The spiritual wisdom of disaster (Headlines from the Meltdown)
GENERAL COMMENT FROM CARDIN (two parts)
1. This is real life, not a disaster movie — and that’s frightening
In my February 6 “Headlines from the meltdown” post, I linked to and quoted from an article by economist and NYU professor Nouriel Roubini, the arch-pessimist of the current economic environment. The article listed what Roubini has dubbed the “twelve steps to financial disaster,” that is, the 12 events or developments that he says have the potential to utterly devastate America’s economy. I only quoted from the introduction to the piece, since the rest of it was available exclusively to paying subscribers to Global EconoMonitor, Roubini’s newsletter (although I myself found the entire text of the thing reprinted elsewhere).
Now Financial Times columnist Martin Wolf has summarized Roubini’s 12-step outline in detail for free public consumption. I’ve pasted the basic outline below, as the first of this edition’s linked readings. You really should click the link and read the entire piece, because, as you’ll notice if you’ve been following economic news at a variety of sites and sources (and I recommend CNNMoney, MarketWatch, Business Week, Newsweek, Prudent Bear, The International Herald Tribune, The Asia Times, The London Times, The London Telegraph, The New York Times, The Wall Street Journal, The Washington Post, The Daily Reckoning, The Financial Times, Buzzflash, AlterNet, CounterPunch, Countercurrents, CarolynBaker.net, the breaking news page at Life After the Oil Crash, plus a variety of blogs and columns) — you’ll notice, I say, that most of the developments Roubini outlines are already underway.
I know I’ve been openly cherry-picking the most dire-sounding, doomsdayish headlines and stories to post and chronicle here at The Teeming Brain. The point is not just to highlight what’s really happening but to paint the grimmest possible picture of it. Call it a combined matter of informed awareness and personal amusement. But in all honesty, I get a rumbling feeling of genuine unease when I scan the news and then hold up what’s actually going on against Roubini’s template for economic collapse. It’s really happening, folks. It’s more than just a matter of idle amusement or fiction-like excitement. America’s economic life has really tipped into the territory of full-blown emergency (as in, the long one elucidated by James Howard Kunstler, the one resulting from a confluence of multiple factors and events). It’s tempting and easy — believe me — to adopt an oddly detached attitude toward all of these things as you stare at them through a computer screen, television screen, or newspaper, an attitude that buffers their reality with the sense that they’re more like a disaster movie or novel than a real-life, real-time series of unfolding events. But they’re not. This isn’t fiction. It isn’t Independence Day or The Day After Tomorrow. It isn’t Armageddon or Godzilla. It isn’t even the 9/11 Commission Report. It’s real life, and while it is certainly possible to spin information in any number of emotional directions, grim or otherwise , the plain fact is that aside from any and all spin attempts by me or anyone else, objective events are fairly hair-raising.
2. The current situation is ripe with spiritual potential
I’ll let other writers make the point for me.
The ego is destined to dissolve, and all its ossified structures, whether they be religious or other institutions, corporations, or governments, will disintegrate from within, no matter how deeply entrenched they appear to be. The most rigid structures, the most impervious to change, will collapse first. This has already happened in the case of Soviet Communism. How deeply entrenched, how solid and monolithic it appeared, and yet within a few years, it disintegrated from within. No one foresaw this. All were taken by surprise. There are many more such surprises in store for us.
….A significant portion of the earth’s population will soon recognize, if they haven’t already done so, that humanity is now faced with a stark choice: Evolve or die. A still relatively small but rapidly growing percentage of humanity is already experiencing within themselves the breakup of the old egoic mind patterns and the emergence of a new dimension in consciousness.
Eckhart Tolle, A New Earth
Woe to him who piles up stolen goods and makes himself wealthy by extortion! How long must this go on? Will not your debtors suddenly arise? Will they not wake up and make you tremble? Then you will become their victim. Because you have plundered many nations, the peoples who are left will plunder you. For you have shed man’s blood; you have destroyed lands and cities and everyone in them.
