Thursday, January 19, 2017

25 Years of Neocon-Neoliberalism: Great for the Top 5%, A Disaster for Everyone Else

It cannot be merely coincidental that the incomes and wealth of the top 5% have pulled away from the stagnating 95% in the 25 years dominated by neocon-neoliberalism.
One unexamined narrative I keep hearing is: "OK, so neocon-neoliberalism was less than ideal, but Trump could be much worse." Let's start by asking: would Syrian civilians agree with this assessment? The basic idea in the "OK, so neocon-neoliberalism was less than ideal, but Trump could be much worse" narrative is that the modest problems created by neocon-neoliberalism will pale next to what Trump will do, implying jackbooted Waffen SS troops will soon be marching through America on Trump's orders.
This narrative is yet another example of American parochialism: since neocon-neoliberalism didn't cause American cities to be bombed and its institutions demolished, it's really not that bad.
Try telling that to the Iraqis, Libyans and Syrians who have been on the receiving end of neocon-neoliberalism policies. The reality is very unpleasant: for those targeted by America's neocon-neoliberalism, nothing worse is imaginable, because the worst has already happened.
The cold reality is America's 25 years of neocon-neoliberalism has been great for the top 5% and an unmitigated disaster for everyone else in the U.S. and the nations it has targeted for intervention.
Those defending the Democratic Party's 16 years of neocon-neoliberalism (Clinton and Obama) and the Republican Party's 8 years of neocon-neoliberalism (Bush) are defending a system that benefited the few at the expense of the many.
Rather than admit the past 25 years have been catastrophic for the bottom 95%, the apologists speak darkly of fantastical visions of a Nazi America as a diversion to the grim truth that they have blindly supported an evil Empire that has stripmined the bottom 95% in America and laid waste to entire nations abroad.
Neoconservatism's malignant spores hatched in the Reagan years, and spread quickly after the collapse of the Soviet Union. Stripped to its essence, Neoconservatism is American Exceptionalism turned into a global entitlement: it's our right to intervene anywhere in the world we choose to defend what we perceive as our interests, and it's our right to impose our version of democracy and a market economy on other peoples.
Self-interest melds seamlessly with moral superiority in neocon-neoliberalism. The moral justification is: since ours is the best possible system, we're doing you a favor by tearing down your institutions and imposing our system on you. The self-interest is: garsh, the "market" we imposed extracts your resources and benefits our banks and corporations. Amazing, isn't it, how "free markets" benefit everyone?
But not equally. The claim of neoliberalism is: everything is transformed for the better when it is turned into a market. Once buyers and sellers can meet in a transparent marketplace, everybody prospers and everything becomes more efficient.
Stripped to its essence, neoliberalism is: the markets we set up are rigged to favor those at the top. All that talk about free markets is just public-relations cover to mask an intrinsically rigged quasi-market that has features of "real" markets while beneath the surface, it's rigged to the advantage of big players at the top of the wealth-power pyramid.
Neoconservatism and neoliberalism are both inherently global, and so globalization is the necessary outcome. There is no market that cannot be skimmed for outsized profits once it has been globalized, and so once bat guano becomes a global tradeable commodity, Goldman Sachs establishes a bat guano trading desk. (This is a spoof, but you get the point.)
Neoconservatism entitles the U.S. to have an "interest" (as in profitable interest) in every nook and cranny of the planet. Policy changes in Lower Slobovia? It's in our "interest" to monitor those changes and intervene if the policies are "not in our interests."
Neocon-neoliberalism is brilliantly evil because it masks its true objectives behind such warm and fuzzy PR. Those looking for enemies of the people will find them not on the streets of America in cartoonish display but in the corridors of financial and policy power.
Dear apologists of the status quo: do you understand you're defending this?
Notice how the wealth of the bottom 90% nosedived once neocon-neoliberalism became the de facto policy of Democrats and Republicans alike. No wonder Obama's two terms seemed like  Bush terms 3 and 4--in terms of a continuation of neocon-neoliberalism, they were.
Yes, profound changes in technology, automation, and geopolitics have influenced finance and wealth, but it cannot be merely coincidental that the incomes and wealth of the top 5% have pulled away from the stagnating 95% in the 25 years dominated by neocon-neoliberalism:



