The Dry Hole of American Finance

Got a call from an old friend, we used to be real close

Said he couldn't go on the American way

Closed the shop, sold the house, bought a ticket to the West Coast

Now he gives them a stand-up routine in L.A.

– Billy Joel, My Life

I fully intended this week to continue what has become a mini-series on the aspects of a safety net of alternative systems for ordinary people to build in preparing for the effects of Peak Oil and climate change. But my plans were “overcome by events,” as they say in the military. The big events over the last two weeks have been the failure of at least two more large investment houses and the Federal “bailout plan” being proposed by President Bush and his economic advisors as a means to stabilize the markets. One major aspect of the impacts of Peak Oil and resource scarcity is the financial aspect, and the present responses of our society to the financial instabilities occurring now will in turn generate their own financial effects, which may hinder the ability of common people to prepare for a post-Peak world.

I will begin with a caveat. First, while there are many things about engineering that I understand, there are many things about finance as it is played at present in the U.S. that I don't understand, since American finance is a shady Las Vegas-style game in which the major players keep changing the rules to keep the rest of us off balance. Secondly, I am a bit late in addressing the financial situation, and other voices have already provided words of great insight and wisdom in explaining what is going on now. (See http://cluborlov.blogspot.com/2008/09/adieu-stage-1-collapse.html; http://thearchdruidreport.blogspot.com/2008/09/rx-depression.html; and http://sharonastyk.com/2008/09/25/peeling-the-onion-whats-behind-the-financial-mess/ for examples. Warning: some of these posts contain some strong language.)

For the last few decades it seems that the American way has been to pump crony capitalism as much as possible by keeping wages stagnant, deregulating financial markets, outsourcing the manufacture of essential goods to low-wage countries, stimulating economic activity by easy credit, and lowering taxes while borrowing to finance national boondoggles such as the wars in Iraq and Afghanistan. Now many Americans have no savings or are upside down on the loans they have taken out to purchase their “stuff” - houses and cars now worth less than what is owed. And the National debt – the amount of money which the Federal Government has borrowed and which it owes to its creditors – is approximately nine trillion, eight hundred sixty billion dollars (Source: U.S. National Debt Clock, http://www.brillig.com/debt_clock/).

To put this into perspective, the total U.S. population is 303,824,640 as of July 2008. (Source: CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/print/us.html) 67 percent of this population is between the ages of 15 and 64 years old. Assuming that this is the age of employable people, that means that there are 203,562,509 potential members of the workforce. If we further assume that ten percent of these are too poor to be taxed heavily and that another ten percent are so rich that they can escape taxes through legal maneuvering, the total taxable workforce is now 162,850,007. Assume further that 6.5 percent of them are out of work at present due to the present economic crisis and we have a taxable workforce of 152,365,757 people. If we divide the national debt by this number of working people, each wage-earner owes $64,700 on the National debt.

That debt grows every day, thanks to President Bush's war boondoggles and refusal to bring Government spending in line with tax receipts. But over the last eight or nine months a new source of debt has emerged, namely the Government's repeated moves to bail out large, high-flying investment banks who are unable to pay their debts and whose assets are now becoming worthless because of the subprime mortgage crisis. Every bailout has been accompanied by pronouncements from the Republicans that “this bailout is necessary in order to prevent the economy from crashing,” yet after every bailout, the crash has progressed a little more.

What is being protected by these bailouts is the notional “assets” of a number of rich investment bankers. These assets were based on the notional value of I.O.U.'s such as mortgages, which were used as collateral by investment houses to borrow money equal to many times the value of the original I.O.U.'s. Thus the investment banks, whose assets consisted of I.O.U.'s, used these “assets” to write much bigger I.O.U.'s. Now it is being seen that the original assets are rapidly becoming worthless, because the little people whose mortgage I.O.U.'s were counted as certificates of worth are unable to pay their debts. The whole debt structure is therefore in danger of falling apart.

A crash of financial markets is therefore a real possibility, and would be a painful thing to experience, since our society is largely credit-driven, and since most Americans don't produce tangible goods of real value anymore. Such a crash would force us to face the fact that the American economy is worth much less than its worth on paper, and would drive down our standard of living, as well as knocking a few rich people off their pedestals. But things get much worse if the Government becomes the guarantor of this structure of private I.O.U.'s. The Federal government already owes $9.86 trillion.

