GENERAL COMMENT FROM CARDIN:
America’s bill is due. Are you ready to pay?
For those of you who still don’t know — and just where in God’s name have you been? –- Richard Heinberg is a major voice in the collective peak oil/economic meltdown/peak civilization conversation. He’s awesomely smart, insightful, sensitive, educated, and well informed. In short, he’s somebody you should listen to when he talks. An excerpt from the bio at his Website paints the picture nicely:
Richard Heinberg is the author of eight books….He is a Senior Fellow of Post Carbon Institute and is widely regarded as one of the world’s foremost Peak Oil educators. He writes a regular column for The Ecologist, and has also authored scores of essays and articles….He has appeared in numerous video documentaries, including Leonardo DiCaprio’s 11th Hour.
The full MuseLetter that the first item below is excerpted from features an extended report on the current coal situation as well as Heinberg’s complete introduction to the second edition of When Technology Fails by Matthew Stein. It’s all great reading, especially when you consider it in light of what he says at the end, which is what’s appears below.
For those raised in the short-attention-span-theatre of contemporary media culture, the nutshell version of what Heinberg is saying is this: America’s monstrous growth binge is now coming to a crashing end. The bill has just come due for our profligacy. And we’re all going to pay for it very deeply and for a very long time to come.
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It’s Happening (economic collapse, famine, etc. — the entire peak oil scenario)
Richard Heinberg, MuseLetter #193 / May 2008
There is a surreal quality to the experience of seeing the unfolding of unpleasant events that one has predicted. Plenty of times over the past few years I’ve said, “I want to be proven wrong!” Who in their right mind would wish to see economic collapse and famine? But it was obvious that, given the direction our society is headed, these must be the consequences. Now, with oil at $117 a barrel, the US economy teetering, and food riots erupting in Haiti, Egypt, and Asia, one could perhaps gain some satisfaction in saying “I told you so.” But what faint compensation that would be. We are all going to have to share the bitter fruits of our society’s century-long growth binge, whether we have criticized it or participated wholeheartedly. The only silver lining is the possibility that now, at last, as the trends (Peak Oil, the failure of growth-based economics, the failure of industrial agriculture, climate chaos, and so on) are becoming so starkly clear, policy makers will begin seriously to contemplate a Plan B (or C, as Pat Murphy insists). For those of us who have been lobbying in that latter direction for some while, this is no time to let up, but rather the ideal moment to redouble our efforts.
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Emptying the Breadbasket: Transformation of U.S. agriculture means end of cheap wheat
The Washington Post, April 29
At Stephen Fleishman’s busy Bethesda shop, the era of the 95-cent bagel is coming to an end.
Breaking the dollar barrier “scares me,” said the Bronx-born owner of Bethesda Bagels. But with 100-pound bags of North Dakota flour now above $50 — more than double what they were a few months ago — he sees no alternative to a hefty increase in the price of his signature product, a bagel made by hand in the back of the store.
“I’ve never seen anything like this in 20 years,” he said. “It’s a nightmare.”
Fleishman and his customers are hardly alone. Across America, turmoil in the world wheat markets has sent prices of bread, pasta, noodles, pizza, pastry and bagels skittering upward, bringing protests from consumers.
But underlying this food inflation are changes that are transforming U.S. agriculture and making a return to the long era of cheap wheat products doubtful at best.
….Wheat’s fall from favor, little noticed when it was cheap, has been long coming. Though still an iconic symbol of American abundance — engraved on currency and praised in song — the nation’s amber waves of wheat have been increasingly shoved aside by other crops. The “breadbasket of the world,” which had alleviated hunger and famine since World War I, now generally supplies only a quarter of world wheat exports.
U.S. farmers are expected to plant about 64 million acres of wheat this year, down from a high of 88 million in 1981. In Kansas, wheat acreage has declined by a third since the mid-1980s, and nationwide, there is now less wheat in grain bins than at any time since World War II — only about enough to supply the world for four days. This occurs as developing countries with some of the poorest populations are rapidly increasing their wheat imports.
….[I]n the long run, said USDA wheat analyst Gary Vocke, “The forces leading to the trends are still in place.” Though supplies may rebound, he and other experts doubt that prices will drop to prior levels.
That poses serious concerns for countries that historically have counted on the United States to have inexpensive wheat on hand to cushion shocks.
….”With low stocks and a weak dollar, things fly off the shelf faster than they used to,” said David Brown, chairman of the American Bakers Association’s commodity task force. “There’s just not enough acreage coming back into production to replenish these stocks.”
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Outlook for oil supplies ‘signals a period of unprecedented scarcity’
The New York Times, April 28
As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supply would rise as producers opened the taps to pump more.
But as prices flirt with $120 a barrel, many energy specialists are becoming worried that neither seems to be happening. Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward.