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Wednesday, January 18, 2017

Why Outsiders Need Insiders To Get Anything Done

You need Insiders who are loyal to an Outsider and an Outsider agenda to accomplish any real reforms.
Readers ask a reasonable question: if Trump is a political Outsider, then why has he stuffed his staff with Insiders--Goldman Sachs alumni, generals, etc.? The question follows an understandable logic: wouldn't an Outsider appoint other outsiders? The doubt expressed also follows a reasonable logic: if Insiders are running the Trump administration, won't it be just another case of "meet the new boss, same as the old boss"?
I think there is another dynamic in play here which I have laid out in this chart:Outsiders can be effective in meeting their policy goals (i.e. "success"), but they need Insiders who know how to get things done within a self-serving Establishment that is highly resistant to Outsiders and institutional reforms.
The Insider-Outsider spectrum has several important variations. In economics, Insiders rig the system to benefit themselves at the expense of Outsiders. In religion, Insiders are trusted members of the community of the faithful, and Outsiders are not members and thus untrustworthy.
In other words, there is a push-pull dynamic to being an Insider: it's easy to feather one's own bed as an Insider, because you are a trusted member of the Insider Community. Insiders have security, Outsiders do not. Insiders cover up the sins and greed of other Insiders, lest their own self-serving greed be exposed.
This means Insiders have enormous opportunities to join the Establishment that resists any reforms that reduce Insiders' private gains or the power of entrenched interests.
On the other hand, Insiders who are True Believers in reform have the trust and connections needed to bypass or overcome the inertial resistance to any change within the Establishment.
Outsiders can only effect significant reforms if they have the overwhelming political power of numbers behind them: if enough Outsiders are enraged at being exploited by Insiders, they can threaten to topple the entire Establishment.
Only when they fear the complete loss of their own power and Insider perquisites do Insiders grudgingly accept reforms that diminish their power, perquisites and security.
The measures of success also matter. If the reformer, Insider or Outsider, seeks to remake society, government and the nation, such lofty goals will fail simply because they are too grandiose to be accomplished in a short time, even with the consent of the governed.
Grandiose goals end up disappointing those who believed them possible.
In contrast, incremental goals are far more modest in scope and therefore within reach of either a mass Outsider movement or True Believer Insiders.
Let's consider two Outsider presidencies: Abraham Lincoln and Jimmy Carter.Lincoln's presidency  has been reported in great depth, Carter's has received relatively little critical assessment. Nonetheless, we discern certain similarities to the Trump presidency: all three "came out of nowhere" to win the presidency by slim margins, all three entered office with a deeply divided electorate and all three were Outsiders in the power circles of Washington, D.C.
Historian Doris Kearns Goodwin's book on Lincoln's cabinet, Team of Rivals: The Political Genius of Abraham Lincoln, illuminates more than the rivalry: all of Lincoln's key appointees were consummate Insiders.
Carter's closest advisors tended to be Outsiders, while his foreign policy appointees were Insiders. Although there is ample room to debate this, as a political junkie who lived through the Carter campaign and presidency, it seems to me his presidency was doomed by an abundance of lofty goals and a paucity of Insiders who had the trust and networks to get stuff done.
I would argue the surest way to fail as a president is to stock your administration with Outsiders -- especially True Believer Outsiders who view entrenched, self-serving Insiders with utter disdain.
To get anything done in a culture of entrenched interests, one must either have an overwhelming political mandate to dismantle the entire machine--Trump does not--or you need Insiders who know the pressure points of the system and its key players--in effect, Insiders who know how to slip a political stiletto into the kidneys of key players and twist the blade to get done what would otherwise be impossible.
Insiders know (or can find out) who the politicized brown-nosers and incompetents are that must be cashiered if anything is going to change for the better. Outsiders are tempted to "clean house," a strategy that can backfire as entrenched interests hunker down and await the inevitable failure of the reforms.
It boils down to this: you need Insiders who are loyal to an Outsider and an Outsider agenda to accomplish any real reforms. Outsiders are easy prey for polished, self-serving Insiders. You need Insiders who can beat the entrenched interests at their own game, and weed out the toxic institutionalized leadership that resists reforms out of self-aggrandizement rather than principle.
We'll just have to wait and see if Trump's Insiders are loyal to an Outsider and an Outsider agenda or not. Time will tell.


