Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on June 29, 2015

Bookmark and Share

Kunstler: Systemic Turmoil, Structural Reform

Public Policy

The problem with the post-2007 world is that we are not in a cyclical recovery; we are in a structural depression defined as a sustained period of below-trend growth with no end in sight. The U.S. has caught the Japanese disease. Structural depressions are not amenable to monetary solutions, they require structural solutions.”
–James Rickards

Can anyone stabilize this bitch? At daybreak, anyway, the Federal Reserve governors were all bagging Z’s in their trundle beds. Maybe after a few pumpkin lattes they’ll jump in and tell their trading shills to BTFD. The soma-like perma-trance among those who follow markets and money matters appears to be ending abruptly with the recognition that sometimes robots and humans alike run shrieking to the exit. A pity when they get to the door and discover it opens onto a cliff-edge. Look out below.

All this trouble with money comes from one meta problem: aggregate industrial growth has ended. It has stopped more in some parts of the world than others, while in the USA it has actually been contracting. The cause is simple: the end of cheap energy, oil in particular. At over $70-a-barrel the price kills economies; under $70-a-barrel the price kills oil production. The bottom line is that, in the broadest sense, the world can no longer count on getting more stuff, except waste, garbage, political unrest, and the other various effects of entropy. From now on, there is only less of everything for a global population that has not stopped growing. The folks on-board are still having sex, of course, which has a certain byproduct.

This dynamic was plain to see a decade ago, but the people who run finance and governments thought it would be a good idea to maintain the appearance of growth via the usufruct mechanisms of central banking: ZIRP, QE, market intervention, and universal accounting fraud. It’s not working so well. Debt was generated in place of the missing growth, and now there is too much of it that can’t be repaid on a coherent schedule. Many nations, parties, and entities are in trouble with debt and the prospective defaults are starting to pile up like SUVs on a fog-bound highway. Greece is just the first one fishtailing into a guard-rail.

The magic moment will come when it becomes obvious that these systemic quandaries have no solution. The system itself is programmed for implosion, in particular and most immediately the banking sector, where most of the untruth and illusion is lodged these days. As it stands exposed, the people are compelled to shake off their faith in what it represents: order, authority, trust. Institutions fail and each failure acts as a black hole, sucking air, light, and even time out of the system.

In the natural course of things, structural reform can occur, but that natural course entails some degree of disorder and loss. If Deutsche Bank or Goldman Sachs founders a lot of people will be living in their cars — a first stop perhaps to not living at all. Sooner or later, though, the survivors will all have to live differently. Structural reform means, for instance, that you can no longer count on getting food the way you were used to getting it. No more 3000-mile Caesar salads and take-out tubs of Kung Po Chicken. That will be very traumatic in the early going. Eventually in the places where it is possible to grow food on a smaller scale, it will be done. Maybe not so much in the Central Valley of California anymore, but in other places: Ohio, Michigan, even New Jersey (“the garden state”). And once grown, it will be sold by means that differ from the supermarket.

Americans think that WalMart and its brethren are here to stay. They’re mistaken. Structural reform means reorganizing many layers of commerce around town centers — Main Streets — while the disintegrating strip malls await the salvage crews. Are we ready for that? Rebuilding local economies would put a lot of people back to work doing real things. All the blabber about “job creation” for the moment is only about increasing the share price of predatory corporations and the bonuses of their mendacious executives. Will the world miss them? Can we still make some things and move them around and put them up for sale? I think so.

Are you disturbed about the pervasive racketeering in health care (so-called) and higher education. Well, those grifts are eating themselves alive. Structural reform probably means far fewer and smaller colleges and far more and smaller local clinics free of the stupendous insurance chicanery that mystifies the public while it swindles them. There will be a lot of useful work for people who want to take care of other people, and certainly fewer MRIs.

Do you fear the end of mass motoring and the suburban infrastructure that it operates in? Maybe your children and their children will be happier in walkable neighborhoods — outlandish as that sounds. There is a hell of lot of rebuilding to do. It may not involve materials like strand-board and vinyl siding, but the newer and smaller buildings will probably last a whole lot longer and look better. And a lot of hands will be needed to do the work.

