in 2008 decline again, to do anything to stop the arrival of a real world war, to replace this fake made for cable one. There aren't many any chances left. This same was true in the 1840's and 1920's. The real instability is yet to arrive.
When it does arrive there will be several islamic states with atomic weapons and the means to deliver them. They will, as the underdogs in the conflict, have the ability politically to use these weapons, perhaps assymetrically, to bring down an order that they do not need. New York City and London are simply too tempting as targets, and the counter attack against the oil fields would destroy what we need. The arabs do not need our financial centers for much longer, we will need the oil in such a conflict.
There is at this point nothing that will be done about this. The current leadership of the US, and of Europe, is completely committed to a global conflict in the future in order to keep doing what they are doing in the present. The right that people are willing to kill for is the right to overconsume what is underpriced. The disutility of oil - in physical terms of war, pollution and scarcity - is well under priced. The price of oil will rise to just below the cost of solving the problems. It will always be a little bit cheaper to pay Saudi Arabia an oil tax not to solve the problem, than to pay ourselves to solve the problem. Just as it was always a little bit cheaper to let slavery continue than to buy it out. That is, until such time as it was clear that there were two mouths and one slice of pie. That day is inevitable, because right now many people are happily munching on the pie. Don't exclude yourself.
What's next, the short term
Short term, if you see a maniac running down the street randomly shooting people while the police look on, bet that he will keep shooting until he runs out of bullets. George Bush will keep fighting in Iraq until the second he leaves office. Congress will keep handing this maniac bullets, and the Central Bank will keep looking the other way. Don't get too attached, to your kid's left arm. [...]
Coal. Bet on coal. Coal. Coal. Coal. Coal. Why? Because both China and the US have lots of it, and will want to use that to get out of dealing with their energy problems, or face economic contraction. [...]
However, this particular farce doesn't have much longer to run, already the process of buying up the financial sector by arabs and chinese interests is proceding. That means that soon the bankers and the other elite are going to start hating this expansion as much as the rest of the country...Bet that the trough after the recession will be, as the last two have been, long, slow, and hard.
This is why I shout this now: get rid of debt, and work your butt off for every bit of money you can now, because this is the last year or so that it will be really easy to do. After that, we might have an expansion, but you won't see any advantage from it.
What can our current political leadership do? Can? Lots of things. Are? Nothing.
They after all, are getting very well paid. 2004 was the most important election in your lifetime. 2008 is the least important election in your lifetime. Nothing is going to be decided. Nothing. [Emphasis added]
Have a nice day.
"The price of oil will rise to just below the cost of solving the problems. It will always be a little bit cheaper to pay Saudi Arabia an oil tax not to solve the problem, than to pay ourselves to solve the problem. Just as it was always a little bit cheaper to let slavery continue than to buy it out. "
Now that's telling. What I read there is that renewable and sustainable systems will never be implemented, because they'll always be just a little more expensive than the current system (which is cheaper because the externalities aren't accounted for).
of course it's a dumb arguement, but it's the one that's been made for the last 30 years. I mean, nobody talks about the payback time for a swimming pool or another car or having another kid, but that always gets asked when you consider installing solar panels.
Posted by: at October 31, 2007 11:35 AM