The significance of that fact becomes apparent when one realizes that that money is owed to someone. Who holds American debt? Right now, at least 25 percent of that debt is held by foreign governments. At the end of 2006, foreigners held 44 percent of federal debt held by the public. China in particular holds over $1 trillion in dollar-denominated assets. (Source: “United States Public Debt,” Wikipedia, http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership)

That debt exerts pressure on all of us, even though this nation has delayed facing the prospect of paying off the debt. And because this nation is past its peak in the production of many natural resources, and has largely outsourced its manufacturing base to other countries, we have increasingly less collateral with which to obtain new credit for the Federal government. To choose at this time to add to the National debt by nationalizing the results of the bad choices of the rich is an incredibly stupid move.

And such a move might soon lead to a time when all Americans - including those who are not in debt and who own their own property - may be required to forfeit all their possessions to service the national debt. This could be via a number of foreign governments demanding repayment of debt certificates issued by the U.S. government, to which the Feds might respond by raising the tax rate on anyone with assessable hard assets (including real estate) to such an extent that no one would be able to afford the tax. Then the Government could foreclose on the personal properties of people who could not afford the tax, and turn those properties over to foreign creditors in an attempt to repay some of the national debt. Is this a farfetched scenario? I'd like to think so, because the present governmental shenanigans are rather spooky.

But there are people who have seen the societal trends now building in the United States and who have tried to act wisely in disconnecting themselves from the present breaking system. Now the preparations of these people may be imperiled – especially if those preparations involved saving money or buying land or reducing debt – due to the real threat of having a crushing tax burden imposed on them, just so that irresponsible rich bankers might continue their high-flying financial games. What then happens to the safety net of the wise?

I will close by mentioning a post by Stormchild on the blog, Gale Warnings, titled “Responsibility and Authority.” According to that post, one characteristic of an abusive leader or abusive organization is the desire for absolute authority coupled with the total evasion of responsibility. This seems to be a characteristic of President Bush, his “bailout plan” and the rich investment houses he is trying to help with his plan. He and the Congress are determined to enact this plan even though a solid majority of Americans opposes it, seeing it for the shock doctrine tactic that it actually is.

A Safety Net Of Alternative Systems - Places To Live

In his thought-provoking book Reinventing Collapse, Dmitri Orlov compares the United States in its present condition to the Soviet Union just prior to the Soviet collapse. He notes a number of similarities between the two countries, including a large military bogged down in useless and harmful adventures, a huge and increasing national debt held largely by foreigners, a negative trade balance due to the collapse of domestic means of meeting basic societal needs and a corresponding reliance on imported goods, the maintaining and expansion of world empires by morally flawed means, and the imprisonment of a large portion of the population. His conclusion is that these conditions precipitated the Soviet collapse, and that they will cause the collapse of the United States as well.

But he also examines those peculiarly Soviet societal characteristics which in his view allowed ordinary citizens in the Soviet Union to survive the collapse without suffering a major societal breakdown. In particular, the communal, state-run, collectively owned nature of all major institutions and of basic assets such as land and housing prevented millions of people from facing the sorts of severe trouble experienced by people without money in the U.S. There were no “Hoovervilles,” no tent cities like the camp for financially distressed people that sprang up in Ontario, California last year as the home mortgage crisis gathered steam (See “Tent City In Suburbs Is Cost Of Home Crisis,” Reuters, 20 December 2007, http://features.us.reuters.com/cover/news/D8C99CD0-AF35-11DC-9E67-616F0DA5.html).

No one in the Soviet Union was evicted from house or apartment because of a lack of funds to pay rent, since housing was free. Land was communally owned and people had for a long time grown kitchen gardens to supplement the goods available from the “official” Communist stores. Therefore, when things collapsed, people had some means of taking care of their basic needs. The collapse was by no means fun or pretty; it was a significant hardship. But it was at least survivable, because of the communal factors mentioned. The same thing can also be said of Cuba's experience after the collapse of the Soviet Union, when Cuba suddenly lost all Soviet material support and had to find homegrown solutions to sudden shortfalls of food and petroleum. The Cuban crisis also was survivable because of the communal nature of Cuban institutions and assets. It is not recorded that there was mass starvation of any kind in Cuba during those years, even though people did not have nearly as much to eat as they would have liked. And Cuba, like Russia, recovered from its crisis.

Our American system is very different. Here, one does not get even basic necessities unless one is able to pay for them. And the quality of the necessities provided is directly proportional to the amount of money paid. Moreover, our economic and political systems are being gamed by the rich elites in order to eliminate any government-sponsored social safety net which exists to protect those who lose the ability to pay for things provided by the “official” economy. Examples of this include a number of Oregon ballot initiatives financed by Oregon multimillionaires Loren Parks, Bill Sizemore and Kevin Mannix, initiatives such as Measure 59, which would allow Oregon taxpayers to deduct the full amount of Federal income tax paid from their state taxable income. This measure would decimate the state treasuries and force cutbacks in essential services provided to children, the disabled and the elderly. Then there is Measure 26, which has not yet qualified for a ballot, which would allow employers to deduct the cost of health benefits from the minimum wage paid to workers.