Will we ever again know banking on the JP Morgan scale? Not on any horizon I can imagine. But there are other ways to establish mediums of exchange, stores of value, and pricing mechanisms. You can be sure that banking will never again occupy 40 percent of gross economic activity in this land.

Today may not be the true event horizon for our diseased status quo, but it is probably, at least, the coming attraction trailer. Try not get puked on.

Kunstler.com



20 Comments on "Kunstler: Systemic Turmoil, Structural Reform"

  1. Plantagenet on Mon, 29th Jun 2015 1:57 pm 

    Another chicken little goes into hysterics and claims the sky is falling because Greece is in debt and about to default.

    The same people went into the same hysterics when Argentina defaulted and when Iceland defaulted a few years before that.

    Face facts—-Greece is small potatoes. Its not going to bring down the modern global economic system.

    Cheers!

  2. Northwest Resident on Mon, 29th Jun 2015 2:04 pm 

    I read a LOT of financial analysis. Rarely do any of the articles or essays relate the current financial situation to issues related to oil. It is always the fault of “Keynesian Money Printers”, or socialism, or governments trying to buy votes with promises that can never be kept, etc…

    But Kunstler in this article just comes right and says it — “At over $70-a-barrel the price kills economies; under $70-a-barrel the price kills oil production.”

    In the times of cheap and easy oil, the financial masters of the world could have their cake and eat it too. There was plenty of excess energy, plenty of excess wealth — so much so that they could let the little people have a nice fat slice of the pie and still have enough left over to become fabulously wealthy.

    Not any more. Times have changed, and have been changing for a while, leading inevitably to this point in time where there is very little if any excess wealth available for distribution to the little people.

    From here on out, it is only going to keep getting more interesting. And chaotic. And brutal. And threatening.

    If you’ve been counting on a diversified portfolio and a good job to get through the bad times, you might want to re-think your situation. It is probably much worse than you realize, and only getting more so.

  3. Apneaman on Mon, 29th Jun 2015 2:14 pm 

    Renting: Awful for Just About Everyone Right Now

    Twenty-five percent of Americans are spending more than half of their income just to keep a roof over their head.

    http://www.theatlantic.com/business/archive/2015/06/rent-is-too-expensive/396971/

  4. joe on Mon, 29th Jun 2015 2:19 pm 

    The IMF and ECB combined have invested more than money in Greece, they invested their reputations. If they tried, each alone would have been something but they, together, are trying to extract a deal to recover money that the ECB lent to Cyprus which greece garunteed in a form of forced loan during the last crisis. If they fail to get that money or a promise of it, then there is no real future for the Euro as a reserve currency, and therefore the future of Europe would be best served in a looser union where risk is spread out and economies compete, right now the model is that they dream of a mobile workforce not mobile companies, but it’s not working. The ECB was supposed to ensure the success for German banks and socialist France semi-state mega-corporations, if they can’t get a few bucks from greece, what’s the point?

  5. Northwest Resident on Mon, 29th Jun 2015 2:24 pm 

    Add SocGen to the list of chicken littles going into hysterics.

    SocGen Says “Raise Cash” As Volatility, Turbulence Ahead

    http://www.zerohedge.com/news/2015-06-29/socgen-says-raise-cash-volatility-turbulence-ahead

  6. Rodster on Mon, 29th Jun 2015 2:33 pm 

    “Renting: Awful for Just About Everyone Right Now”

    If you think that’s bad? How about Rent-A-Tent in San Francisco. That’s right for $900 a month you too can sleep in the comfort of your own tent in someone’s backyard. And the pilot program has over 25 people have expressed interest.

    http://www.zerohedge.com/news/2015-06-27/rent-tent-next-silicon-valley-startup

  7. joe on Mon, 29th Jun 2015 2:40 pm 

    ‘Raise cash’ is polite for ,sell, sell, sell. Soon the only buyer left will be the Federal Reserve. I hear Bill Stills voice in my ears now.

  8. BobInget on Mon, 29th Jun 2015 3:00 pm 

    About Greece, NW Resident says it best today.

