Tuesday, July 29, 2008

The Human Cost of Mal-investment and the Empire of Debt Collapsing

Writer/permaculturalist Noah Cicero (Ohio) recently submitted this poem on the human costs of oil's rise. I would say the cause is not just Peak Oil but decades of mal-investment and the collapse of the Empire of Debt.

Peak Oil Down Home

After a barrel hit a hundred no one got a raise anymore we stopped expecting them so we stopped working so hard

After a barrel hit a hundred My friend and I didn't take long vacations In our car to Disneyland in California anymore Disney made 300 dollars less dollars this year

After a barrel hit a hundred My 61 year-old friend who has been working for 23 years at the same plant producing parts for RVs only works every two weeks now and his pay is cut is half he's facing foreclosure

After a barrel hit a hundred my friend a mom with three kids trying to get through school trying hard like we are all couldn't afford to pay her mortgage and the house is gone

After a barrel hit a hundred my friend at work wife got laid off from a 12 dollar an hour job and so did 300 others

After a barrel hit a hundred an aluminum factory that employed over a hundred was totally closed down

After a barrel hit a hundred the restaurant where I worked changed their menus so they serve less food for the same price

After a barrel hit a hundred the corporation I work for closed 28 stores with 60 people working at each store

After a barrel hit a hundred my neighborhood started to become empty there are still houses but the lights are off and no one lives there anymore and in the winter the pipes will bust and they will be unusable

After a barrel hit a hundred things at work that came in plastic baggies come in cardboard boxes now

After a barrel hit a hundred the only person I know getting raises and overtime is a guy that works for a plant making parts for tanks and jet fighters

After a barrel hit a hundred I started growing a garden and found others growing gardens and my neighbors starting introducing themselves and I started introducing myself

Noah made these comments in a followup email:

People don't get it. A lot of people have jobs involving cars, RVs, four-wheelers, motorcycles, lawn mowers, semi trucks, etc. From driving them, selling them, making all the small parts that go in them. Like when Chevy, Ford and Winnebago closes a plant or stops a certain model from being made, they also closed down the plant that was making the cup holders and bolts that go on the tires, two different plants in two different locations, but both having employees that have mortages and mouths to feed. All those people are losing jobs, not getting raises, their health benefits aren't getting better, their lives are getting worse.

And then there are those people that say, "Look oil is 123 right now." Oil isn't down unless it is like 20 dollars a barrel. Every day that it is above that it erodes the economy.

Look at the mortage problem, too. Building a new house and getting people to move into it makes a lot of money for different people. From people at couch factories to the movers that put the couches in, to the carpenters that put in the drywall, the people that pour and finish the concrete driveway.

On his thought-provoking blog The Outsider, Noah recently posted some thoughts on poverty in America. I think they are highly relevant to any discussion of the recession/depression/bad times we face; here are some excerpts:

Personally what we have in America, well, what we used to have before the housing bubble burst and the energy crisis which I think will create actually poverty. But to go before these problems. A poor American has a television, heating, air-conditioning, a good amount have cars, they have garbage men and sewage. And there is a good list of social programs a poor person can use. What we have in America isn't 'poverty' but 'injustice' and 'greed.'

A poor person can go to the hospital, but they can't just to a doctor. If you don't have health care, you can't go to a dermatologist or any specialist, they won't take you. You have to go to a hospital and the an ER doctor will look at you for two minutes, give you a pill and leave.

What I mean by 'greed' is that Americans watch television and always want more. This culture breeds 'wants.' We have the antithesis to a Buddhist or Catholic culture which both in different but similar ways tells their people that it is okay to be poor, that just because you don't have everything, doesn't make you an asshole.

A poor person I know is getting a divorce. She faked a heart attack and had an ambulance come and get here to get attention and pity from people. I doubt Nigerians or Colombians fake heart attacks to get attention.

What I'm trying to say is that being poor in America is not the toughest thing in the world. If someone really wants to be poor they should just camp. Because that is what real poverty is, camping. Go buy some land, grow your own food, camp in a shack, cut down trees for fire wood and cook using the fire. Because what Americans view as poverty is just how people lived before oil.

Here are my comments. Noah's work stands on its own but this is what his excellent poem triggers in my mind.
This is the cost of decades of mal-investment and misallocation of capital.

Instead of funding the upgrading of our national electrical grid or rebuilding our bridges and railroads, instead of enforcing tighter energy efficiency standards at every level of our economy, we've chosen instead to invest trillions in surplus housing (20 million empty dwellings and rising) on the periphery of transport and employment. We've chosen to award huge pensions and healthcare benefits to public-sector elites. We've chosen to pay for expensive MRI and other high-tech tests and horrendously costly medications, which enrich an elite supposedly concerned with improving the health of our elderly (pharmaceutical companies and their ad agencies, etc.) even as the health of the average American degrades and the care they receive dwindles.
We've chosen to sink trillions in a foreign Desert War based on dubious intelligence and political motivations, squandering not just money but the lives of thousands of people, Iraqi and American alike. We've chosen to spend hundreds of billions on dubious "security" measures like Homeland Security, where knowledgeable insiders are raking off millions in bogus/worthless contracts they award to their pals.

