Whole Foods, John Mackey and Single-Payer Health Care

John Mackey, CEO of Whole Foods, recently wrote an essay for the Wall Street Journal in which he argued against any real health-care reform of the sort that would lift the burden of expensive health care off the backs of the working class. Instead, he argued for easing competition restrictions on health insurers as well as making it harder for victims of malpractice to sue their health care providers. (Source: http://opinionator.blogs.nytimes.com/2009/08/17/whole-foods-fight/) This is an interesting statement coming from the CEO of an upscale, “health-oriented” grocery chain that tries hard to pretend to be “progressive.”

Some might take such Mackey's deed as an awful event, but increasingly, I see it as a blessing in disguise. For too long, those who oppose our corporatist state and its masters have seemed to lack a proper target for their opposition. John Mackey has just provided such a target. By this I mean that responding to corporatism by targeting lawmakers is ineffective, since they only listen to people with money. On the other hand, targeting the people with the money is likely to get much swifter and more decisive results.

Many people have responded to Mr. Mackey by calling for a boycott of Whole Foods stores. I agree entirely. I think Whole Foods should be boycotted until one of three things happen: either Whole Foods removes John Mackey, or Whole Foods publishes a statement supporting health care reform including single-payer health care, or Whole Foods goes out of business. I would also suggest something further.

There are several Whole Foods stores in the Portland metro area, including one store on Burnside, on the east side of the river, next to the Laurelhurst Theater. If a number of picketers showed up on a Saturday or Sunday, and I was passing by, I'd be most happy to take pictures, do interviews and write a “citizen journalism” post for this blog. All I'd ask is that the picketers maintain a good testimony of politeness and abide by the law, and that they have a plan for outing and staying clear of any agents provocateurs who might try to discredit them. In this, it might be helpful to study the G20 protests in London that took place earlier this year. If there is any sort of protest or picketing, I'd also encourage other bloggers and citizen journalists to cover such events.

The Limit of F(x) As x Approaches C(ollapse)

Ooh, a storm is threatnin'

my very life today,

If I don't get some shelter,

Oh yeah, I'm gonna fade away...

– The Rolling Stones, Gimme Shelter

I have previously stated that our present global economic and political systems are breaking, due to a declining resource base and a deteriorating natural environment. I have also stated my belief that the masters of these systems are not interested in fostering or even allowing local, resilient alternatives for ordinary people. Instead, their aim at present seems to be to maintain the present systems at all costs, and to force ordinary people to continue to rely on these systems.

The present economic and political systems are also predatory and catabolic, in that they tend to devour large numbers of ordinary people in order to enrich the masters of these systems. While the enrichment of these masters has also historically come through economic and industrial expansion, the base of natural resources necessary for this expansion has begun to contract, because many of these resources are now used up. Because the base of natural resources is now contracting, there is no longer the opportunity for large-scale economic growth. Therefore, the catabolic, thanatoeconomic character of our present systems will become more prominent, as the rich will only be able to maintain and increase their wealth by jacking increasing numbers of the poor.

I have come to believe that under these circumstances, it is not possible at this time for most people to build truly resilient, permanent communities that are immune to trouble from economic collapse. There are some sectors of the population (such as those who are very well off) that will be able to form such communities. Yet most people will be prevented from achieving this because of crippling loads of personal debt, as well as the desperate attempts on the part of banks and government at all levels to keep prices of essential assets so high that obtaining them requires taking on additional debt. In short, most ordinary people are finding that most of their resources are being taken from them by rich predators, or that most of their resources are going toward defending themselves from these predators. The best that individuals and communities can do is to achieve a sort of “relative” resilience based on having a multitude of skills and strategies for coping with a rapidly changing economic and political situation.

This changing economic situation is increasingly looking like a hard crash. Our present system is unsustainable, yet its masters will not willingly choose a sensible, orderly and equitable transition to a state of lower economic activity and energy use. Rather, they will try to maintain the status quo until they simply can't anymore, and then some things will break down catastrophically. A good question is when that breakdown will occur, and what will be the limiting conditions which force such a breakdown. We might also ask what such a breakdown will look like.

