Sunday, November 2, 2014

What Rough Beast Is This?

"A globally-networked economy cannot shrink; deprived of fuel for further growth, it must break."

We are recently returned from the Mother Earth News Fair in Kansas where we spoke of the promise of permaculture and carbon farming to reverse global weirding. We are always happier after attending these events because they are so grounded in real skills and vocations and full of hope for the future.

Bryan Welsh, publisher of Mother Earth News, Utne Reader and Grit and author of Beautiful and Abundant: Building the World We Want,  kicked off the event with an inspiring talk on the power of vision, and how to get it going in society.

Is it hopium? Are optimists only deluded? We don't think so.

Lately some of the most sane and foresighted preppers we know are beginning to question their own assumptions, if not their sanity. Oil production did peak in 2006, after all. All conventional liquid fuels, including biofuels, peaked shortly thereafter. This is 2014. We just filled up at the pump and paid less than $2.80 per gallon. Whatever happened to The End of Suburbia?

By sole dint of mass hypnosis, the United States had a good 3Q14 GDP, sending the stock market and the dollar to new heights. Gold closed Friday just below $1180/oz, ridiculing Goldbug warnings of sovereign default and hyperinflation. The two gold share indexes closed just above their 2008 lows and are poised to go lower Monday. Most analysts described this as a reaction to the QE program just launched by Japan. Outlier David Stockman (former Nixon OMB Director) described it this way:

In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds its ignited the Japanese stock averages by 5%. And here’s the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded. The scheme is so insane that the surge of markets around the world in response to the BOJ’s announcement is proof positive that the mother of all central bank bubbles now envelopes the entire globe.

The human mind, apparently unlike that of other primates, can hold two different explanations for experiential phenomenon at the same time. That does not always produce cognitive dissonance. We are unique among primates in having a frontopolar cortex that permits multitasking, including undertaking countersurvival activities such as simultaneously driving and texting.

This helpful anatomical asset allows us to hold contrary explanations for our experiences until at some point we find evidence to support one explanation over another. We do this by categorizing features like the redness of an apple, the sweetness of honey, or the sound of an owl but withholding the conclusion that what we are experiencing is an apple, honey or an owl. Instead, we hold the experience at the initial layer of our epistemic contact with reality, a layer we can then use as the basis for more sophisticated categorization into our beliefs and theories. That is where the mischief is done.

As Professor David Orr recently wrote for Solutions:

The plow, for instance, represented the ingenuity of John Deere, but also an emerging, yet seldom acknowledged agro-industrial paradigm of total human domination of nature with commodity markets, banks, federal crop insurance, grain elevators, long-distance transport, fossil fuel dependence, chemical fertilizers and pesticides, crop subsidies, overproduction, mass obesity, soil erosion, polluted groundwater, loss of biological diversity, dead zones, and the concentrated political power of the farm lobby representing oil companies, equipment manufacturers, chemical and seed companies, the Farm Bureau, commodity brokers, giant food companies, advertisers, and so forth. The upshot is a high output, ecologically destructive, fossil-fuel dependent, unsustainable and brittle food system that wreaks havoc on the health of land, waters, and people alike.

Many farmers are now forsaking the plow for these very reasons. Their beliefs about the not-immediately-apparent realities have changed. They are planting perennials and using no-till organic techniques that turn back the clock to the way societies functioned before agriculture. With that shift comes a return not merely to nutrient-dense and more delectable seasonal cuisine but to steady-state economies, redefined gender roles, and abandonment of faith in wage slavery, or student loan and health plan indenture systems.

The re-examination of agriculture is long overdue. It is, to borrow from Yeats, twenty centuries of stony sleep vexed to nightmare by a rocking cradle.

In 2006, when we published The Post Petroleum Survival Guide and Cookbook, we assumed the post-peak decline slope would be steeper than it has been now, 8 years after the peak. What we are holding in our frontopolar cortex is not peak oil per se. That is already a fait d'accompli. What we are holding there are different explanations as to what has happened and what happens next.

 Of course, there are many things that we cannot know because they are hidden from our view. So, for instance, there is a popular narrative, put forth by the White House and captive media that Russia fomented popular unrest in Ukraine to enable it to seize Crimea and now to threaten Eastern Ukraine with annexation. We know that is a complete fabrication thanks to Wikileaks-exposed secret State Department cables, courageous reporters like Maria Finoshina on RT-TV, and observers on the ground whose accounts are self-validating. It makes us suspect everything the State Department blames on Vladimir Putin; fantasies such as training Edward Snowden as a spy, the downing of the Malaysian MH17 passenger jet, or the recent hacking of White House computers.

US claims jet was shot down by Russian-backed missile (top). Russia claims plane was shot down by US-backed fighter jet (bottom). Dutch investigators await radar evidence from both countries before deciding.