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Tuesday, January 17, 2017

Does a Rogue Deep State Have Trump's Back?

Rather than being the bad guys, as per the usual Liberal world-view, the Armed Forces may well play a key role in reducing the utterly toxic influence of neocon-neoliberals within the Deep State.
Suddenly everybody is referring to the Deep State, typically without offering much of a definition.
The general definition is the unelected government that continues making and implementing policy regardless of who is in elected office.
I have been writing about this structure for 10 years and studying it from the outside for 40 years. Back in 2007, I called it the Elite Maintaining and Extending Global Dominance, which is a more concise description of the structure than Deep State. Going to War with the Political Elite You Have (May 14, 2007).
I've used this simplified chart to explain the basic structure of the Deep State, which is the complex network of state-funded and/or controlled institutions, agencies, foundations, university research projects, media ties, etc.
The key point here is you can't separate these network nodes: you cannot separate DARPA, the national labs (nukes, energy, etc.), the National Science Foundation, DoD (Department of Defense), the National Security State (alphabet soup of intelligence/black budget agencies: CIA, NSA, DIA, etc.), Silicon Valley and the research universities: they are all tied together by funding, information flows, personnel and a thousand other connections.
For the past few years, I have been suggesting there is a profound split in the Deep State that is not just about power or ideology, but about the nature and future of National Security: in other words, what policies and priorities are actually weakening or threatening the long-term security of the United States?
I have proposed that there are progressive elements within the sprawling Deep State that view the dominant neocon-neoliberal agenda of the past 24 years as a disaster for the long-term security of the U.S. and its global interests (a.k.a. the Imperial Project).
There are also elements within the Deep State that view Wall Street's dominance as a threat to America's security and global interests. (This is not to say that American-based banks and corporations aren't essential parts of the Imperial Project; it's more about the question of who is controlling whom.)
So let's dig in by noting that the warmongers in the Deep State are civilians, not military. It's popular among so-called Liberals (the vast majority of whom did not serve nor do they have offspring in uniform--that's fallen to the disenfranchised and the working class) to see the military as a permanent source of warmongering.
(It's remarkably easy to send other people's children off to war, while your own little darlings have cush jobs in Wall Street, foundations, think tanks, academia, government agencies, etc.)
These misguided souls are ignoring that it's civilians who order the military to go into harm's way, not the other way around. The neocons who have waged permanent war as policy are virtually all civilians, few of whom served in the U.S. armed forces and none of whom (to my knowledge) have actual combat experience.
These civilian neocons were busily sacking and/or discrediting critics of their warmongering within the U.S. military all through the Iraqi debacle. now that we got that straightened out--active-duty service personnel have borne the brunt of civilian planned, ordered and executed warmongering--let's move on to the split between the civilian Central Intelligence Agency (CIA) and the DoD (Department of Defense) intelligence and special ops agencies: DIA, Army Intelligence, Navy Intelligence, etc.
Though we have to be careful not to paint a very large agency with one brush, it's fair to say that the civilian leadership of the CIA (and of its proxies and crony agencies) has long loved to "play army". The CIA has its own drone (a.k.a. Murder, Inc.) division, as well as its own special ops ("play army" Special Forces), and a hawkish mentality that civilians reckon is "play army special forces" (mostly from films, in which the CIA's role is carefully managed by the CIA itself: How the CIA Hoodwinked Hollywood (The Atlantic)
Meanwhile, it's not exactly a secret that when it comes to actual combat operations and warfighting, the CIA's in-theater intelligence is either useless, misleading or false. This is the result of a number of institutional failings of the CIA, number one of which is the high degree of politicization within its ranks and organizational structure.
The CIA's reliance on "analysis" rather than human agents (there's a lot of acronyms for all these, if you find proliferating acronyms of interest), and while some from-30,000-feet analysis can be useful, it's just as often catastrophically wrong.