“Home ownership” has been one of the biggest examples of the risky nature of participation in the American system. To buy a home, a person had to take out a loan to buy a house or condominium, unless that person was able to pay the full price up front. The loan was made at interest, so that the amount of money given to pay off a mortgage was usually at least twice as much as the actual price of the house, assuming that one paid the minimum payment each month on a fixed rate mortgage. And if a “homeowner” who had made several years' worth of payments suddenly lost his or her ability to pay the mortgage for an extended period, that person lost not only the house, but all the equity they had paid into the house.

Renters were not much better off, except that at least renters knew up front that they would never own the properties on which they made monthly payments, whereas home “buyers” were gambling that everything would work out right over a thirty-year period, so that they would eventually be able to throw a “burn the mortgage” party in their golden years. But now as the official economy is breaking, many people are finding themselves homeless or in danger of becoming homeless and searching for alternatives. In this country, those alternatives consist of things like finding relatives who will take you in; finding a cheap slum apartment; going to a rescue mission; moving into a housing project (not recommended unless you want neighbors like the “Bounty Hunter Bloods” of the Nickerson Gardens project in L.A.); getting yourself arrested and checked into the “Gray Bar Hotel”; or finding a shopping cart, a tarp, and a convenient freeway underpass where you can camp out.

This is not very encouraging. One key to maintaining a stable society even in hardship is the availability of reasonably clean and safe places to live. Places which have a bit of land are even better, because they can be used to grow food, herbs and fruit for people who are trying to lessen their dependence on a breaking economic system. The total plot size does not have to be large. Jules Dervaes of Path To Freedom was featured in a 2007 Los Angeles Times article on urban homesteading. He grows over 6000 pounds of food per year on a portion of a 9000-square foot lot. The Oregonian newspaper also printed a recent feature on edible urban gardens. And there are other advantages to the availability of adequate places to live – namely, that if people stay in those places long enough, they begin to form connections with their neighbors and learn to rely on each other and to help each other out. These interconnections become very important as official systems start to break.

I think it's fairly certain that our present government, at a national and state level, will not try to create a safety net of affordable housing for working-class people, since our elected officials are largely the servants of the rich. But what can private citizens do to create their own safety nets?

One answer is cohousing. Cohousing is a communal living arrangement in which a number of people agree to live in a locality, whether a house or a group of homes, and agree to share all the expenses and benefits of such a living arrangement. I have run across the concept over the years while doing Internet research on other subjects, but last week I got to actually see a cohousing arrangement in person. The occasion was a benefit concert for the Portland Fruit Tree Project, held in the backyard of a house which is part of a five-house community. There I had a chance to interview a woman named Katy, one of the founders of the Portland Fruit Tree Project and a member of the cohousing community. We talked about the birth of the Fruit Tree Project as well as the arrangement shared by Katy and the others in her cohousing community.

While the members share responsibilities for chores, their arrangement is not highly structured or hierarchical. Besides chores and chipping into pay bills, the only other obligation is a communal dinner held twice a week. The members of Katy's household are all “active” activists – each is involved in a social cause which is near to his or her heart. Thus they don't have much time to sit and watch television (I did not see a TV when I was there, but I am told that they keep one in a closet somewhere). They do spend time together on occasion to make music together; almost everyone in the household can play a musical instrument.

According to Katy, their cohousing group was founded nearly twenty years ago, and even though some members have moved on to other things, these former members frequently join the regulars for the community meals. Their group has managed to remain remarkably stable, and has even evolved a very small-scale egg and goat milk economic cooperative in which neighbors participate.

Cohousing seems to be a promising answer to some of the uncertainties of our present American crisis. But it takes land and houses and an ability to pay for these. As the economy continues to be squeezed, where can people interested in forming cohousing communities turn for resources?

One answer is to look for properties in areas hit hard by foreclosure or economic blight. Detroit, Michigan is a poster child for such areas. (See http://www.detroitruins.net/ for an example.) One can easily buy a modest two or three bedroom home there for under $50,000. There are places in Los Angeles and Orange counties in California which have been hit hard by the mortgage crisis, where prices of modest (I repeat, modest) homes have fallen drastically. Such places would be beyond both the ability and the interest of those who are addicted to living beyond their means. But these places might be easily affordable by people who have chosen frugality and wisdom rather than allowing themselves to be turned into “consumatrons,” and who therefore have some money saved up. Such people might be able to put up enough money to pay the price of a house right up front, bypassing the need to take out a loan.