As far as limiting conditions go, there are several authoritative thinkers who have written about these things. Rather than trying to reproduce their work, I'll merely offer my summary two cents' worth. My focus will primarily be the United States and its government at all its levels. The limiting conditions I see are as follows:

1. Government debt. As debt increases without bound, so does the yearly revenue required to service that debt. (To service debt means to make the regular payments with interest that are required as part of the contract between borrower and lender to pay off the debt.) When the revenue required to service the debt exceeds yearly taxes taken, governments must default. Then, no more debt is issued, the creditors come knocking, and governments collapse or cut their spending drastically.

2. Post-Peak Oil. Crude oil production is inextricably linked to the output of industrial economies. If the world is post-Peak and oil production is falling, the global economy must contract. This is especially true of the United States. As the American economy contracts due to a declining resource base, the ability of the various levels of the American government to borrow more money or to service existing debt declines. This pushes us further toward default and collapse. (By the way, when estimating the severity of future oil supply constraints, I rely on the German Energy Watch Group's Oil Market Report predictions.)

3. Food supply collapse – due to climate change and other environmental degradation, and post-Peak Oil. There is a real possibility of food shortages in the First World within the next few years, due to the collapse of agricultural water supplies because of overuse, misuse and climate change-induced drought. (See http://www.theecologist.co.uk/News/news_round_up/293297/colorado_river_running_on_empty_by_2050.html, and http://www.latimes.com/news/local/la-me-climate-farms22-2009jul22,0,7564338.story for instance.) Famine will also reduce economic activity and hinder the servicing of government debt.

4. The present, ongoing economic contraction consisting of business failures and hundreds of thousands of people losing their jobs each month. This leads to more loss of income, more loan defaults on private debt and more bank failures. Of course, those who hold the debts of people who have been thrown out of work will not want those debts to become worthless – thus more lenders will call for more “bailouts” (i.e., transfer of bank debt to Government books). Yet the Government is getting closer to being caught in a maxed-out condition where further debt transfers become impossible.

5. The collapse of the powers of the corporate state. As government access to debt collapses, so will government ability to try to protect big business from incurring loss (no one will be able to afford to pay the bulldozers to knock down abandoned houses anymore, for instance, nor will any government be able to afford to enforce anti-competitive laws against small farms and small food producers).

6. The pledge of dis-allegiance if the Government tries to increase its ability to service debt by means of an excessive (confiscatory) tax burden on the poor and middle class. Should we tax the rich? Absolutely yes! But so much of the Government's activity of late has been to burden working class taxpayers in order to secure the wealth of the top 5 percent of the American economy. (Think AIG and Goldman Sachs, for instance.) This can go on for only so long.

What will a breakdown look like? I have a pretty good idea of what it will look like at first in many neighborhoods, as it is already starting to happen. First, there will be a rare, small number of people who have prepared quite fully. Chief among their preparations will be the elimination of all debt. (This is why I say they will be somewhat rare. Within the last couple of years, I have met only two other people who have paid off their houses.) These people will increasingly find themselves the odd men out (or odd women out) in neighborhoods where many people's homes are getting repossessed and becoming vacant. Also, those who still have a “job” in the conventional sense will increasingly be a minority. Lots of neighbors will suddenly have lots of unplanned-for “free time.” There will also be more store closures, so that it becomes harder for people in a neighborhood to obtain the things they need. There will be an increase of homeless people as well, and as time passes, an increase of renters or squatters. Neighbor whose house is paid for, meet your new neighbor: the squatter or renter who just moved in next door. In this state of flux, there will be a great need for wisdom, tact, politeness and diplomacy in forming new relationships. For perceptive souls, these conditions may also present opportunities for “culture repair.”

What are effective strategies of personal and group resilience for such conditions? The answer depends on whether one intends to stay in a particular place at all costs, or become a migrant. “Should I stay or should I go?” That depends on what holds you to a place. “If I stay, but if I owe,” what should I do? Develop a suite of alternative gigs in case you get laid off. Make sure that whatever you do, you make enough to pay down your debt. “If you stay and you don't owe,” this gets easier – you just have to worry about utilities and property taxes, as opposed to a mortgage. If you rent, most of this still applies – develop a suite of gigs that earns enough money so that you can pay your bills. In all cases, reduce other expenses so that you have enough money for the essentials. (Note: this will involve learning a fair amount of self-reliance skills.)