Woe to him who builds his realm by unjust gain to set his nest on high, to escape the clutches of ruin! You have plotted the ruin of many peoples, shaming your own house and forfeiting your life. The stones of the wall will cry out, and the beams of the woodwork will echo it.
Woe to him who builds a city with bloodshed and establishes a town by crime! Has not the LORD Almighty determined that the people’s labor is only fuel for the fire, that the nations exhaust themselves for nothing?
For the earth will be filled with the knowledge of the glory of the LORD, as the waters cover the sea.
If we totally experience hopelessness, giving up all hope of alternatives to the present moment, we can have a joyful relationship with our lives, an honest, direct relationship, one that no longer ignores the reality of impermanence and death.
Pema Chodron, When Things Fall Apart
A Chinese allegory tells how a monk set off on a long pilgrimage to find the Buddha. He spends years and years on his quest and finally he comes to the country where the Buddha lives. He crosses a river, it is a wide river, and he looks about him while the boatman rows him across.
There is a corpse floating on the water and it is coming closer. The monk looks. The corpse is so close he can touch it. He recognizes the corpse, it is his own.
The monk loses all self-control and wails. There he floats, dead. Nothing remains. Anything he has ever been, ever learned, ever owned, floats past him, still and without life, moved by the slow current of the wide river.
It is the first moment of his liberation.
Janwillem van de Wetering, A Glimpse of Nothingness
For those who want to save their life will lose it, and those who lose their life for my sake will save it. What does it profit them if they gain the whole world, but lose or forfeit themselves?
Approaching death and death itself, the dissolution of the physical form, is always a great opportunity for spiritual realization . . . . One of the most powerful spiritual exercises is to meditate on the mortality of physical forms, including your own. This is called: die before you die. Your physical form is dissolving, is no more. Then a moment comes when all mind-forms or thoughts also die. Yet you are still there — the divine presence that you are. Radiant, fully awake. Nothing that was real ever died, only names, forms, illusions.
Eckhart Tolle, The Power of Now
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Martin Wolf, The Financial Times, Feb. 19
Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome.” The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”
Prof Roubini is even fonder of lists than I am. Here are his 12 — yes, 12 — steps to financial disaster.
Step one is the worst housing recession in US history.
….Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages.
….Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.
Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.
Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
Step eight would be a wave of corporate defaults.
….Step nine would be a meltdown in the “shadow financial system.”
Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.
Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices.”
….Is this kind of scenario at least plausible? It is. Furthermore, we can be confident that it would, if it came to pass, end all stories about “decoupling.”
….Can the Fed head this danger off? In a subsequent piece, Prof Roubini gives eight reasons why it cannot.
….The risks are indeed high and the ability of the authorities to deal with them more limited than most people hope. This is not to suggest that there are no ways out. Unfortunately, they are poisonous ones.
….The connection between the bursting of the housing bubble and the fragility of the financial system has created huge dangers, for the US and the rest of the world. The US public sector is now coming to the rescue, led by the Fed. In the end, they will succeed. But the journey is likely to be wretchedly uncomfortable.
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David Ignatius, The Washington Post, Feb. 21
It doesn’t look like an old-fashioned bank run because it involves the biggest financial institutions trading paper assets so complicated that even top executives don’t fully understand the transactions. But that’s what it is — a spreading fear among financial institutions that their brethren can’t be trusted to honor their obligations.
Frightened financiers are pulling back from credit markets — going on strike, if you will — to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one’s mistakes, the whole system begins to sag. That’s what we’re seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt — from student loans to retailers’ receivables to municipal bonds.
Investors are nervous because they aren’t sure how to value these bundles of securitized assets. So buyers stay away, prices fall further, and the damage spreads.
The public, fortunately, doesn’t understand how bad the situation is. If it did, we might have a real panic on our hands.
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The New York Times, Feb. 19
Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.
In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled.
The breadth and scale of the declines mean more pain for major banks, which have already written off more than $120 billion of losses stemming from bad mortgage-related investments.
The deepening losses might make banks even more reluctant to make the loans needed to prod the slowing American economy. They also could force some banks to raise more capital to bolster their weakened finances.