People relocating to distressed areas would also need two other things: a vision of the sort of intentional community they would like to create, and a plan or vision of how they as a community could bless, beautify and improve the larger community in which they live. Their impact on the larger community would be especially important, in order to remove any resentment which might spring up because of the threat of displacement of long-time residents due to gentrification. A cohousing community in a distressed area would ideally consist of people with skills suited to meeting the needs of their neighbors – people skilled in local urban agriculture, teaching, medicine, construction, salvage economies and other necessary skills. And this sort of cohousing community would succeed best by living simply, not flaunting wealth in front of the surrounding neighbors, and being ever ready to lend a helping hand to those in need.

I believe that cohousing is a viable safety net for those who are willing to live modestly and to share what they have with others. And cohousing holds great promise as a means to provide stability to neighborhoods that would otherwise be blighted by the breakdown of our present system. But cohousing is like seeds planted to produce a harvest – there is an urgency to the planting season, because the winter of our society may be fast approaching.

Below are a few pictures of the Portland cohousing community I visited. Also, here are two links for those who want more information on cohousing: www.cohousing.org/2003/review and http://www.cohousing.org/cm/Creating+Cohousing. Enjoy!

House of Cards On Fire - Lehman Bros and the Dow

For the last year and a half I have been a serious, wide-awake student of the impending worldwide energy shortage and its likely impacts. My education began in earnest in January or February of 2007, when the truth about Peak Oil hit me like a two-by-four upside the head. Since then, I've heard a lot of predictions about the sorts of oil price and financial market impacts that the world and the United States were likely to experience.

Seeing predictions come true is for me a surreal experience. When oil first traded for over ninety dollars a barrel last November, I remember going outside the office one day at lunch, sitting on a park bench, and saying "Oh, wow!" to myself over and over. Today is another surreal time, an astonished, "Oh, snap!" time. Banks have been failing in earnest ever since August or September 2007, the failures growing larger and larger each time. Now Lehman Brothers has failed. Merrill Lynch was sold to Bank of America under emergency conditions. The Dow lost over 500 points. My co-workers were so distracted that they hardly got anything done. Several of them, who have heard my rants and warnings regarding Peak Oil and its likely impacts, stopped me in the hall or stopped by my desk to talk, to wonder, in some cases to ask worried questions.

There's more to come. Chevron is warning of potentially severe gasoline supply disruptions in the United States over the next few weeks as a result of Hurricane Ike (http://www.nytimes.com/2008/09/15/business/15oil.html?_r=1&ref=us&oref=slogin). Other oil company executives are calling for gas rationing (http://www.washtimes.com/news/2008/sep/15/gas-rationing-needed-former-oil-executive-says/). The action over the next few weeks should heat up considerably.

It is almost too late, but now is the time to make such preparations as you can for what may be a very lean future, if you haven't started already. Now is also the time for Christians to show themselves to be prudent and wise and people of integrity, ready to lend a helping hand to those in need. There will soon be lots of people in need.

By the way, if you care at all about social justice, please read my recent post, “Money and Filthy Hands.” Especially if you live in Oregon. Please.

Hey Now, The Well Run Dry...Hurricane Impacts

Hurricane Ike has struck Texas and has moved on. This comes two weeks after Hurricane Gustave struck Louisiana. Because of damage done to the electric grid by Gustav, much of Louisiana's oil pumping and pipeline transport has been off line for the last two weeks. This means that it has been difficult to transport not only crude oil, but finished petroleum products such as gasoline. In addition, refineries in Louisiana have been off line for the last two weeks.

The U.S. inventory of refined petroleum products is now at or possibly below the minimum operating level, and shortages of gasoline and other petroleum products are starting to appear throughout the east. I am not merely talking about the American Southeast, but even places in the Midwest, due to the shutdown of pipelines such as the Colonial Pipeline and the Explorer Pipeline. Some energy analysts expect these shortages to become widespread and to last for at least three to four weeks. It seems that we shall all have a taste of what Peak Oil is about. Some of us will get a very strong taste. I hope you all have made some preparations.

Gail Tverberg, an actuary and energy analyst, has written a very informative article on what we can expect over the next month as a result of the hurricanes. Her article, "Implications of a Ten Day Refinery Outage," is at http://www.theoildrum.com/node/4526.

Money and Filthy Hands

In my last post, “Uncle Sam's Vital Signs,” I wrote that Southern California is a ruined place, ruined by the land use, economic and development policies of an elite whose sole aim is to make money without regard for the effects of the means used to make that money. I also wrote that this elite is trying to make money from the rest of the country by making the rest of the country like Southern California. But some of the ruinous policies enacted by the members of this elite extend throughout California as a whole.