    I’ll take issue on the price of oil.

    $70, today ain’t the $70. of two years ago.
    There’s nothing sacred in any special number one of us pick out of a hat.

    If deep water, our last hope, gets done $70 won’t cut it.

    We’ve gone over this dozens of times.
    1) ALL exporters need $100 (pus transportation)
    2) There are at minimum, thee certified ‘oil wars’ currently in progress.
    By that I mean two or more oil exporters battling.

    a) Saudi Arabia vs Yemen
    b) IS vs. US Iran Iraq Iran (Israel)
    Sudan, North vs South
    c)Kurds vs IS

    Add China’s militarization just to exploit South China Sea oil, gas.
    Add Russia vs Canada et all in the Arctic
    Add Israel threatening Iran with total destruction, for the last twelve years.
    How about Argentina vs UK in Falklands.
    Factor in various Pipelineastans.
    Near civil war in Nigeria,
    Failed statehood for Libya
    Failing Venezuelan economy.
    IS may be claiming Saudi Arabia’s ‘holy places’ any month now. Will the US, UK permit that?

    NWResident gets it right about Greece but, like everyone else, ignores harsh reality of
    millions of war refugees floating around the planet. (millions more climate refugees, it’s true)

  9. Apneaman on Mon, 29th Jun 2015 3:02 pm 

    Seniors going bankrupt in soaring numbers
    More Canadians are outliving their savings and spending their golden years in debt

    http://www.cbc.ca/news/business/seniors-going-bankrupt-in-soaring-numbers-1.3129176?utm_content=buffer39ca4&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

  10. Apneaman on Mon, 29th Jun 2015 3:06 pm 

    Mayor faces complexities of poverty, crime in reviving N.J.’s largest city

    http://www.reuters.com/article/2015/06/25/us-usa-newark-baraka-idUSKBN0P51AL20150625

  11. Apneaman on Mon, 29th Jun 2015 3:08 pm 

    Surge of 200 million climate change refugees will reverse global healthcare progress

    http://www.ibtimes.co.uk/surge-200-million-climate-change-refugees-will-reverse-global-healthcare-progress-1507548

  12. Apneaman on Mon, 29th Jun 2015 3:13 pm 

    Half a Million Acres Burned in Just One Day — Alaska Shatters Record For Worst June Wildfire Outbreak Ever

    “All throughout the mainstream media last week we heard the same myopic litany — ‘a massive wildfire outbreak ongoing in Alaska is not abnormal.’ Well, today, all pretense that there was anything normal about the 314 wildfires still raging throughout the state has gone up in a cloud of boreal forest, tundra, and thawed permafrost emitted smoke.

    As of 6:28 AM Alaska time today, 1,912,000 acres had burned in Alaska since the start of the year. That’s roughly 1,800,000 more acres burned than just before the current wildfire outbreak started on June 18th and 497,000 more acres burned over just the last 24 hour period alone. By comparison, the previous worst ever June fire outbreak for Alaska during 2004 burned less than 1,200,000 acres of the Arctic state.”

    https://robertscribbler.wordpress.com/2015/06/29/half-a-million-acres-burned-in-just-one-day-alaska-shatters-record-for-worst-june-wildfire-outbreak-ever/

  13. joe on Mon, 29th Jun 2015 3:18 pm 

    The real issue is not whether or not Greece will cause a systemic problem, but will it cause the already existing systemic problem to co e back. 2007/08 never really ended, the Central Banks merely postponed it, and it’s all they can do.

  14. Davy on Mon, 29th Jun 2015 4:49 pm 

    Kunstler and other like to finger point at the US. It is “part of the territory” as the Ape Man like to say. Yet, if it could only be the US with this problem we could maybe have a global system limp out of this descent trajectory.

    This is global folks and most every local has been delocalized and made dependent on this dangerously unstable global. There are still pockets of sustainability the world over in the third world and first world but most of our 7BIL people are either in a population overshoot or consumption overshoot situation. Many are dangerously in both situations.