….“This correction feels a lot deeper and wider and more prolonged than what we have seen historically,” said one senior Wall Street executive who was not authorized to speak to the media.
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Walden Bello, Foreign Policy in Focus, Feb. 20
Skyrocketing oil prices, a falling dollar, and collapsing financial markets are the key ingredients in an economic brew that could end up in more than just an ordinary recession. The falling dollar and rising oil prices have been rattling the global economy for sometime. But it is the dramatic implosion of financial markets that is driving the financial elite to panic.
And panic there is. Even as it characterized Federal Reserve Board Chairman Ben Bernanke’s deep cuts amounting to a 1.25 points off the prime rate in late January as a sign of panic, the Economist admitted that “there is no doubt that this is a frightening moment.” The losses stemming from bad securities tied up with defaulted mortgage loans by “subprime” borrowers are now estimated to be in the range of about $400 billion. But as the Financial Times warned, “the big question is what else is out there” at a time that the global financial system “is wide open to a catastrophic failure.”
….Some key movers and shakers sounded less panicky than resigned to some sort of apocalypse.
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The Washington Post, Feb. 21
[Cardin comments: Note that this revised and more pessimistic economic forecast from the Fed comes only a week after Fed chairman Bernanke teamed up with Treasury secretary Paulson to give a joint “Okay, it’s worse than we’ve been saying” speech, as reported in last week’s installment of “Headlines from the meltdown.”]
The Federal Reserve yesterday slashed its forecast for the country’s economic growth as fresh evidence showed that prices for a wide range of goods are soaring. The twin announcements crystallize the challenge facing the central bank as it tries to prevent a recession without letting inflation get out of hand.
….As the economy slows, that combination creates a potentially toxic mix for American consumers of higher prices and slower growth in the number of jobs and wages. It could even be a milder version of the stagflation, or stagnant growth mixed with inflation, that crippled the nation’s economy in the 1970s.
That would be a central banker’s worst nightmare. For the Fed, it would be a failure to maintain either part of its “dual mandate” ordered by Congress of maintaining low unemployment and price stability.
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CNNMoney, Feb. 21
[Cardin comments: This particular story is hardly academic or remote for me and the other people living in my general neck of the woods, that is, southwest Missouri. The Saturday, February 16 edition of The News-Leader, the wide-circulation daily newspaper originating from nearby Springfield, Missouri — which is the third largest city in the state, after St. Louis and Kansas City — reported in a front-page story that Springfield is currently suffering a budget crisis from an unexpected decrease in sales tax revenue, and that a hiring freeze is now in effect while city leaders figure out what to do. The article mentions that planned new hires in the fire department are already affected. Beyond a mere freeze, the city is actively looking at cutting staff from various departments. On a wider scale, the entire state of Missouri itself is suffering from the same problem, with January’s sales tax collections dropping a staggering five percent from the same month last year. The brief note about the problem at Missouri Digital News states the obvious ramification: “If we have a decrease in a major source of our general revenue fund we will be looking at serious problems in the provision of state services.” The interaction of this phenomenon with the municipal bond crisis will surely have, shall we say, interesting effects on local and state infrastructures.]
“Without affordable funding, projects don’t get built, streets don’t get repaved,” [Wilkes-Barr, New York Mayor Thomas] Leighton said. “It affects the people driving on those roads and the people paving those roads.”
The credit crisis that began in the subprime mortgage market last year has now spread to municipal bonds. Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the companies that insure the debt.
Public officials nationwide are now weighing whether to restructure their debt to lower rates — if they have good enough credit ratings — or to ride out the storm with the hope that investors will return. However, some are concerned they may have to raise taxes or cut services to balance their budgets…..”The result of a destabilized bond insurance market is that some governments, already facing reduced income due to the slowing economy, will have higher borrowing costs,” said New York Gov. Eliot Spitzer, testifying before Congress last week. “That means shifting funds from schools and police to pay interest.”
….This spike in borrowing costs comes at a time when governments can least afford it. Many are already facing a budget squeeze from the national economic downturn. The drop in housing prices and sales and increase in foreclosures mean they are taking in less revenue from transaction fees and property tax revenue. On top of that, the pullback in construction and consumer spending translates into fewer sales tax dollars.