One particular example is the steady push by conservative politicians and political groups to criminalize ever-larger areas of public behavior, and to mandate ever-harsher sentences and penalties for behavior deemed to be criminal. This has led to explosive growth in the number of prison inmates in California, as well as explosive growth in the number of California prisons. And last year, California began signing contracts with private prison corporations to house inmates – something that has not happened since the mid-1800's. (Source: “Increase In Inmates Opens Door To Private Prisons,” Los Angeles Times, 24 August 2007, http://articles.latimes.com/2007/aug/24/business/fi-prisons24)

The huge cost of enforcing the many “get tough on crime” initiatives passed in California is a well-known drain on the state budget ($10.4 billion in Gov. Schwarzenegger's most recent proposed budget, or 7.6% of the total). It is also well-known that the fastest-growing segment of the California prison population consists of non-violent offenders. California's correctional system is groaning under the weight of its large number of inmates, and even prison guard and correctional officer unions are now agreeing with critics of the system that it is time to reduce the prison population by implementing rehabilitative alternatives such as drug treatment and counseling for non-violent offenders.

These issues, as well as mistreatment of prisoners in private prisons and the use of prisoners as low-wage “slave labor” were covered in a recent Mother Jones Magazine article, as well as two previous posts in this blog, The Well Run Dry, titled, “Pages Of Your Book On Fire” and “The Replacement Of Petroleum Slaves.” The Times article cited above states that private prisons are now being used by over thirty states, and are extensively used by the Federal government. Other sources note that prison guard unions and private prison corporations are sponsors, lobbyists or donors to campaigns for stiffening penalties for criminal behavior, and for expanding the definition of what constitutes criminal behavior. After all, if it's easy to lock people up, that's good for business! (Sources: “Families To Amend California's Three Strikes, http://www.facts1.com/reasons/money.htm#Prison; “Slavery and Involuntary Servitude,” Don Bacon, Lew Rockwell, http://www.lewrockwell.com/orig9/bacon1.html; “10 Reasons to Oppose Plans for More Prisons,” New American Media, 11 August 2006, http://news.ncmonline.com/news/view_article.html?article_id=fa9cfec4e8d2984c1776d6ee4d3700c9; “Privatizing Prisons,” Center for Policy Alternatives, http://www.cfpa.org/issues/issue.cfm/issue/PrivatizingPrisons.xml)

It may be that the madness which infected California over the last two decades is playing itself out. But if one moves north just one state, one can find people trying the same tricks in order to make a profit for themselves. Two such people are Kevin Mannix and Loren Parks, who have introduced Measure 61(previously Measure 40 according to one source), a “Get Tough On Crime” measure on the November 2008 Oregon ballot. Measure 61 would significantly increase mandatory sentences for those convicted of “major crimes” as defined in the initiative. Some of the crimes on this list are definitely major. But some are nonviolent, and it is the nonviolent portion – especially the drug crimes and crimes against property – which would likely swell Oregon's prison roster. Those who oppose Measure 61 point out that Oregon already has stiff minimum sentencing guidelines for violent crimes, and that Measure 61 would add nothing new except to increase the severity of punishment of nonviolent criminals.

Measure 61 also enhances penalties prescribed under Measure 11, another measure sponsored by Kevin Mannix, which established mandatory minimum sentences for various violent crimes, and which was ratified in 1994. However, Measure 11 was made to apply to every defendant from the age of fifteen years and older, and does not allow reduction of prison time for good behavior. Thus a high school kid who got into a fight could wind up in prison for five years if convicted of second-degree assault. Twenty-eight percent of Oregon's present prison population consists of Measure 11 offenders. (Source: http://ballotpedia.org/wiki/index.php/Oregon_Ballot_Measure_61_(2008)) Measure 11 has cost the state of Oregon significantly, and Measure 61 would cost between $450 million and $2 billion to implement, according to various estimates (http://www.oregonlive.com/politics/index.ssf/2008/08/mannix_prison_measure_would_co.html). There are no provisions in Measure 61 for counseling or drug treatment programs.

I fully believe that violent crime is a serious matter, and should be appropriately punished. But it is interesting to note that a 2008 Oregon Department of Health Services study found that violent crime, drug use and property crime in Oregon have been decreasing from 2000 to 2005 (http://www.oregon.gov/DHS/addiction/ad/main.shtml; http://www.oregonmeasure11.com/portland-reports-low-crime-rate.html). It is also interesting to note that in the 1990's, while Kevin Mannix was a member of the Oregon legislature, he invited Nike to move its manufacturing operations from Indonesia to Oregon in order to take advantage of the cost savings of using prison labor (“Are There No Prisons?”, http://www.afn.org/~govern/Prisons.html). Kevin Mannix has sought to funnel large amounts of money to correctional employees over the years (http://ballotpedia.org/wiki/index.php/Oregon_Ballot_Measure_61_(2008)#cite_note-increase-6). In fact, a Web search of Kevin Mannix will reveal a large number of questionable ballot initiatives backed by him.