“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency, which advises industrialized countries. “They reduce demand and they induce oil supplies. Not this time.”
A key reason that supply is not rising to meet demand is that producers outside of the OPEC cartel — countries like Russia, Mexico and Norway — have been showing troubling signs of sluggishness. Unlike the Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate supply to keep prices up, the other countries are the free traders of the international market, with every incentive to produce flat-out at a time of high prices.
But for a variety of reasons, like sharply higher drilling costs and nationalistic policies that restrict foreign investments, these countries are finding it difficult, if not impossible, to increase output. They seem stuck at about 50 million barrels of oil a day, or 60 percent of the world’s oil supplies, with few prospects for growth.
….Analysts at Barclays Capital said last week that non-OPEC supplies were “seemingly dead in the water.” Goldman Sachs raised similar concerns last month, saying that growth in non-OPEC supplies “can no longer be taken for granted.”
….“What is disturbing here is that things seem to get worse, not better,” an analyst at Goldman Sachs, David Greely, said. “These high prices are not attracting meaningful new supplies.”
….The outlook for oil supplies “signals a period of unprecedented scarcity,” an analyst at CIBC World Markets, Jeff Rubin, said last week.
….Oil prices might reach more than $200 by 2012, he said, a level that would probably mean $7-a-gallon gasoline in the United States.
….The International Energy Agency estimates that current investments will be insufficient to replace declining oil production, let alone increase overall output. The energy agency said it would take $5.4 trillion by 2030 to increase global output, a level of investment that is unlikely to be met. It said a crisis “involving an abrupt run-up in prices” could not be ruled out before 2015.
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Waking Up from the American Dream (how the U.S. federal government helped create this crisis)
CBS News (reprinted from The New Republic), May 2
In the midst of the subprime crisis, there’s an important question that analysts and policymakers have neglected: Did so many people need to own homes in the first place? The dream of home ownership has long been part of the American experience, but, as the federal government steps in to artificially support borrowers and lenders with tax credits that encourage more spending or with public spending that keeps over-indebted borrowers in unaffordable homes, we ought to consider whether it’s time to wake up from that dream.
Indeed, we ought to consider what role the federal government has played in creating this mess. By stimulating home ownership while failing to account for the reasons home ownership is valuable to society, Washington has simply sought to buy our votes with our own debt. As the subprime crisis accelerates and threatens to spread through prime and near-prime markets, policymakers face a watershed moment. To keep us from an economic nightmare, they need to replace the dream of home ownership with policies that actually increase wealth — not just the illusion of it.
….For the past decade, Americans have increasingly relied on the appreciation of their homes, rather than the returns of their labors, to support themselves, creating an unsustainable and destabilizing economic mirage. Home ownership will — and should — remain a goal, but only if it brings with it the long-term commitment that a mortgage traditionally implied. Home ownership is a social good as long as it allows buyers to build equity — an investment not only in their house but in their community — but a home without equity is really just a rental with debt.
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Why most folks in the future won’t fly: Peak oil and the end of air travel as we know it
Tom Whipple, Falls Church News-Press, May 1
It is clear we are going to see major changes in air travel shortly.
For some time now, airlines have been eliminating frills, raising prices, filling the planes and effecting whatever other economies come to mind. After the summer flying season ends next September, many airlines are planning to retire 5-10 percent of their least efficient aircraft, thereby reducing their flight schedules by a similar amount.
Knowledgeable observers are expressing doubts these moves will be enough. People are starting to talk about $200 oil which implies that airline fuel costs will double again. Newer aircraft are more efficient, but the improvements are nowhere near what is necessary to keep up with surging fuel costs and, as Continental Airlines concluded this week, there is not enough financial benefit in a merger to keep up with costs.
….In short, airplanes simply can’t make money while charging affordable fares at current, much less prospective, fuel prices. The era of 500 mph travel for most people is nearly over.
….Ten or 15 years from now, air travel is likely to be significantly reduced; will be patronized by business travelers or the very wealthy; and will be limited to trans-oceanic or long-distance flights between major population centers.
….There is still a remarkable amount of denial in the airline business. This week Airbus released a forecast showing that the number of large commercial aircraft will grow from 15,000 to 33,000 in the next 20 years and that the number of passengers will triple.
If there is to be a long-term future for air travel, it is unlikely to be with liquid fuel powered turbines driving heavier than air devices.
….Over the longer run, the development of hydrogen powered aircraft might prove feasible or perhaps lighter-than-air dirigibles might be developed to the point where they can move people and goods efficiently over long distances. In any case, the day of the ubiquitous kerosene-powered jet transport which revolutionized travel for many of us in the second half of the 20th century is likely to be shorter than most realize.