The lost revenue could total billions of dollars, according to the United States Conference of Mayors.
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The Financial Times, Feb. 24
When William Lapp, of US-based consultancy Advanced Economic Solutions, took the podium at the annual US Department of Agriculture conference, the sentiment was already bullish for agricultural commodities boosted by demand from the biofuels industry and emerging countries.
He added a twist –- that rising agricultural raw material prices would translate this year into sharply higher food inflation.
“I hope you enjoy your meal,” Mr Lapp told delegates during a luncheon. “It is the cheapest one you are going to have at this forum for a while.”
His warning that a strong wave of food inflation is heading towards the world economy was met by nods from agriculture traders, food industry executives and western’s government officials at the USDA’s annual Agricultural Outlook Forum.
Larry Pope, chief executive of Smithfield Foods, the largest US pork processor, warned delegates of a wave of “real food inflation” just at the time central banks were under pressure to cut interest rates.
“I think we need to tell the American consumer that [prices] are going up,” he said. “We’re seeing cost increases that we’ve never seen in our business.”
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The Financial Times, Jan. 25
The pressures in global food markets have grown so intense that, for the first time in its history, the World Food Programme is finding it hard to procure supplies of essential commodities, senior officials at the United Nations body indicated on Friday.
In particular, they said, countries in the emerging world are now placing so many export controls on items such as wheat in order to conserve them for their own populations that they have sometimes refused to release supplies when the WFP has asked for emergency goods.
“We have never seen this before: we went begging for wheat and for two weeks we could not find it,” said a senior WFP official at the World Economic Forum in Davos, where growing geopolitical tensions over food supplies and other resources dominated many of the debates.
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OpEdNews.com, Feb. 22
Oftentimes it seems so inconceivable that we could have come to this place, yet here is exactly what we are facing, right now: Depression in the housing market; retail inflation (due entirely to the price of oil and the plummeting dollar), credit availability all but shut down, and today we discover that grain stores are at their lowest point since they began measuring in 1960: 53 days. According to the CEO of Potash Corp., the Canadian fertilizer giant, if there is any disruption to this year’s grain harvest, the world will be facing famine in 2009. And this is not a question of the rock-concert-for-third-world-countries famine, folks. He is describing global shortages of wheat. Food prices are already on the rise; with grain shortages, will surely come hoarding and hyperinflation in food.
If you think times are getting tough, add a real food shortage. Now it’s time to grow backyard farms (Victory Gardens) – in fact it’s not at all a bad idea.
….[N]ot a single week has gone by this year (or, frankly for the second half of last year) without another jaw-dropping economic scandal. In addition to the grim aforementioned facts, of course, the housing slump and crumbling stock markets are continuing to run down the cumulative net worth of the entire American population, the bundled securities pyramid scheme has forced our financial institutions so near insolvency that the Fed quietly slipped them $50 billion to shore up their solvency, and now even state and municipal bonds are going unsold at auction. What more can happen, you ask? Well, I don’t need crystal balls to go foresee some “bank holidays,” as it has already begun in Great Britain, where the government just nationalized Northern Rock Bank. But how many banks could we absorb? How many retirement funds could sustain bond defaults? And how will people eat when food costs soar and the bank is closed?
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Yahoo! News (AP story), Feb. 17
Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction. True, jobs were relatively plentiful over the last few years.It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn’t feel right, even if they couldn’t quite explain why.
Now the economic tide is receding, and the undertow that was there all along is getting stronger. Take away the easy credit and consumers are left with paychecks that, for most, haven’t nearly kept pace with their need and propensity to spend.
….Americans’ declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.
….”This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling,” said Jacob Hacker, a Yale University professor and author of “The Great Risk Shift,” which charts increased economic insecurity. “I think people are saying, where did the gains go? Where did the boom go? And now that it’s gone, what are we going to do?”
….”Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences” separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan’s consumer survey said in summing up the most recent figures.
….Maybe the downturn in optimism is temporary. Americans are voracious consumers and persistent optimists. But some believe a fundamental change in behavior and mind-set is taking place.