Why a suite of alternative gigs? Because the official economy is no longer willing or able to guarantee an income to a person who simply pursues a single career or profession. As an example, this last week, I was riding a MAX train home when I ran into a co-worker from my office. We talked about the fact that both our departments are very, very slow right now, as well as strategies for dealing with possible layoffs. He is a piping designer by profession (as in piping for large industrial plants), but he is also a sports referee. If my office shows him the door, he's got a large number of games lined up where he can referee and get paid for his services.

But are you already out on the street – have you fallen from “respectability” due to loss of income? There are strategies you can pursue for protection and mutual aid. I will have more to say about these strategies in a future post. Some of these will be useful not only for those who are homeless, but for other groups usually targeted by our predatory system.

One thing I must emphasize: I am a Christian. Therefore I believe in an absolute moral standard. I will not therefore ever suggest turning to certain criminal or unethical deeds as a coping strategy.

Is Community Resilience Possible At This Time?

My post, "Escaping the Thanatoeconomic System," marked a change of my mood from mildly optimistic to quite sober (maybe even somber), as I came to realize the full implications of some of the societal trends I have been following. For a long time I had realized that not only is our present economic system breaking, but that it is not in the interests of the masters of that system to foster local, resilient alternatives for ordinary people. Yet I had been reasonably optimistic that ordinary people of small means could engineer local, resilient safety nets of alternative systems by which they might decouple from the official economy. Of course, this ability would depend on the presence of local resources for these safety nets, as well as a certain minimum level of access to these resources.

While I still think that some members of the populace might be able to build such safety nets, I have recently come to believe that the majority of Americans will probably not be fully able to do so at present, due to lack of access to the necessary resources. While there are some things that most people will be able to achieve, there are also things that will be beyond the reach of all but the most affluent.

One thing that may be beyond the reach of most people at present is building local, permanent resilient neighborhoods and communities. The reasons for this are obviously tied to land use and ownership. Most people rent, or they “own” in the sense of making installment payments on a loan used to buy a house. During the run-up to the 2005 peak of the housing bubble, prices of homes were continually and wildly inflated, far beyond the ability of most people to pay, while wages for most workers remained stagnant or declined in real terms. Then the economic collapse began, triggered by the rise in oil prices leading to the spike in 2008. That economic collapse has resulted in millions of jobs lost, as well as further erosion of incomes; yet there has been no debt relief for people who bought houses during the bubble years. A debtor living in a regular, modest house (I'm not even considering McMansions) is not resilient in the face of economic shocks, but is brittle, and is likely to end up out in the street in the event of a job loss or some sudden large expense.

Now one thing that could have provided opportunity for many people to build resilience is a sudden, large-scale reset of real estate prices nationwide. Had prices been allowed to fall to a level that people could actually afford in this present economic climate, more people would have been able to find homes that they could afford to stay in for the long term, and they would have been free to work on other strategies of resilience, such as gardening and energy efficiency. Indeed, there were and are places where this reset has occurred – places like Detroit and Flint, Michigan, and other cities in the Midwest. As word got out about home and land prices in places like these, forward-thinking people moved to these places in order to build a more sustainable life for themselves.

Yet these places also attracted speculators looking to get rich by playing a real-life version of “Monopoly.” I believe they also attracted the notice of the masters of the banking and finance sector as well as their friends in various levels of government. These people had a vested interest in preventing any fall in real estate prices, since most properties had been bought on credit and these properties were collateral for securities priced at an inflated value. What has therefore emerged over the last several months is a concerted effort to keep the price of housing high by artificially restricting access.

Thus we have seen cities bulldozing abandoned properties; cities foreclosing on people who can't afford to pay their property taxes; the withholding of foreclosed houses from the market by the banks that own them; and cities creating “land banks” consisting of abandoned properties which the cities either demolish or remodel in order to collect revenue and bring housing prices back up. (Sources: “Unpaid Property Taxes Hit Cities, UPI, 30 July 2009, http://www.upi.com/Top_News/2009/07/30/Unpaid-property-taxes-hit-cities/UPI-99581248962645/; “Land Banks Gain Popularity As Way To Fight Urban Blight,” USA Today, 9 July 2009, http://www.usatoday.com/news/nation/2009-07-09-landbanks_N.htm; “Flood of Foreclosures: It's Worse Than You Think,” USA Today, 23 January 2009, http://money.cnn.com/2009/01/21/real_estate/ghost_inventory/index.htm)