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California water shortage is worst in decades
The Los Angeles Times, May 2, 2008
California communities face a strong possibility of water shortages and even mandatory rationing this summer because of record dry weather in March and April, a fast-shrinking snowpack and below-normal reservoir levels, state officials said Thursday.
The bleak news, contained in California’s final Sierra snowpack report of the snow season, means a second consecutive year of water anxieties in a state heavily dependent on water from the melting snow in the Sierra Nevada.
“I have not seen a more serious water situation in my career, and I’ve been doing this 30 years,” said Timothy Quinn, executive director of the Assn. of California Water Agencies. An outmoded delivery system and court rulings that protect endangered fish are also straining the system, he said.
“This is a harbinger of relatively tough times, not just for this year but for a set of years,” Quinn said.
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The Age, May 3
[Cardin comments: The general significance of this story for all of us not living in Melbourne is, of course, the way the evolution-in-progress of that city into an inner core of “haves” surrounded by a periphery of “have nots” — with a distinct socioeconomic culture and way of life pertaining to each — may be a harbinger of what all developed countries can expect to occur not just in their urban areas but everywhere, as a matter of general cultural and socioeconomic transformation, during the early stages of the peak oil crisis.]
Looming peak oil and plunging housing affordability are especially troubling for a sprawling, car-reliant city such as Melbourne. The city’s rail network stopped expanding with its suburbs long ago, leaving two-thirds of residents beyond its reach and creating a massive imbalance between inner and outer Melbourne.
….For all intents and purposes, Melbourne is humming. The smart set from Sydney love visiting for its laneway boutiques and bars, its mix of bold new architecture and Victorian nooks and crannies. So perfectly Victorian are the old streetscapes of Carlton and Fitzroy that the National Trust wants them world-heritage listed. So wonderfully eclectic are the city’s architecture and fashion scenes that RMIT University’s Leon van Schaik lists Melbourne as one the world’s great design hot spots.
Sydney architect Elizabeth Farrelly is a huge fan, saying Melbourne has that “indefinable chutzpah that makes cities hum”. “How could Sydney get it so wrong?” she asked provocatively in a Sydney Morning Herald article a year ago. “Sydney remains bigger, but Melbourne makes the running.”
But appearances can be deceiving. Farrelly is talking about the Marvellous Melbourne of the last century with some interesting latter-day nips and tucks. If she cared to venture into Melbourne’s outer suburbs, it is fair to assume that she would detest them as much as she does those that confront her in Sydney. The Melbourne celebrated by the likes of Farrelly is increasingly mythical, an inner hub that bears little resemblance to its outer wheel.
And while inner city inhabitants might be heard railing against McMansions and gated suburban estates, their world is effectively a similarly gated community — only the cashed-up have access. That means most Melburnians are locked out of the place that contains the cool jobs with the abundant public transport and bike paths that service them, as well as its cafe society, its bars and its theatres. Ironically, too, for all our cultural diversity and rich migration history, inner Melbourne risks becoming mono-tonal. The diversity that Lord Mayor John So constantly praises is fast disappearing.
….So glaring is the splitting of Melbourne into geographical “haves” and “have nots” that even developers raise concerns about the future social consequences.
….Many of those who do migrate to the fringe, according to planners, risk becoming trapped by what is referred to as distance decay — stranded away from jobs and infrastructure. And property prices taking that factor into account will always lag inner-city values, making people’s ability to trade up — and out — of less-advantaged neighbourhoods almost impossible.
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The San Francisco Chronicle, April 27
It’s a global shift that some are calling the Great Reckoning. For a generation, economists warned that Americans were living too large. With wallets crammed with credit cards and home-equity loans available to any homeowner who could sign his or her name, consumers went on a debt-fueled buying binge. Living rooms bulged with the latest in snazzy electronics and garages filled with shiny new cars and trucks. Restaurants were fully booked, and airlines whisked happy passengers to dream vacations around the world.
Now, that shop-till-you-drop, I-want-it-all-and-I-want-it-now era may be coming to an end. It couldn’t last because it was built on a mountain of money borrowed from overseas.
….[T]he housing crash, a severe credit crunch and a dizzying fall of the dollar are depriving the nation of the means to keep on borrowing and spending. Foreigners have become wary of underwriting the U.S. standard of living. The flow of outside investment is slowing.
In effect, the United States has maxed out on its national credit card. Like it or not, that’s one of the most important things now forcing a new standard of frugality on free-spending Americans.
“We’re going back to the good old days of living within our means,” said David Rosenberg, chief North American economist for securities giant Merrill Lynch.
….The years from the early 1980s until recently were a long boom for American consumers, even though their incomes grew slowly if at all during much of that period. “There was a lot of air under this economic expansion,” Rosenberg said. “It was engineered by an unprecedented increase in (borrowing) that involved practically every area of consumer credit.” Consumer debt reached levels never seen before and, by the end of 2007, the household savings rate fell below zero.