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Bloomberg Markets Magazine, March 2008 (cover story)
[Cardin comments: I’ve included such lengthy chunks of this one because it’s such a significant example of the way full-on peak oil thinking has broken through into the mainstream American press. This phenomenon first began in earnest last year with a flurry of stories in the likes of The New York Times, The Wall Street Journal, Time, and various others. Now Bloomberg, one of the major mainstream financial news sources, has run a very long, in-depth, extensively researched story about the reality of peak oil as focused through the vision and efforts of a high-level Toyota employee. And they have run it as the cover story for this month’s issue of their markets magazine.
For readers and followers of the peak oil scene, not much of the information and opinions that follow will be radically new. The included facts about the peak in discoveries of new oil deposits back in the 1960s, the environmental devastation associated with extracting crude oil from tar sands, etc., and also the offered visions of a near future world convulsed by social, environmental, and economic crises as a result of an underlying crisis in energy supply, are old hat to people who are already peak oil aware. What’s new is the fact that a major mainstream source like Bloomberg would run such a report. In the excerpts that follow, Bill Reinert (the Toyota employee) sounds a lot like James Howard Kunstler and other prominent peak oil exponents when he talks about the converging crises that are bearing down on a nation and world that really don’t know how to deal with them, and that will utterly transform our way of life. It really sounds like Reinert and a couple of other people quoted in the story are talking about something akin to Kunstler’s “long emergency.”
Needless to say, it lends support to the peak oil hypothesis when the newness of this type of thing is rapidly wearing off. Peak oil is literally forcing itself into mainstream awareness because, well, it’s real.
Need further proof? How about the inclusion of an entire chapter titled “Searching for Alternative Energy Solutions” in this year’s installment of the annual Economic Report of the President to Congress, which Bush signed just two weeks ago. The chapter even includes a boxed-in sidebar specifically addressing the question of peak oil. So keep your eyes peeled and your ears open, because this story is only just starting to unfold. And it’s the story we’re living in.]
“This is what the end of the age of oil means,” says [Bill] Reinert, 60, who plans the vehicles Toyota will make in a quarter century as national manager for advanced technology at the U.S. sales unit in Torrance, California. “The car-based culture, the business-as- usual of building cars and trucks, is going to change dramatically.”
….Reinert says automakers are endangering themselves by basing sales and profits on the big, fast cars that many U.S. customers say they want in 2008. In five years, as oil shortages and global warming intensify, car companies may be out of step with drivers’ demands for fuel-efficient vehicles. Even worse, degrading stretches of the planet like Fort McMurray [in Alberta, Canada, where epic operations are underway to extract oil from enormous oil sands deposits,] will only delay — not prevent — the time when the world must function in a post-peak- petroleum economy.
….Reinert says nobody can say for sure how the separate tailpipe emission, fuel economy and manufacturing regulations promulgated worldwide by multiple levels of government will affect the environment. There’s no blueprint for the impact of increasingly scarce oil on a U.S. economy already laboring with a mortgage crisis and a dropping dollar. Add industrialization in China and India, and the number of cars and trucks worldwide may double to 2.1 billion by 2030, according to the Paris-based International Energy Agency.
“We don’t have a past, a history or a database that allows us to explore the simultaneous impact of recessions, disruptions to the energy supply and climate change,” says Reinert, who spent six years in the 1980s maintaining solar and wind-powered telephone towers in Colorado’s Rocky Mountains. “We don’t have the legislative, regulatory, financial or product planning tools.”
….The environmental desecration at Fort McMurray and the dangers in petroleum-rich countries such as Iraq and Saudi Arabia show why it’s foolish to brush off warnings about an energy-depleted future, says Jan Kreider, an engineering professor at the University of Colorado at Boulder who had Reinert as a graduate student. “We’re going to have to have crisis on top of crisis before energy policies change,” he says. “Americans have this shock mentality where they do what they want to do for as long as they can and then set up massive programs to fix everything in a few years.”