We can fruitfully revisit the Bay of Pigs disaster, the result of warmongering civilians in the CIA convincing incoming President Kennedy that the planned invasion would free Cuba of Castro's rule in short order. There are many other examples, including the failure to grasp Saddam's willingness to invade Kuwait, given the mixed signals he was receiving from U.S. State Department personnel.
Simply put, if you are actually prosecuting a war, then you turn to the services' own intelligence agencies to help with actual combat operations, not the CIA.This is of course a sort of gossip, and reading between the lines of public information; nobody is going to state this directly in writing.
As I have noted before:
If you want documented evidence of this split in the Deep State--sorry, it doesn't work that way. Nobody in the higher echelons of the Deep State is going to leak anything about the low-intensity war being waged because the one thing everyone agrees on is the Deep State's dirty laundry must be kept private.
As a result, the split is visible only by carefully reading between the lines, by examining who is being placed in positions of control in the Trump Administration, and reading the tea leaves of who is "retiring" (i.e. being fired) or quitting, which agencies are suddenly being reorganized, and the appearance of dissenting views in journals that serve as public conduits for Deep State narratives.
Many so-called Liberals are alarmed by the number of military officers Trump has appointed. Once you realize it's the neocon civilians who have promoted and led one disastrous military intervention (either with U.S. Armed Forces or proxies managed by the CIA) after another, then you understand Trump's appointments appear to be a decisive break from the civilian warmongers who've run the nation into the ground.
If you doubt this analysis, please consider the unprecedentedly politicized (and pathetically childish) comments by outgoing CIA director Brennan against an incoming president. Even if you can't stand Trump, please document another instance in which the CIA director went off on an incoming president-- and this after the CIA spewed a blatant misinformation campaign claiming a hacked Democratic Party email account constituted a successful Russian effort to influence the U.S. election--a surreal absurdity.
Let me translate for you: our chosen Insider lost the election; how dare you!
A number of observers are wondering if the CIA and its Deep State allies and cronies will work out a way to evict Trump from office or perhaps arrange a "lone gunman" or other "accident" to befall him. The roots of such speculations stretch back to Dallas, November 1963, when a "long gunman" with ties to the CIA and various CIA proxies assassinated President Kennedy, an avowed foe of the CIA.
Setting aside the shelfloads of books on the topic, both those defending the "lone gunman" thesis and those contesting it, the unprecedented extremes of institutionally organized and executed anti-Trump campaigns is worthy of our attention.
Given my thesis of a profound disunity in the Deep State, and the emergence of a progressive element hostile to neocons and neoliberalism (including Wall Street), then it's not much of a stretch to speculate that this rogue Deep State opposed to neocon-neoliberalism has Trump's back, as a new administration is pretty much the only hope to rid the nation's top echelons of the neocon-neoliberal policies that have driven the U.S. into the ground.
Rather than being the bad guys, as per the usual Liberal world-view, the Armed Forces may well play a key role in reducing the utterly toxic influence of neocon-neoliberals within the Deep State.
If you have wondered why academics like Paul Krugman and the CIA are on the same page, it's because they are simply facets of the same structure. Krugman is a vocal neoliberal, the CIA is vocally neocon: two sides of the same coin. I invite you to study the chart above with an open mind, and ponder the possibility that the Deep State is not monolithic, but deeply divided along the fault lines of Wall-Street-Neocons-Neoliberals and the progressive elements that rightly view the dominant neocon-neoliberals as a threat to U.S. national security, U.S. global interests and world peace.
We can speculate that some of these progressive elements view Trump with disdain for all the same reasons those outside the Deep State disdain him, but their decision tree is simple: if you want to rid America's Deep State of toxic neocon-neoliberalism before it destroys the nation, you hold your nose and go with Trump because he's the only hope you have.