Meanwhile, there are some very good state-funded education programs which are of interest and of great use to those Oregonians who are preparing for a post-Peak world – yet these programs are now shrinking due to budget cuts. One such program is the Oregon State University Master Gardeners' education program, which gives students a fairly advanced education in organic food gardening. Another program is the Oregon State University Family Food Educators/Master Food Preservers education program, which provides research and education on storing vegetables and fruits, vegetable harvesting, emergency preparedness, drying food and herbs, canning, pickling and much more. Yet programs like these, and services like mass transit and expansion of bicycle lanes and bike safety programs, may soon wind up being sacrificed in order to satisfy what is an emerging “corrections-industrial complex” in our society – yet another example of the raiding of public resources established for the public good, in order to satisfy the greed of corporatists.

And speaking of corporate raiding, it seems that Bolivia is now experiencing a great deal of civil unrest, due to the opposition of rich land and resource owners in that country to the redistributive reforms of President Evo Morales. Bolivia is rich in natural gas, and as the world runs out of cheap, easily available light sweet crude oil and begins to rely more on heavy and sour crudes, refineries are using more and more natural gas to refine that heavy sour crude. President Morales has resisted efforts by global corporations and Western governments to remove barriers to “free trade” and foreign ownership of Bolivian assets.

So it is interesting that this week, President Morales kicked the U.S. ambassador to Bolivia out of the country, accusing him of instigating a revolt against the elected government of Bolivia. There is evidence to back up this accusation, including the fact that the ambassador recently met with some of the rich resource owners who are opposed to Morales, and a news article which suggests that the violent protests against the Morales government may have been funded by the U.S. government, which earlier this year asked Peace Corps students to spy on the Bolivian government. It is also interesting to note that Evo Morales is the nation's first indigenous Native American president, and that the rich resource owners protesting against him are white. (Sources: “Bolivia Expels US Ambassador Philip Goldberg,” The Telegraph, 12 September 2008, http://www.telegraph.co.uk/news/worldnews/southamerica/bolivia/2801579/Bolivia-expels-US-ambassador-Philip-Goldberg.html; “U.S. Should Disclose Its Funding of Opposition Groups In Bolivia and Other Latin American Countries,” Center for Economic And Policy Research, 12 September 2008, http://www.cepr.net/index.php/press-releases/press-releases/u.s.-should-disclose-its-funding-of-opposition-groups-in-bolivia-and-other-latin-american-countries)

Bolivia may soon join the long list of countries jacked by the rich Anglo elites in the West, particularly those of the United States, who have discovered that the Mideast is not such a temptingly easy target as they may have thought in 2001 or 2002. All this so that we in the USA can continue to drive as fast as we please, in vehicles as large as we like, stuffing our appetites which have been swollen to ginormous size by steroidal advertising.

These things are a shame. Truly, “the love of money is root of all the evils” (1 Timothy 6:10).

Uncle Sam's Vital Signs

The questions surrounding Peak Oil and the other resource peaks the world is now facing tend to fall into three general categories:

1. When will we start running significantly short of Resource X (oil, clean water, NPK fertilizer, etc)?

2. What role does Resource X play in maintaining the present lifestyle of advanced industrial civilization?

3. What will happen to society as available supplies of Resource X start to shrink?

Among those who have studied these questions and written about them for a long time, there are many who are saying that the world is experiencing significant resource peaks now, that the resources which are now beginning to decline play a key role in maintaining modern advanced civilization, and that catastrophic changes will result as available supplies of these resources start to shrink. Several of these writers (known as “fast-crash” theorists) point to the American financial troubles and the run-up in oil prices, both of which began in the last half of 2007 and which continue to the present, as proof that big changes are imminent, and that societal collapse is just around the corner. Others say that while there will be big changes, and that they may happen suddenly, society as a whole will experience a more gradual decline that lasts for decades at the very least.

I think something big (or several “somethings big”) is about to happen. Our way of life is unsustainable, and our political and financial systems are built on an unjust and unhealthy foundation. All around there are signs that our present system is beginning to break. But I am reminded of Jackie Gleason, an American entertainer whose lifestyle was an almost exact opposite of what most doctors recommend, yet who didn't die until he was 71 years old. How fast will things unravel? If you're asking me, I will be the first to admit that I don't know. But this last Labor Day weekend, I was obliged to travel to visit relatives in Southern California, and since I chose to drive there and back, it seemed to be a good opportunity to see firsthand the effects of some of the trends I have been following.

