Entropy never sleeps
Wondering why the money world got its knickers in a twist last week? The
answer is simple: the global economy is breaking apart and
its constituent major players are doing face-plants on the downhill slope of a
no-longer-cheap-oil way of life. Let’s look at them case by case.
The USA slogs
deeper into paralysis and decay in a collective mental fog of disbelief that
its own exceptionalism can’t overcome the laws of thermodynamics. This general
malaise precipitates into a range of specific quandaries. The so-called economy
depends on financialization, since it is no longer based on manufacturing
things of value. The financialization depends on housing, that is, a particular
kind of housing: suburban sprawl housing (and its commercial accessories, the strip
malls, the box stores, the burger shacks, etc.). Gasoline is now too expensive
to run the suburban living arrangement. It will remain marginally unaffordable. Even
if the price of oil goes down, it will be because citizens of the USA will not
have enough money to buy it. Lesson:
the suburban project is over, along with the economy it drove in on.
But so is the
mega-city project, the giant metroplex of skyscrapers. So, don’t suppose that
we can transform the production house-building industry into an
apartment-building industry. The end of cheap oil also means we can’t run
cities at the 20th century
scale. That includes the scale of the buildings as well as the aggregate scale
of the whole urban organism. Nobody gets this. For
one thing, there will be far fewer jobs in anything connected to
financialization because that “industry” is imploding. The recent action around the Federal
Reserve illustrates this. When chairman Bernanke’s lips quivered last week, the
financial markets had a grand mal seizure. He floated the notion that his
organization might “taper” their purchases of US government issued debt and
mortgage-backed securities — the latter being mostly bundled debt originated by
government-sponsored entities and agencies. That’s the “money” that supports
the suburban sprawl industry.
If the Fed were
to reduce its purchases of this debt paper, nobody else would buy it.The reason the Fed buys the quantity it
does in the first place ($85 billion-a-month) is that nobody else would touch
it at the offered zero interest rates. The US Treasury and the mortgage
bundlers could only sell the stuff if they paid higher interest rates. But the
US government would choke to death on higher interest rates because its
aggregate debt is so huge and the scheduled interest payments so gigantic that
a one percent increase would destroy even the fantasy of economic equilibrium.
Apart from that
unhappy equation, entropy never sleeps. Everything
in America except the Apple stores and a handful of big banks is falling apart
— especially the human habitat and households. Suburbia will only lose value
and utility. Big cities will have to get smaller (ouch!). Tar sands, shale oil
and shale gas will not ride to the rescue (they cost too much to get out of the
ground). The entire declension of government from federal to state to local
will be too broke to fix the roads and make “transfer payments” to idle,
indigent citizens. This populace will lose faith in their institutions… and
disorder will eventually resolve in a new and very different disposition of
things on-the-ground. If we’re lucky, this will not include cruel despotic
leadership and war.
If the “taper”
talk is empty rhetoric, and the Fed continues sopping up issued debt, it will
eventually destroy the credibility of its issued money. That is
just another way of going broke, though it might beat a shorter path to the
general loss of legitimacy of governments and other institutions.
Young people,
harken: prepare for careers in agriculture and activities that support it.Consider moving to small towns in parts of
the country where farming is possible and get ready to rebuild a very different
economy. Also, consider repudiating your college debt en masse, since the
fantasy of repayment is but another mental shackle holding you back from your
future.
As for the other
parts of the global economy, a digest:
Europe doesn’t
have enough oil and gas to run itself. Its suppliers (Russia, various Islamic
states) are all basically hostile to it. As the late, great Tony Soprano might
say, “end of story.” Europe has been playing financial pocket pool with itself
for five years with credibility ebbing. Soon Europe will descend into painful
economic re-set. Its era as the go-to theme park of advanced civilization is
ending. Go there while it’s still possible and take some snapshots of what
comfort and artistry used to look like.
China is
imploding under the weight of its half-assed crony command economy and banking
system. Nice try. Cookie fortune says, “Industrial era entered too late in
game.” All else there is desperation: e.g. the idea of moving hundreds of
millions of peasants into new cities. As Tony would say, “Fuggeddabowdit.”
They’re better off growing bok choy en situ. Anyway, no one should assume that China can remain
politically stable. Let’s hope that its economic and political crack-up doesn’t
transmute into war.
Russia’s oil production is in permanent decline.
It has a lot, but it gets most of its income from selling it to other people.
Hence, Vlad Putin’s notion of finding something else to base Russia’s economy
on. Like…what? I don’t think they’re going to replace China in making salad
shooters. Farming would be the way to go, and Vlad’s government is hoping that
global warming improves Russia’s prospects for doing more of that. In any case,
Russia might benefit in the long term by not selling off all of its oil and gas
— though Western Europe would surely suffer from that decision. On the plus
side, Russia’s government is not crippled by idiot squabbles over abortion, gay
marriage, and the Bible in schools.
Japan. Sorry
to repeat myself. Going medieval. They have no oil and gas. (Cue Tony Soprano
again.) In the event, Japan’s financial hara-kiri will drag down the rest of
the world’s banking system — or at least hasten the damage already
self-inflicted elsewhere around the globe. I’m also informed that much of the
essential computer chip fabrication in the world still happens in Japan, and
that will go away, too, as the Japanese engine seizes, smokes, and expels its
final belch of CO2.
What else is
there? South America? Think: spreading jungle (or desert, take
your pick). Canada? There’s an idea. Maybe Labrador becomes the new Hamptons?
Second biggest national land mass… 30 million people (2 percent of China’s
population). Only one drawback: the view to the south.
No comments:
Post a Comment