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Monday, January 16, 2017

Trump as Lightning Rod--Not Just for Disaffected Progressives, But For Panicked Insiders

The Eastern Establishment fears and loathes Outsiders, and seeks to destroy them, usually via the mainstream media.
Political agnostics who are skeptical about Big Government "solutions," left or right, view the current hullabaloo about the Trump presidency with some detachment. What's remarkable to us is the extremism, not just of those bitter about Clinton's loss, but by insiders who are threatened by the possibility Trump may upset their insider skims and scams.
As an opening observation, I don't recall bitter Nixon supporters issuing death threats to performers at John Kennedy's inauguration in 1961--and the 1960 election was extremely close.
I also don't recall bitter Gore supporters issuing death threats to performers at G.W. Bush's inauguration in 2001--even though the 2000 election came down to a few hundred votes in Florida.
Trump is a lightning rod for a spectrum of people and organizations. Let's see if we can separate the spectrum into socio-political groups.
In times of turmoil, identifying a bogeyman/woman as the cause of the turmoil is a classic mechanism for shirking responsibility and agency. This is the psychological source of witch-hunts (it's all the witches' fault!), scapegoating, show trials, and so on: it isn't our fault things are falling apart, or the fault of our institutions--it's the bogeyman/woman's fault.
This transference/projection concentrates the blame and responsibility on The Other--a scapegoated group, or even better, one individual or a small group. Those making the accusation reckon pointing the finger at some target lets them off the hook: I am blameless, it's all his/her fault.
Trump is tailor-made for the part of Bogeyman--ditto the Russians. Decades of films depicting the heroic Americans besting the low-down dirty Commies seem to have seeped into the American Id: when in doubt, blame the Russians. If they are temporarily unavailable for scapegoating, then blame an Asian bogeyman.
For Progressives, symbolism is more important than substance. Never mind that the incomes, wealth and opportunities of the bottom 95% have steadily eroded in the eight years of the Obama presidency, or that an American neocon-neoliberal foreign policy was running amok globally. To Progressives steeped in the mythology of political correctness, the symbolism of the speech acts being uttered mattered far more than the substance or the consequences.
President Obama did not just promise hope and change--he was a legal-eagle master of delivering the symbolic speech acts that Progressives longed to hear, because they confirmed the world-view of legalisms, "rights," and all the other high points of the mythology of political correctness.
In other words, we don't actually have to threaten the status quo by changing anything, all we have to do is utter the correct phrases, and the erosion of civil liberties, opportunity and wealth will all magically vanish in the warm and fuzzy phraseology of political correctness.
No wonder Trump is like a fingernail on a chalkboard to progressives lulled into somnambulance by eight years of symbolic speech acts. Politically correct speech acts are out the window, and this refusal to wear the robes of correct mythology is deeply upsetting to those seeking the reassurances of symbolic speech acts.
Even more interesting is the reaction of the Eastern Establishment--you know, Washington, D.C., Yale, Harvard, the entire Deep State of Eastern Establishment cronies.
In the long narrative of American history, presidents are either Insiders or Outsiders. Insiders go the Right Schools, meet the Right People, work in the Right Companies and serve in the Right Government Agencies. Outsiders grew up in The Outside World, and did not meet the Right People or work in the Right Companies or serve in the Right Government Agencies.
Franklin Roosevelt was a classic insider, Harry Truman, a classic outsider. John F. Kennedy was a classic insider, Richard Nixon, a classic outsider. G.W. Bush and Al Gore were both insiders. Jimmy Carter was a classic outsider.
The Clintons masterfully worked their way into the Insider Circle, despite starting on the Outside.
President Obama also worked his way into the Insider Circle via Harvard Law, etc.
Once you understand this narrative, you realize the party affiliation of the candidate is simply a matter of convenience; what really matters is their standing within the traditional Eastern Establishment. Will they faithfully carry water for the Establishment, i.e. be a loyal Insider, or do they pose a threat to the power and wealth of the Insiders, i.e. an Outsider?
The Eastern Establishment fears and loathes Outsiders, and seeks to destroy them, usually via the mainstream media. That the corporate media targeted Nixon is well-known. Though few discuss it now, it was equally true that the corporate media ceaselessly bashed and ridiculed Jimmy Carter, "peanut farmer," goofy grin, etc. After he was safely out of office and couldn't threaten the Eastern Establishment's power, skims and scams, Carter was quickly rehabilitated.
Though his wealth and New York base suggests Insider to many, Trump is a classic outsider--someone the Establishment fears and loathes because he might diminish their power, their skims and their scams. The Establishment's skims and scams are rentier skims and scams--wealth and income that is skimmed from the productive elements of the economy by virtue of the Establishment's power to impose the gatekeeper's toll on virtually every aspect of American life.
The Establishment's fear and loathing is laughably obvious. Why else drum up the hysterical, absurd narrative that Russia is responsible for Trump's election? The entire media blitz was a transparent attempt to discredit the results of American democracy because the Insider unexpectedly lost. Now the Establishment--from academia to the C.I.A.--is in full-blown panic, because all their precious skims and scams are for the first time in decades, at risk of being throttled or reduced.
Trump isn't just a lightning rod for delusional Progressives who were happy to see their real-world fortunes erode away as long as the Insiders in charge kept muttering the desired symbolic speech acts; he is also a lightning rod for Insiders fearful that their Insider apple cart is about to be upended, and they might actually have to work for a living, or actually compete in the real world--something they know they are ill-prepared to survive.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