Low Gas Prices

The costs of oil extraction are rising at over 10 percent per year due to the depletion of conventional oilfields and replacement with much more expensive unconventional sources such as deepwater, Arctic, and fracked shale and gas formations. Since 2008, however, wholesale prices have dropped nearly 50% and retail prices even more, thanks to the generosity of oil refineries that have taken advantage of the global lows to push inventories to greater supplies than can be quickly sold, especially in a weak economy.

"Diminishing returns from oil limits are already beginning to hit, but the impacts and the expected shape of the down slope are quite different from those forecast by most Peak Oilers," writes Gail Tverberg.

If you were to ask why that is, Daniel Yergin and The Wall Street Journal, the Koch Party lobbyists on K-Street, or Stewart Brand's cabal of technocornucopians will sing a chorus that, as they have long predicted, increased returns from technology, whether it be horizontal drilling, mini-nukes or the latest new consumer gizmos that save energy, have more than substituted for declining recoverable resources. The logic flowing from this doctrine in every business school in every country is that peak anything is a myth. The best of these Ivory Tower economists lack all conviction, while the worst are full of passionate intensity.
If you were to ask energy/ecology aware economists – Nicole Foss, Steve Keen, or Gail Tverberg for instance – why 2006 Peak Oil did not change business as usual (yet) they would tell you that by exponentially multiplying debt, using the 2008 financial crash as a pretext, it was possible to book imaginary profits that will be earned in the future in order to persuade gullible Main Streeters to work and spend – and to part with their life savings, homes and pensions. Massive and unrepayable debt is used to fund risky current expansions (such as for private space races, energy-intensive factories or foreign military bases) and current purchases (such as student loans and iPhones) that can float consumerist delusions ("Nothing to see here, move along") just long enough to make it through another year.

We are not advocating loitering Yergin and Foss in the same holding zone of our forebrain. Yergin is clearly wrong. Foss is clearly right. But the holding zone will be useful as we go along, so let's keep it in mind.

Instead of making more pie to be divided among ever more people needing ever more and better paying jobs, "extend and pretend" piles up more impossible-to-repay claims upon the finite underlying real assets, and most importantly, Earth's steadily declining energy resources. As David Korowicz assures us, a globally-networked economy cannot shrink; deprived of fuel for further growth, it must break.

"Let’s get real," says Richard Heinberg,

"The Earth is a bounded sphere, and the human economy is an engine that extracts raw materials and produces waste. If we keep that engine’s operation within the bounds of what our planet can absorb or replenish through its normal ecosystem functions, all is well. But if the economy continues to grow year after year, at some point the planet’s systems will be overwhelmed—even if we’re using renewable energy to extract and transform raw materials. Our uses of energy and materials can be made somewhat more efficient, but only up to a point. If the Earth itself were expanding at an ever-increasing rate, perpetual economic growth would pose no problem. Yet last time I checked, the planet hadn’t gotten any bigger — while our demands upon it continue to increase."

A reckoning is overdue. As Ellen Brown puts it,

"The too-big-to-fail banks have collectively grown 37% larger since 2008. Five banks now account for 42% of all US loans, and six banks control 67% of all banking assets."

These same few banks each have more than 40 trillion in derivatives on their books. Knock those down to market value and ripples of insolvency cascade through the entire system. This is why the prepper movement is growing, not shrinking.

One cause for Peak Oil self-doubt is that Hubbert linearization – that nice bell-shaped curve – that may correctly model growth and decline in individual oil wells and coal mines, or whole fields and provinces, and even, perhaps, estimated national reserves, does not correctly model the more complex global economy that is partly a product of market psychology involving both human aspirations and crass manipulation for nationalistic and profit purposes. A more thorough model might pull in neglected externalities such as price demand destruction, fertility rates and the corporate consolidation of media.

The Heisenberg Uncertainty Principle suggests that the more certainty we can ascribe to one variable (the inevitability of oil depletion, for instance) the less we can hold for some other variable (timing, price, market regulation). That fits well with what we understand of neurobiology. Our simian brains multitask, but only to two things at once, and then only by microseconds. Increase the focus on one task and all others lose focus.

What happened in 2008 is that "Extend and Pretend" became the consensus government strategy, based on reliance in economic theories equating market logic with natural law. Psychology was seen as not only capable of gaining infinite extensions, but susceptible to manipulation by mass media. Keynesians assured governments that you can buy your way out of recession.