The "free market" propaganda machine runs fulltime espousing how alternative energy is a "poor investment because oil and coal are so much cheaper." Really? Is sending $700 billion a year overseas for oil, mostly to our sworn enemies or those with conflicted interests in our well-being, a smart investment because it was "cheaper" than spending $1 trillion per year creating sustainable energy and sustainable jobs here in the U.S.? How about when the bill for imported oil rises to $1 trillion a year? Will alternative energy be a "wise investment" then?

Tough luck, America, because by then the endless well of borrowed money will be dry. Back when we could borrow $5 trillion off our houses and another $5 trillion from foreign entities to blow on excess Federal spending, then we blew it on consumer garbage, entertainment, a war and various forms of graft/waste. Now that we really need to invest $10 trillion in a new energy infrastructure and renovating our rail and electrical infrastructure, the money's gone and we're paying $600 billion in interest on the wasted money we borrowed so freely and thoughtlessly.

Well guess what, America--now we have to save the trillions of dollars we need ourselves. Yes, save. That is such an alien concept that I will explain: we will have to run foreign trade surpluses in the hundreds of billions of dollars a year, not trade deficits on the order of $700-$800 billion per year. We as a nation must pay more in taxes than we current spend on pensions, Medicare, military adventures, graft/corruption, bogus "security" measures, and so on. the Federal budget must run hundreds of billions in surplus which can then be allocated to infrastructure rebuilding and maintenance. Selling our highway and transport system to Gulf Oil sovereign funds is not a solution, it's a travesty.

As indviduals, we will have to save trillions which forms a pool of actual capital (as opposed to $1 which is then leveraged into $100 by slight of hand) which can be lent to fund real companies doing real work and not "innovating financial services."

I have to laugh to myself when somebody tells me they're saving money each month and the sum turns out to be $100. If you only make $1,000, then that's an OK sum, but these are people making multiple thousands a month. Real savings is on the order of 1/3 to 1/2 your take-home pay. Me and my friends routinely did that and even now it's entirely possible--but not if you live and consume like average Americans.

I have to laugh at the "saving money" tips which are popping up all over the mainstream media, ideas like buying new furniture on sale and "saving" as a result. The funny thing about all these ideas is they all require spending more money, and they all assume that any savings you manage off bargain-hunting will then be spent on a vacation or other form of consumption/entertainment.

Where is the article promoting the idea that a family taking home $3,000/month should be saving $1,000/month? Impossible! Yes, I know. But what's funny is that when that household was younger and getting by on less income, they somehow managed to live on $2,000/month and did not feel like they were living on the trash-heap of abject poverty. But once their income rose to $3,000/month, then that became the new "minimum baseline."

That "spending creep" has throttled our entire economy. Like "mission creep" which has occupied every level of government--we should be solving everyone's problems all the time, and if we're not, then we're depriving people of their rights to, well, everything--it's all been a fantasy based on borrowing money cheaply from someone who actually saved or made the money in the real world.

The fantasy is about to come to an abrupt end. Once the cost of borrowing rises, and once our overseas friends tire of propping up a failing Empire of Debt, then the costs of borrowing will eat into all the things we want: pensions and healthcare and education and a strong military and so on. Then it will finally be "cheaper" to save and be careful with our spending, and wiser to look at our long-term needs for sustainable energy rather than mostly useless MRI tests and entertainment, foreign wars, etc.

We will have to figure out what we can sell to others rather than just what we can borrow from others to consume what has been made (or pumped to the surface) by others.

Wrenching? Undoubtedly. Being kicked off the welfare of borrowed money is nobody's idea of fun. But it has other names, too, other than deprivation and suffering and woe-is-us, who's gonna pay my bills for me: it's called freedom and radical self-sufficiency.
That is what Noah's last stanza is all about, and that is a supremely positive way to end his poem.
Bush 2009 deficit will reach $482 billion, record driven by sagging economy
With typical obfuscation/slight of hand, $80 billion in Desert War expenses were left off, so the real deficit is $560 billion. If we bypass the trickery of "borrowing" (read "raiding") the Social Security Trust Fund, i.e. funds paid into Social Security, then the real deficit is more on the order of $700+ billion.

That's what we call society-wide welfare on a stupendous scale. Yes, we are all welfare recipients, because we are all complicit in borrowing $700 billion to fund an illusion of entitlements, tax breaks, corporate welfare, graft, war costs, "healthcare" a.k.a. sickcare and "security" each and every year.

Thank you, Dody B.-R. ($5), for your much-appreciated donation to this site. I am greatly honored by your support and readership.

It's nice that we all feel we "deserve" this welfare, but our kids and grandkids will be stuck with the bill. Do they "deserve" that as much as we "deserve" all our tax breaks, entitlements and other benefits? I think not.

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