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Sunday, January 15, 2017

Will Our Grandchildren Wonder Why We Didn't Build a Renewable Power Grid When It Was Still Affordable?

In the logic of the market, it makes no sense to sacrifice trillions of dollars in current energy and income to build something we don't yet need.
Anyone seeking clarity on the energy picture a decade or two out is to be forgiven for finding a thoroughly confusing divide. On the one hand, we have reassuring projections from the U.S. Energy Information Administration (EIA) that assume current production of fossil fuels will remain steady for decades to come. Coal will continue to decline as a share of total energy consumption, and renewables will rise modestly. In other words, everything's hunky-dory, there's nothing to worry about.
The EIA's Annual Energy Outlook 2017 (64-page PDF) lays out the all-is-well, no-worries projections.
If you want to really dig deep into energy consumption, then the EIA has a treat for you: a detailed 390-page PDF report: Energy Perspectives 1949–2011 (link to 390-page PDF).
But just when you conclude fossile fuels will remain cheap and abundant until 2040 and beyond, you read this: Civilization goes over the net energy cliff in 2022, which references a 65-page PDF report that details a much different view of energy that will actually be available to us, as opposed to estimates of reserves awaiting extraction: Depletion: A determination for the world's petroleum reserve (65-page PDF, available by permission of The Hill's Group)
Here's an excerpt:
Determining the depletion state of a resource is, however, not merely a matter of determining how much of the resource remains in the ground. A resource's depletion state has as much to do with the efficiency with which it can be extracted and used as it has to do with the quantity of resource remaining in the ground. To define oil's depletion state it is necessary to look at the efficiency with which crude oil can be extracted, processed, and used. Therefore it is necessary to understand why petroleum is produced, and then be able to analysis the entire production process; not just the extraction portion. The Quality Control Engineer defines this as determining "fitness for use". To define crude oil's depletion state we must first determine the quantity of it that is "fit for use".
Every barrel of oil on average, has required more energy to extract and process than the barrel that came before it. Since the specific exergy of a unit of oil is, and always has been the same, less and less energy per unit remains for use by the end consumer. The "fitness for use" of crude oil must also then be dependent on variables relating to its energy delivery capabilities.
In other words--we cannot project future energy available for consumption without factoring in a host of other variables: not just the cost of extraction at the well head but of processing and transport. If this report is correct, the energy left over for consumption after we deduct the energy required for extraction, processing and transport is declining, as the easy-to-extract, easy-to-process, easy-to-transport oil has largely been depleted.
What's left is costly to extract, process and transport.
The success of fracking and other technologies has demolished claims of Peak Oil in most people's minds. But it may not be quite so simple, as Gail Tverberg (Our Finite World) argues in her recent essay, 2017: The Year When the World Economy Starts Coming Apart.
At the risk of simplifying a complex and nuanced analysis, here is my summary: Tverberg makes the case that today's global industrial economy is in a double-bind without resolution: if energy costs rise enough to make extraction and processing of hard-to-get oil/gas profitable, the high costs of the resulting energy will inevitably push the growth-dependent economy into recession or depression.
