The official unemployment number is 9.7% and the more correct U6 number is 15.4%. We face a disaster like the subprime mortgage mess in commercial real estate and its unwinding over the next four years will take down between 15% and 30% of our FDIC insured banks. The attendant credit contraction is going to wipe out a large portion of consumption in the United States, consumption which makes up a ridiculous 70% of our economy. And that 70% number comes from having foolishly exported our manufacturing jobs over the last two generations; we’re short of the means to rebuild some sort of post peak oil economy even if we have the remaining fossil fuels and political will to do so.
The word ‘unemployed’ implies that there is an ‘employed’ out there waiting if only the person would retrain, relocate, or accept a job paying less than the last one. If peak oil is truly the epochal change it appears to be this may be an incorrect view. The estimated 30% who are going to lose their livelihood may never recover. They’ll become landless peasants in a post peak oil world.
A little more foundation for the lede:
"We are in the tank forever. As a country we are out of control, we're in a death spiral."
The Automatic Earth publishes the Debt Rattle, a daily summation of finance, banking, and economics articles. Their sources are the top print and online economic journalism sites: Bloomberg features prominently, as does the BBC, the Wall Street Journal, and the Washington Post.. They give equal billing to bloggers who are getting it right and they wrap it all up with a pithy daily introduction.
I ripped the quite above from yesterday’s Debt Rattle – no need for cherry picking, the news is uniformly bad. This one is from Howard Davidowitz but as a benchmark for predictions I look at Meredith Whitney’s prognostication. Go search YouTube and you can find this well respected banking sector analyst appearing on various TV shows. She gets death threats at times from businesses that she analyzes. Her position is such that she can’t make predictions so grim as the ones I carry to you – she’d cause a panic. Her estimates have steadily tracked, albeit several steps behind, the very worst the other industry watchers have to offer.
That 15% to 30% mortality rate for FDIC insured banks is very real and the constraints of the FDIC’s war chest coupled with concerns over starting a panic are the only thing holding them back from doing the housecleaning we so desperately need.
"In the next five to ten years, oil production from non-OPEC producers will reach a peak before starting to decline, for lack of sufficient reserves."
We are 5% of the world’s population consuming 25% of the world’s oil directly. Our 70% consumption based economy coupled with the offshoring of manufacturing means an additional 10% of world oil consumption is ours, too. We’ve known for 53 years, thanks to the work of Marion Hubbert King, that we were going to experience a phenomenon known as peak oil. He predicted back in 1956 that U.S. oil production would peak between 1965 and 1970, with global production peaking about half a century from now. The U.S. used to have an entity called the Texas Railroad Commission, the OPEC of its time, and in the spring of 1971 a little noticed newspaper announcement indicated "100% allowable". Domestic producers pumped flat out and our production never exceeded that month, despite technical advances and the motivation of the oil embargo.
The quote here I did have to hunt up, but one can find no more credible voice than the International Energy Agency’s Faith Bierol, quoted here from a Le Monde article. She is constrained by the same concerns as Meredith Whitney – someone in her position could cause a panic with a too aggressive statement. I can take care of the full disclosure estimate for her. Globally we thought the peak had been reached in May of 2005. The predicted undulating plateau was here and the final gasp actually came in July of 2008. We might be able to pump a bit more if our finances weren’t so messed, but they are, and the fields are going to keep depleting even if we’re in a massive economic downturn. This is a constraint for us now – every time we think we’re going to stand back up we’ll bang our heads on the ever lowering ceiling of maximum oil production.
There are emotional and ideological disagreements to these two issues. It’s very common for those faced with such changes in their lifetime to simply deny that it’s possible. Dmitry Orlov relates this in Reinventing Collapse – after the fall of the Soviet Union some of the older Russians wandered the streets carrying portraits of their leaders, simply unable to grasp what had happened. The god of growth is in its death throes now and this passing has dramatic implications for the United States. Our empire is certainly done, bled out in the thin mountain air of Afghanistan, but our union itself may fray under the combination of economic, energy, and environmental forces.
The twin forces of economic collapse and fossil fuel energy depletion are going to squeeze the distant, inefficient, poorly constructed suburbs like a tube of toothpaste dropped into an old wringer style washing machine. The residents of the unsustainable developments will pour out into the face of a society set to view those without a home as somehow defective, rather than viewing the system itself as defective. That disaffected mass is one possible seed of the unbinding for our union.
It won’t be the case at first, but these who are neither properly homeless nor unemployed, but instead economic refugees in their own land are actually landless peasants. Consider the statistical similarities between the United States and Brazil, which hosts the Movimento dos Trabalhadores Rurais Sem Terra, or MST. The English translation is the Landless Worker’s Movement.
Brazilian land distribution? The top 1.6% own half of all arable land. U.S. wealth distribution? The top 1% own 38% of all wealth.
I often write about the need for renewable ammonia and it’s well known that this is tied to our current factory farm system, but it runs much deeper than that. There is an existing market for ammonia, some eighteen million tons a year in the U.S. alone, and if we overbuild that’s fine, because ammonia is useable as a liquid fuel in its own right, allowing us to skip ethanol/biodiesel production and use it directly. There is a bigger picture to this and it won’t sit well with many idealistic Kossacks: ammonia drives grain production, grain is virtual water, and we’re better set in this regard than most parts of the world. There is speculation regarding a bi-lateral food for oil global economy. No one wants to talk about what happens to those who have neither and I can scarcely bear to think of it, but I can’t envision a way to help them. We’re simply too many, the seven billion of us on this little rock.
So, the opposite side of the factory farming coin where I’ve first focused my personal efforts to interdict economic collapse and global warming is this societal transformation of epochal proportion. The two aren’t mutually exclusive, in fact they’re complementary, clean industry on one hand and the dramatic reduction in consumption and change in lifestyle in the other, but the first is where I saw a way to maybe get paid for helping the process along. There doesn’t seem to be a lot of money in grim prognostication of reduced standards of living, but we have to start talking and planning for this or we’ll have folks wandering in the street like those Russians of twenty years ago.
One thing immediately grabbed me when I started reading about the Brazilian movement was the rail aspect and the need for urban/rural cooperation. Go digging with Google and you’ll find endless stories about them interdicting rail in Brazil, but along with it you find things like this:
The political aspect, the land struggle as it will become in the future, implies several challenges. One of the dangers is that the cause of the MST will become isolated in rural matters and forget to include the cities. This is a great risk, as one consequence of successive internal migrations is that the majority of Brazil’s population is now urban. The redefinition of the enemy and its objectives is also resulting in a restructuring of political alliances. From now on, as Stédile himself says, campesinos will become more reliant on establishing relationships with urban workers to achieve their aims.
The landless of rural Brazil are also the transportless – they’re asking for what Alan Drake calls transit oriented development. The factory farms are already running large vehicles over distances, but plots of land remote from the means to get to them do little for those who are disempowered, especially when they need to interact economically and politically with their urban allies. A mix of medium speed long distance rail and interurban rail here in the U.S. will facilitate both this return to the land and the spread of wind energy via the use of rail corridors for transmission right of way as well as for wind farm construction materials transport. And that benefits ammonia production and the attendant greenhouse operations using waste heat.
We can do no better thing for ourselves as a nation than to position for a lower energy future and the attendant migrations that will come with it. We’ve already learned that rail access means thriving rural towns and Alan Drake’s work with the Threshold 21 model demonstrates that we could see a 10% reduction in oil use and a 25% increase in our economy due to development (not growth!) related to rebuilding our rail infrastructure.
This won't be the life we've known, but it's a far cry better than the worst case scenarios if we don't get moving on the needed infrastructure now.