The United States is now in the early stages of a prolonged period of belt tightening, a contraction not seen in decades.
….”We’re seeing the birth pangs of a new economic structure,” said Neal Soss, chief economist for the securities firm Credit Suisse First Boston. “The next year or two or three will be about the transition to a new equilibrium. Consumption by households will grow more slowly than their incomes, which is the exact opposite of the last 25 years when consumption grew faster than incomes.”
….”This is not the end of the world. It’s not Armageddon,” Rosenberg said. “It doesn’t mean we’re going to have to live in a cave or a hut or an RV. The areas of retrenchment are in things we can do without, such as cutting out that extra vacation.”
The current period marks the finale of the post-World War II era when the United States stood unchallenged atop the world’s economic pyramid and the dollar reigned as the one truly global currency, many observers say. Now the nation must deal on more equal terms with a rising China and India, a united Europe and a powerful bloc of Asian manufacturing nations. Even Latin America, the long-time underperformer in the global economy, is flexing its muscles.
“The world has become multipolar,” said UC Berkeley international economics expert Barry Eichengreen. “Our dominance will decline.”
In places such as Asia, where Uncle Sam long wagged his finger at nations that mismanaged their economies, “there is a peculiar sense of satisfaction that the United States has received its comeuppance,” Eichengreen said.
The catalyst for this transformation has been the traumatic collapse of the nation’s housing market.
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End of America’s buying binge signals much trouble — and profound changes — just ahead
The Los Angeles Times, April 30
[Cardin comments: Please note the subtext that’s present in this and the similar article located directly above: that the the era of Americans living beyond their means on ginormous credit, zero savings, and the economic largesse of other nations was ultimately a GOOD thing. After all, isn’t that obviously the point that’s being made when the end of said era is pegged as a bad thing? This just goes to show how thoroughly nutsoid (to coin a new term that I rather like) our collective thinking has become, when what’s considered “bad for the economy” is actually what’s manifestly beneficial for human life, the human spirit, planet earth, and the Big Picture. The great E.F. Schumacher nailed the matter a generation ago, right on the incipient edge of this cultural catastrophe back in the 1970s, in his book Small Is Beautiful, when he pointed out that an economic system based on perpetual growth is divorced from reality. He wrote,
Can such a system conceivably deal with the problems we are now having to face? The answer is self-evident: greed and envy demand continuous and limitless economic growth of a material kind, without proper regard for conservation, and this type of growth cannot possibly fit into a finite environment. We must therefore study the essential nature of the private enterprise system and the possibilities of evolving an alternative system which might fit the new situation.
We’re presently experiencing an entirely Schumacherian moment. The man is being revealed as a prophet more and more every day by current events, as are the members of the Club of Rome, who brought us The Limits to Growth during the same 1970s era. Geez, do you think we’ll listen to them this time around, when events are forcing us to?]
For a generation, Americans snapped up clothes tailored to every demographic, bought the latest sport utility vehicles and piled on the wide-screen TVs.
No more. The nation’s long buying binge appears to be over. And that’s probably bad news for the economy.
Today, when the government issues its first snapshot of growth in 2008, the role played by U.S. consumers will appear smaller and faded compared with the past, when, year after year, their spending became ever more important to the economy.
“We’re at a watershed moment,” said Jay P. Feldman, an economist with Credit Suisse in New York. “The era of consumers living beyond their incomes is at an end.”
….The abrupt slowdown in consumer spending has already wreaked havoc with retailers, especially auto dealerships, furniture showrooms and apparel stores. Auto sales fell 12% last month compared with a year earlier, according to AutoData Corp., which compiles industry statistics. More than 2,100 retail stores have been shuttered since January and more than 6,500 are likely to be by the end of the year, according to the International Council of Shopping Centers.
A string of mid-size chains, including furniture sellers Levitz, Bombay and Domain, catalog retailer Lillian Vernon and electronics firm Sharper Image, have gone bust. And home goods giant Linens ‘n Things is tottering on the edge, having missed making recent interest payments.
….If Americans ultimately decide that their longtime strategy of low savings, high debt and reliance on stocks and housing no longer works, the results could be big, and unpleasant. People would have to save more, rather than rely on price appreciation to cover spending. They’d have to consume less. Businesses, in turn, would have to find new consumers elsewhere, especially overseas.
“Nothing’s going to reverse a generation of behavior overnight,” said Feldman, the Credit Suisse economist. But “what the markets are signaling is we have to consume less and export more.” Doing so would make for a very different — and considerably less heady — America than that of the last quarter of a century.
just saw 11th Hour, the “Nature’s Operating Instructions” extra feature is especially interesting… apparently there is some amazing technology built into nature, a lot there that we should use as a model for our own technology