This is the inescapable result of structuring the economy so it optimizes continual, permanent expansion of everything: more resources, consumption, earnings, debt and taxes skimmed from the productive elements of the economy.
Once growth hits limits of any kind, the economy doesn't enter a steady-state--it collapses, because it is dependent on expansion.
But if energy costs decline to the point where households and enterprises can afford to expand consumption, the low prices render an increasingly significant share of fossil fuel extraction unprofitable.
Tverberg also ties this energy double-bind into debt and wages: we can play a game of borrowing the higher costs of energy needed to keep the economy afloat, but eventually the rising debt load is recognized as being unpayable, and buyers of new debt demand a risk premium. As the costs of debt rises, the window of paying for higher energy costs with cheap debt closes, and the economy is stuck paying the real costs of energy.
Since wages are ultimately paid out of the surplus energy and value extracted from consuming that energy, as cheap, abundant energy declines, so do wages, leaving households with less money to spend on consumption and debt payment.
So which narrative do we believe: the one in which fossil fuels remain relatively affordable and abundant for another 30+ years, even as hundreds of millions of new middle-class consumers clamor for energy-hungry autos, SUVs, motorcycles and air travel, or the one in which cheap energy becomes a cherished memory in less than a decade?
Here's my question: will our grandchildren wonder why we didn't build a renewable power grid when it was still possible? The time to build a renewable power grid that is self-sustaining and durable enough to outlast the end of cheap oil is when oil/gas are still cheap enough to fund the build-out.
The grand irony of human nature and the market economy is that as long as oil/gas are cheap, there's no need to build a renewable power grid. If we believe oil/gas will remain cheap for decades to come, why waste the surplus building a costly renewable power grid when we could fly to Bali with that cheap oil, or build another 100 million vehicles to sell to newly minted middle-class households?
By the time it's obvious that we could really use a renewable power grid, it will be far too costly to build without drastically slashing consumption. Once we blow up the borrowing-from-the-future machine, a.k.a. debt, it's going to be harder to fund the construction out of declining future energy surpluses.
Though we cannot know which narrative will prove correct, we do know that renewable energy is at present a very thin slice of total energy consumption.Courtesy of the EIA, here is a chart of energy  sources. (This is dated 2011, but the mix hasn't changed much.)
Note that all renewables are only 9% of total energy, and that 57% of that 9% is provided by the ancient sources of wood and hydropower (water wheels and turbines). A modest 15% of the 9% (i.e. 1.35% of the total energy) are generated by solar and wind energy.
How many trillions of dollars must be invested to replace even 20% of the energy currently provided by fossil fuels? There's an opportunity cost to this money, of course; if we blow trillions on another 500 million energy-hungry vehicles, thousands more airliners (at $100+ million each) and vacations to Bali, there will be trillions less available for investing in a functioning, resilient, sustainable renewable energy grid.
In the logic of the market, it makes no sense to sacrifice trillions of dollars in current energy and income to build something we don't yet need. So we'll put it off until we need it, but by then, we'll have squandered all the cheap energy and money on the "growth of any kind is good" economy.
Tragi-comedy in the making, or no worries, mate, energy will be cheap and abundant for decades to come? We won't know which is true until it's too late to fashion an affordable alternative.


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