I got on the road rather late – around 1 PM on Friday, to be exact. That wasn't a smart move, since it made for a long night of driving. I kept myself focused by listening to the radio, but in listening I noticed just how dumb radio and mass media have become. As they have increasingly become mere tools of a corporatocracy, mere vehicles for presenting ads to hook consumers, radio and TV and other media organs have ceased to say anything really meaningful. Even when the night grew late and I was fumbling for classic rock stations to keep me focused, it occurred to me that the selection of “classic rock” songs that actually get airplay nowadays has become quite narrow. That list generally does not include any of the politically dangerous songs from the 1960's and 1970's; instead, it's mere head-smashing noise designed to appeal to teeny-boppers – things like “School's Out Forever” by Alice Cooper or songs by Van Halen and Bachman Turner Overdrive, along with rock songs of more recent vintage like “Hit Me With Your Best Shot”.

I stopped at the gas station shown below once I crossed into California. I have written before that I believe the oil markets are being gamed by several powerful interests in order to hide possibly faltering world oil production, but someone must have forgotten to invite the owners of this station to play the game. The sign speaks for itself.

I rolled into Buena Park around 5 AM on Saturday (Ouch!), and tried to check into my hotel. But because my bank card was from a small Oregon bank, the hotel computer would not accept it. I spent a couple of frantic hours searching for an ATM from which I could withdraw enough money to pay the room reservation, then spent another hour or so trying to convince the hotel staff that yes, I could be trusted to occupy a room in their hotel without smoking in the room or smashing things, oh, and by the way, would you please take my cash since my card doesn't seem to work? I finally got to sleep around 9:30 AM.

I slept for only a few hours, since I was supposed to meet my mother later and we were to visit my sister, then go out to dinner. In the time before our meeting I wanted to see a bit of my old stomping grounds, just to see what changes, if any, had taken place since I moved away. I drove through a bit of Anaheim and Fullerton among other places. In the picture below is a local example of the fallout from the present mortgage and financial crisis. The yellow sign in front says "Bank Owned."

It is by no means an isolated example. If you go to www.trulia.com and look up single family homes for less than $200,000 in north Orange County, the majority of properties listed are in foreclosure. I think this is typical of many working-class neighborhoods in Southern California.

Moving on to upscale “custom homes” (or McMansions), I'll tell you the story of a plot of ground near the intersection of Lincoln Avenue and Holder Street in Buena Park. In 2006, when I began bicycle commuting from my home to an engineering office in Cypress, this plot had been a strawberry field with a fruit stand. But I guess adverse agricultural economic conditions combined with the lure of cashing in on the real estate boom caused the owner to sell to a developer of “custom homes” who tried growing houses on that plot, starting in 2007. It was a bad time for such a move. Though I failed to snap a picture of that plot, I can tell you that this past weekend I saw a number of unfinished houses there – evidence perhaps of hard times for the builder.

Dinner with my mom provided an opportunity for a stimulating conversation which began when she asked if I would ever move back to Southern California. My answer, “Never!”, led into a discussion of Peak Oil and the general unsustainability of Southern California. We talked about mass transit, since my mom regularly rides the bus. I had noticed that the OCTA has been buying new double-decker natural-gas powered buses. My mom informed me that while the buses were quite nice, it was still hard to get anywhere in Orange County by bus, that the buses did not run frequently enough to be convenient, that the drivers were frequently rude, and that while the OCTA had long ago promised to install security cameras on their buses, no cameras had actually been installed.

This is a shame which is not limited solely to mass transit in Southern California. If global oil supplies have peaked as stated in last year's German Energy Watch Group report, then mass transit systems will become a vital resource in urban areas. It is therefore critical to make mass transit safe, comfortable and pleasant to use, in order to wean people away from the breaking system of automotive transport. But Orange County has a right-wing Republican heritage and consequently tends to despise government-supported social welfare systems like mass transit. One thing my mom mentioned is that the buses are now packed with people – not just kids and immigrant workers, but professionals fleeing high gas prices.

I got over eight hours of sleep on Saturday night (which felt very good) and prepared to roll out on Sunday. I drove to the house of a neighbor I had known for a long time, and got caught up on neighborhood news, then headed away – down the incredibly wide streets, utterly devoted to cars and inhospitable to any other form of transport, including bicycles – and hit the 5 Freeway northbound a little after 10:30 AM.