    This is an unstable situation when you have a global system reaching limits of growth. The financial system is reacting to this tension of limits. The Social fabric is fraying and the networks that support our habituated growth based system are under threat. We have come to expect growth and are not ready for descent. Less with a future of less is not part of the global vocabulary and it is causing anger.

    I do not care if you are rich or poor. Most all of us have been part of a growth based phenomenon. Population has grown and consumption has grown. We have excess births over deaths. This is about to be turned on its head. Most locals will find themselves unsupported to maintain consumption and or population.

    Even those third world locations that have not been completely globalized are surrounded by the effects of globalism. Nowhere and no one is safe. This is global, it is ecosystem wide, and it is now becoming climate based.

    The climate basis of this end of growth will be the end game most likely but the time frame is unclear. The most immediate issues is our global complex system destabilizing. Our foundational commodity oil is part of this but its worst effects may be a few years hence. This leaves us clearly with a global economic system especially the complex financial side in entropic decay from limits of growth at multiple levels the immediate threat to global stability.

    You all can have your fun poking the US but you are missing the greater point and that is a global collapse building like a hurricane. This is all of our problem and finger pointing at this point is spilled milk.

    The rich really are not that rich. Modern wealth is all a digital façade. What good is a private jet and yacht, and three homes in a collapsed global world? It will come down to the local and the physical. IOW your dooming and prepping in the end are the key.

    You can bitch, moan, and complain but wouldn’t it be better to locate and prep for the shit storm. Don’t get me wrong anger needs to vent but a better focus is boarding up windows and grabbing food and water for the shit storm ahead.

  15. Apneaman on Mon, 29th Jun 2015 5:00 pm 

    Here’s some subtle Asian bashing to help make you feel better Davy.

    Beijing quadrupled in size in a decade, NASA finds

    http://www.dnaindia.com/scitech/report-beijing-quadrupled-in-size-in-a-decade-nasa-finds-2099896

  16. Apneaman on Mon, 29th Jun 2015 5:05 pm 

    Nightmare scenarios

    “BACK in 2011, the American actor George Clooney recalled asking Barack Obama to identify the one thing that kept him up at night.

    “Pakistan,” replied the US president.

    Obama did not elaborate. We can assume, however, that he was alluding to the various nightmare scenarios that spooked Washington officialdom back then, including loose nukes and state disintegration.”

    “A new IMF report throws the severity of Pakistan’s water crisis into sharp relief. Pakistan has the world’s fourth highest rate of water use. Its water intensity rate — the amount of water, in cubic metres, used per unit of GDP — is the world’s highest. This suggests that no country’s economy is more water-intensive than Pakistan’s.”

    “New Nasa satellite data of the world’s underground aquifers reveal rapidly depleting groundwater tables. The aquifer in the Indus Basin — whose rivers and tributaries constitute Pakistan’s chief water source — is the second most stressed in the world (this means rapid depletion with little or no sign of recharge). This shouldn’t be surprising; even seven years ago, groundwater tables in parts of Lahore had fallen by up to 65 feet (20 metres) over a five-year period.”

    http://www.dawn.com/news/1191022/nightmare-scenarios

  17. Davy on Mon, 29th Jun 2015 5:11 pm 

    Ahh, soothing relief, thanks Ape Man. Pretty amazing link. Truthfully a scary link for us all not just a Chinaman. This type of analysis unfortunately can be applied in multiple locations globally on all continents to a smaller but similar degree. Clearly this points to the end of growth. There is no way this can continue.

  18. Apneaman on Mon, 29th Jun 2015 7:26 pm 

    Humanity to keep tweeting positive slogans until point of extinction

    http://www.thedailymash.co.uk/news/environment/humanity-to-keep-tweeting-positive-slogans-until-point-of-extinction-2015062299489

  19. Makati1 on Mon, 29th Jun 2015 10:46 pm 

    Apneaman, most of the Western North American forests are in serious trouble. If the drought and heat continues, there may not be a forest there in a decade or two. Resources like these are fragile and existed in an exceptionally wet and cool millenia. That appears to have ended.

  20. Makati1 on Mon, 29th Jun 2015 10:48 pm 

    Boomerangs do come back…lol.

Leave a Reply

Your email address will not be published. Required fields are marked *