….”When you’re schlepping around two tons of sand [to extract a single barrel of crude oil from Alberta’s oil sands], it shows that conventional oil is already well into depletion,” says Jeffrey Rubin, chief economist at CIBC World Markets Inc. in Toronto. “Price will ultimately ration demand. People won’t be able to afford to drive.”
….”It’s definitely true that the era of cheap and easy oil is over,” says Brad Bellows, spokesman for Suncor Energy Inc., which opened Fort McMurray’s first commercial oil sands mine in 1967. “Industry is looking offshore and to unconventional sources like oil sands.”
….Reinert says that without action, oil may become so expensive that the world would resemble the one in Blade Runner. In the 1982 film, the rich live hundreds of stories high and the poor walk dark, rain-soaked streets. Or the lack of oil may cause the breakdown of social order depicted in the 1979 movie Mad Max. Reinert says Fort McMurray provides a window into such fictional portrayals. He predicts that the clamor for energy security will trump all environmental concerns worldwide. And he forecasts that most alternatives to conventional petroleum, such as oil sands and ethanol, will make climate change and water shortages worse.
….If Reinert is sure of anything, it’s that Toyota can’t go into reverse. Since 1950, the world has been blessed with an eightfold increase in oil production. Yet the peak discoveries for new oil came in 1962, petroleum consultant [Peter] Wells says. Total production outside the former Soviet Union and the Organization of Petroleum Exporting Countries topped out two years ago, he says. Oil in the former Soviet Union will reach its highest level in about five years; OPEC will peak in about 10, he says.
In the interim, nations will be more dependent on the Middle East, where getting oil is complicated by war, political turmoil and declining output from mature wells. “After a series of incidents in the Persian Gulf, or a low-level nuclear exchange that shuts off oil supplies, you wouldn’t have a short-term disruption like Katrina,” Reinert says. “You would have a profound one- or two- or three-year period in which economies and governments fail.”
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The Atlantic, March 2008
[Cardin comments: Wow. The idea that America’s wholesale rush toward suburbanization, which kicked off in earnest after WWII, will end with today’s suburbs and McMansions becoming tomorrow’s crumbling slums and tenements is a longstanding plank in the peak oil platform advanced by the likes of James Howard Kunstler. But to see a publication like The Atlantic predicting the same thing, and doing it in detail, right down to the Kunstler-like focus on rising fuel costs for home heating and long commutes and the grim future for McMansions hastily constructed from tinkertoy-like materials, is almost surreal.]
Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.
….[T]he story of vacant suburban homes and declining suburban neighborhoods did not begin with the [subprime mortgage] crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.
….For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.
….If gasoline and heating costs continue to rise, conventional suburban living may not be much of a bargain in the future. And as more Americans, particularly affluent Americans, move into urban communities, families may find that some of the suburbs’ other big advantages — better schools and safer communities — have eroded. Schooling and safety are likely to improve in urban areas, as those areas continue to gentrify; they may worsen in many suburbs if the tax base — often highly dependent on house values and new development — deteriorates.
….This future is not likely to wear well on suburban housing. Many of the inner-city neighborhoods that began their decline in the 1960s consisted of sturdily built, turn-of-the-century row houses, tough enough to withstand being broken up into apartments, and requiring relatively little upkeep. By comparison, modern suburban houses, even high-end McMansions, are cheaply built. Hollow doors and wallboard are less durable than solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood veneers or carpeting tend to break up and warp as the glue that holds the wood together dries out; asphalt-shingle roofs typically need replacing after 10 years. Many recently built houses take what structural integrity they have from drywall — their thin wooden frames are too flimsy to hold the houses up.
….[M]uch of the future decline is likely to occur on the fringes, in towns far away from the central city, not served by rail transit, and lacking any real core. In other words, some of the worst problems are likely to be seen in some of the country’s more recently developed areas — and not only those inhabited by subprime-mortgage borrowers. Many of these areas will become magnets for poverty, crime, and social dysfunction.
….About 25 years ago, Escape From New York perfectly captured the zeitgeist of its moment. Two or three decades from now, the next Kurt Russell may find his breakout role in Escape From the Suburban Fringe.