The drive north was a repeat of Friday's drive, complete with listening to classic rock (punctuated by a few minor league baseball broadcasts) until I got to the city of Elk Grove. Elk Grove intrigued me because the city had been the subject of an article in the British newspaper The Guardian, titled, “There Goes The Neighborhood: Mortgage Crisis Sees Suburbs Slump” (http://www.guardian.co.uk/business/2008/apr/28/us.subprime). Indeed, the Guardian had published a series of articles about the possible looming decline of American power and prestige in the face of declining energy supplies and an unraveling economy. Because Elk Grove had managed to make the headlines, I decided to stop and have a look myself.

Pulling off the 5 Freeway, I rolled up to a gas station/mini mart and went inside. “Excuse me,” I said to the woman behind the counter, “I have a question. I am the author of a blog which deals with energy and financial issues, and I heard something about how the present financial crisis has hit Elk Grove. Can you direct me to some housing developments or shopping centers whose builders have stopped building because of the present financial situation?”

The woman looked at me as if I had just come from Mars, giggled, and said something about “I don't know anything about all that.” But another customer overheard my question and directed me to a few places where I might find what I was interested in seeing. So off I went down Elk Grove Boulevard. Along the way, I saw a trail of these signs:

Following the signs led me to this house:

Inside the house I met Joey Satariano, a RE/MAX realtor who was very happy to have his picture taken. He acknowledged that business had dropped off in recent months, yet he remained enthusiastic about future prospects. He was offering a “Tier 1 list” and a “Tier 2 list” of repossessed homes to interested buyers. He also told me where I could find some unfinished housing developments.

Moving on from there, I drove a bit further down Elk Grove Boulevard. But long before I came to the places described by Joey, I spotted a cluster of homes with tar paper and stacked shingles on unfinished roofs, so I turned aside to have a look. I found a very large development consisting of a decorative wall surrounding a number of undeveloped lots. If you look in the pictures, you will see that some lots have nothing more than conduit and cable sticking up in the air for utility connection to future houses.

There was a model home office close by, so I went inside and talked to one of the sales agents. She was a pleasant, attractive lady, but she seemed to be a bit stressed by my questions. I found out that her company, Reynen Bardis, had been forced to halt building more homes due to lack of funds, and was simply trying to sell off its model home stock. Their brochure listed homes ranging from 1936 square feet to 2951 square feet, at prices ranging from $370,900 to $449,990. But I noticed that someone had written in (perhaps) desperate handwriting, “MAKE AN OFFER!” at the top of the price list.

Adjacent to this development was a development owned by Taylor Morrison Builders. It too had unfinished houses on partially finished streets. I talked with a couple who had recently bought a finished home on a street with both finished and unfinished houses. The husband, a large, burly letter carrier, seemed genuinely surprised that the city of Elk Grove should have attracted international attention due to the mortgage crisis. “If you want to see the foreclosure capital of California, you should go to Stockton!” he kept saying, with great enthusiasm.

He and his wife informed me that Taylor Morrison seems actually to be doing rather well. Part of this may be due to the fact that they are a multinational corporation and can spread losses around so that they don't hurt so much. They are also cutting back on building in Elk Grove, but they are building “on demand” – that is, they sell houses to prospective buyers (based on architectural renderings, perhaps), then they build the houses they have sold.

Both the letter carrier and his wife have jobs that are two freeway hours away from Elk Grove, yet they value living where they do because of the school system and the neighborhood. I asked them where they thought gas prices were going, and whether there was any sort of mass transit system to service their neighborhood. They both acknowledged that gas prices in the long term were likely to rise, and that while there were plans to expand rail service to Elk Grove, it might take a while.

Soon it was time for me to go. I had spent over an hour in Elk Grove, and it was now around 6:30 PM. I still had nine hours of driving ahead of me.

So there you have it – my extremely cursory attempt to take Uncle Sam's vital signs, to see how fast our various diseases are progressing, to discern whether they are as immediately life-threatening as some say. It seems obvious that we are in trouble generally, though some places feel the trouble less than others. When I think of Southern California, it seems to me to be a ruined place, ruined by the land use, development and economic policies of an elite whose sole aim was to make a lot of money without regard to the effects of the means used to make that money. And now this elite is trying to make money from the rest of the country by making the rest of the country like Southern California. Will things hold together long enough for them to succeed? Time will tell.

Meanwhile, although Hurricane Gustav did not do very much damage to oil refining and extraction infrastructure in the Gulf of Mexico, it did do extensive damage to the electrical grid in the Gulf states. This will have the effect of removing over a million barrels per day of petroleum products from American markets for a few weeks. Things could get interesting.