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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] WHAT NEXT? James Howard Kunstler
  • Date: Tue, 03 Mar 2009 12:26:19 -0700


"The net effect of the failures in banking is that a lot of people have
less
money than they expected they would have a year ago. This is bad enough,
given our habits and practices of modern life. But what happens when
farming collapses? The prospect for that is closer than most of us might
realize. The way we produce our food has been organized at a scale that has
ruinous consequences, not least its addiction to capital. Now that banking
is in collapse, capital will be extremely scarce. Nobody in the cities
reads farm news, or listens to farm reports on the radio. Guess what,
though: we are entering the planting season. It will be interesting to
learn how many farmers "out there" in the Cheez Doodle belt are not able to
secure loans for this year's crop."


WHAT NEXT? James Howard Kunstler
Monday, 02 March 2009
http://carolynbaker.net/site/content/view/1004/1/
[The next collapse? Farming. The decline continues to keep coming back to
the issue of food security.--CB]

ORIGINAL BLOGPOST
http://jameshowardkunstler.typepad.com/
Isn't that a question, though....


The Peak Oil story was never about running out of oil. It was about the
collapse of complex systems in a world economy faced by the prospect of no
further oil-fueled growth. It was something of a shock to many that the
first complex system to fail would be banking, but the process is obvious:
no more growth means no more ability to pay interest on credit... end of
story, as Tony Soprano used to say.


There was a popular theory among Peak Oilers the last decade that the world
would enter a "bumpy plateau" period when the global economy would get
beaten down by peak oil, would then revive as "demand destruction" drove
down oil prices, and would be beaten down again as oil prices shot up in
response -- with serial repetitions of the cycle, each beat-down taking
economies lower -- the only imaginable outcome being some sort of quiet
homeostasis. This scenario did not play out as expected. It was predicated
on a mistaken assumption that all systems would retain some kind of
operational resilience while ratcheting down. Anyway, the banking system
was mortally wounded in the first go-round and the behemoth is dying hard.

The last desperate act of the banking system in the face of Peak Oil's
no-more-growth equation was to engineer species of tradable securities that
could produce wealth out of thin air rather than productive activity. This
was the alphabet soup of algorithm-derived frauds with vague and
confounding names such as credit default swaps (CDSs), collateralized debt
obligations (CDOs), structured investment vehicles (SIVs), and, of course,
the basic filler, mortgage backed securities. The banking system is now
choking to death on these delicacies.


The trouble is that the EMT squad brought in to rescue the banking system
-- that is, governments -- can't remove these obstructions from the
patient's craw. They don't want to drown in a mighty upchuck of the
alphabet soup.


The collapse of complex systems is actually predicated on the idea that the
systems would mutually reinforce each other's failures. This is now plain
to see as the collapse of banking (that is, of both lending and debt
service), has led to the collapse of commerce and manufacturing. The next
systems to go will probably be farming, transportation, and the oil markets
themselves (which constitute the system for allocating and distributing
world energy resources). As these things seize up, the final system to go
will be governance, at least at the highest levels.


If we're really lucky, human affairs will eventually reorganize at a lower
scale of activity, governance, civility, and economy. Every week, the
failure to recognize the nature of our predicament thrusts us further into
the uncharted territory of hardship. The task of government right now is
not to prop up doomed systems at their current scales of failure, but to
prepare the public to rebuild our systems at smaller scales.


The net effect of the failures in banking is that a lot of people have less
money than they expected they would have a year ago. This is bad enough,
given our habits and practices of modern life. But what happens when
farming collapses? The prospect for that is closer than most of us might
realize. The way we produce our food has been organized at a scale that has
ruinous consequences, not least its addiction to capital. Now that banking
is in collapse, capital will be extremely scarce. Nobody in the cities
reads farm news, or listens to farm reports on the radio. Guess what,
though: we are entering the planting season. It will be interesting to
learn how many farmers "out there" in the Cheez Doodle belt are not able to
secure loans for this year's crop.


My guess is that the disorder in agriculture will be pretty severe this
year, especially since some of the world's most productive places --
California, northern China, Argentina, the Australian grain belt -- are
caught in extremes of drought on top of capital shortages. If the US
government is going to try to make remedial policy for anything, it better
start with agriculture, to promote local, smaller-scaled farming using
methods that are much less dependent on oil byproducts and capital
injections.


This will, of course, require a re-allocation of lands suitable for growing
food. Our real estate market mechanisms could conceivably enable this to
happen, but not without a coherent consensus that it is imperative to do
so. If agri-business as currently practiced doesn't founder on capital
shortages, it will surely collapse on disruptions in the oil markets.
President Obama at least made a start in the right direction by proposing
to eliminate further subsidies to farmers above the $250,000 level. But the
situation is really more acute. Surely the US Department of Agriculture
already knows about it, but the public may not be interested until the
shelves in the Piggly-Wiggly are bare -- and then, of course, they'll go
apeshit.


The recent huge drop in oil prices has left the public once again convinced
that the world is drowning in oil -- if only the scoundrelly oil companies
were forced to deliver it at reasonable prices. The public has been
consistently deluded about this for decades. What's missing so far is for
the president of the US to lay out the reality of the situation in a
dedicated TV address. I know a lot of you think that Jimmy Carter already
tried this and failed to make an impression (and ruined his presidency in
the process). I guarantee you that Mr. Obama will have to do this sometime
in the next few years whether he likes or not, and he'd be well-advised to
get it done sooner rather than later. And by this I don't mean just vague
allusions to "energy independence" or "renewables" in speeches devoted to
many other issues. I mean telling the public the plain truth that we'll
never offset oil depletion and the intelligent response is to do everything
possible to transition to walkable towns and public transit, not to sustain
the unsustainable.


The alternatives -- i.e. what we're trying now -- is to further delude
ourselves into thinking that we can run WalMart and the suburbs by some
other means than oil. Despite all our investments in these things, we won't
be able to run them by other means, and the news about this had better get
out before enormous disappointment turns into titanic rage. If Americans
think they've been grifted by Goldman Sachs and Bernie Madoff, wait until
they find out what a swindle the so-called "American Dream" of suburban
life turns out to be.


On this blizzardy Monday in the power centers of America, attention is
fixed on the never-ending fiasco of AIG -- a company whose main product
turned out to be credit default swaps, and is now choking on them.
Kibitzers on the sidelines of finance are forecasting a king-hell bear
market suckers' rally in the stock markets followed by a belly flop to Dow
4000 or lower. I myself called for Dow 4000 two years ago -- and was
obviously a bit off on my timing. All this is surely trouble enough. But
while your attention is focused on Rick Santelli in the Chicago trader's
pit, or Larry Kudlow desperately seeking "mustard seeds" of new growth in
financials, try to let one eye stray to the horizon where these other
complex systems are working out their next moves. Farming. The oil markets.
These are the coming theaters of alarm and distress.




  • [Livingontheland] WHAT NEXT? James Howard Kunstler, Tradingpost, 03/03/2009

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