Sadly, the multi-trillion-dollar purchase begun in 2008 was only good for a short block of time, and has now grown too expensive to repeat. We might have used that purchased time to switch rapidly to solar energy, mass-transit and walkable cities, or to put greater attention into dismantling the most dangerous threats in a sudden collapse scenario (nuclear weapons and power, GM terminator crops, pandemic-response inadequacies) but our governments decided it was more important that bankers fatten up their offshore accounts and get a summer home in the Hamptons. Maintaining the illusion of normality was paramount.
Why $2.79 gas? One guess would be that offered by Tverberg, Heinberg and others to the effect that we are in a deflationary economy, pummelled by layoffs, business failures and other indica of recession and demand destruction has driven down the price. Another explanation might be to thank our loveable Saudi friends – you know, the ones who took the Cheney-Rumsfeld contract on 9-11? Now they are playing the long con against their Empire-addled Western partners. By driving down the price of Brent Crude, they can successfully undercut the razor thin capital margins of wildcat frackers, who are now pulling the ripcord on hundreds of giant projects. Gaslanders with high market cap or being supported by heavily sedated governments like Australia and Canada's will survive to try again. For now, it is an abattoir.

Two-dollar-and-change high octane is Big-New-Gas-Play speculator blood washing into the storm grate. The blood-dimmed tide is loosed, and everywhere the ceremony of innocence is drowned.

From the Deutsche Bank Commodities Quarterly:

“While we would expect an OPEC quota reduction to occur before any non-OPEC curtailments, it has been suggested that OPEC may refrain from immediate cutbacks in order to assess the price sensitivity of US tight oil production. In this unlikely event we would regard US production to be more price responsive than higher-priced (when measured on investment breakevens) Russian or Canadian supply because of shorter drilling contracts. Although the weighted average cost of US tight oil is US$ 72/bbl, close to 200 kb/d (or 9%) of 2015 expected production would not attract new investment below US$ 90/bbl, and a further 650 Kb/d would become unattractive between US$ 80-90/bbl.”

Follow the Absence of Money

Conventional wisdom holds that below $80 per barrel new fracking wells and similar unconventional plays – shales, tar sands, kerogens will not occur.  For the Saudis to keep their place as one of the top three providers of oil to the Empire and also their favored market position at Asian oil refineries, including China's, prices so low that your competition is squeezed out of business is very desirable. More importantly, that market share is something the exponentially expanding Saudi royal family desperately needs to support its acquisition of London townhouses, what with skyrocketing prices in the posher parts of town.

When there is a contest between fantasy and reality and fantasy wins, there is a tendency to see that as a rebuff. In actually, fantasy will often succeed in the short term.

Reality gets its way in the end. Looking back at the Mother Earth News Fair, we can ask again, Is it hopium? Are optimists only deluded? We don't think so.

Living now, this year, this month, with earth-based economies, where food comes from local no-till organic sources, water and air are unsullied, and the whole capitalist enterprise seems so quaint and distant, anyone can happily join the swelling ranks of anarchy. We don't need your old dystopian paradigm, thanks all the same. Everyone who wishes to can be happy living as we all should, for as long as we possibly can.

Except… this is not as true in the slums of earthquake ravaged Port-au-Prince or in ebola-plagued villages in Sierra Leone. The natural world has no borders. With knowledge comes obligation. Information and tools to shift paradigms need to travel faster than plagues. Prepping in isolation is shirking. A lot of trouble down the road can be spared by a little more willingness to offer a friendly hand up, now. This is the role of permaculture. It's the responsibility of greater awareness.

Turning and turning in the widening gyre

The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world.

W.B Yeats, The Second Coming


Danny C said...

As I move about friends and family and see the different "takes" on our current problems, the consensus is that, indeed, things have changed. What's disturbing is the usual beliefs that things will be as usual buoyed by the price at the pump, some new gizmo, or the hope of the upcoming expenditures of our Xmas season. Doesn't cross into the consciousness that this spending will be not in real money but in increasing debt that most families really can't afford. I am hopeful that with the passage of time, more folks will withdraw from the media blitz long enough to listen to that little nagging voice that says something is amiss and perhaps the nurturing of compassion and community will prove the ultimate reality of our being.

Joe said...

Great post, as usual.

I will say that prepping in isolation is better than not prepping at all, especially if that isolated prepper is willing to accept refugees from BAU when "things fall apart".

And when one is still learning the finer points of rural sustainability, which I see as being able to live without money or other outside inputs, keeping to oneself until one is truly able to offer concrete instruction to others is far superior to "tooting one's horn" without any truly solid knowledge base. There are plenty of posers out there already, we don't need any more.

Eddie Tennison said...

Still prepping, but got my own PDC last fall here, and trying to begin to apply the principles on our land in in our lives.

As a refugee from the the BAU loving American middle class, I often find myself swimming upstream against the currents you describe in your post.

It's a hard, long row to hoe, isn't it? And no promise of a good outcome. Still, it makes me happy to see so many folks willing to do what they can to be the change they want to see, in the face of denial.

Fry10cK said...

Great big-picture article.




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