Many of these strategies were anticipated in the United States Housing And Economic Recovery Act of 2008, signed into law by President Bush, which, among other things, set aside $4 billion for the establishment of land banks and the redevelopment of abandoned, foreclosed or “blighted” properties, in order to boost real estate prices. These strategies continue to be supported by the American Recovery and Reinvestment Act of 2009, signed into law by President Obama. These strategies are part of a broader effort to protect the rich from a loss of the notional value of their assets, yet they continue to put basic resources such as houses and land out of reach of ordinary people of limited means. Any regular person trying to buy a house nowadays is still likely to be subjected to an unsustainable burden.

And the attempt to reinflate the housing bubble is only one example of the imposition of unsustainable burdens on the American working class. Another glaring example is the continued bailouts of the banking sector, bailouts which now number in the trillions of dollars, just to cover the losses of bank “assets” which had been built on loans that are now unrepayable. Lest anyone take this as a signal to become stupidly partisan, let me remind any readers that this mess is bipartisan. Both Democrats and Republicans are to blame. The net effect of the bailouts will be to saddle ordinary Americans with yet another unsustainable burden – that of being turned into collateral for a huge mass of bad loans.

These are just a few examples of the way in which our predatory system is taking from ordinary people the very resources they need in order to foster resilience. These examples illustrate the extent to which the masters of our present system will go in order to maintain the status quo. It was considering these examples that made me increasingly pessimistic about our prospects for a “soft landing,” an orderly and equitable transition to a state of lower economic activity and energy use. I don't think we will achieve a “soft landing,” because the masters of the present system will do their best to keep things as they are until they simply can't any longer, and then some things will break down catastrophically.

What will such a breakdown look like? I can't say with any confidence. There are people much cleverer than I who have thought about these things. I've read Dmitri Orlov; now I may get my hands on a copy of Joseph Tainter's The Collapse of Complex Societies. Is now the time for communities and neighborhoods to try to foster resilience? I think it may not be possible at this time. (But if anyone can prove me wrong, feel free. I'd welcome it.) It may only be possible for individuals to foster resilience, and if communities try for such a goal, it may only be possible for groups of nomads or migrants. Building permanent, local resilient communities might have to wait until our present system has gone a little further down the road of collapse. In the meantime, allow me to recommend Jeff Vail's blog (http://jeffvail.net), where he tackles some of the same questions (although he does a much better job, in my opinion). His latest series is called “The Rise of the Diagonal Economy and the Transition to Decentralization,” and he's just getting started. There is also a post on the internet titled, “"Peak Civilization": The Fall of the Roman Empire,” by a man named Ugo Bardi. Note especially what he says about the emperor Diocletian.

“What advice do you have, then?” someone may ask. Unfortunately, I don't have any right now. I need time to think about this some more. These thoughts have definitely changed the character of the upcoming interviews I was planning to do for this blog; now I'll have to approach things from a different angle. Someone else might be asking, “Do you see any other examples of large-scale hindrances to community resilience?” My answer is that if I tried to think of all the potential hindrances, I'd be here typing until midnight, and I'm trying to cut down on that sort of thing... ;)

Jonas Brothers and Chinese Heavy Machinery

There's a recent article at Bloomberg regarding Chinese concerns over the U.S. budget deficit (“U.S. Assures 'Concerned' China It Will Shrink Deficit,” http://www.bloomberg.com/apps/news?pid=20601087&sid=as7NE_Rygqpk). The article describes a recent round of Strategic And Economic Dialogue (SED) talks hosted in Washington, and how the Chinese officials present voiced concerns about the extent of U.S. government borrowing and money printing, as well as the stability of the U.S. currency itself. This is understandable, as China holds over $800 billion in U.S. Treasury debt.

What is interesting is the “concerns” the United States has brought to the table. Under President Bush, a large part of these concerns had to do with trying to pressure the Chinese to open their financial markets to investment (and control?) by international firms (think Goldman Sachs or AIG, for instance). Under Obama, the tone has changed and the emphasis has become different. It seems that the U.S. realizes that it no longer has any leverage to insist on greater access by foreign firms to Chinese financial markets. Yet now the U.S. is calling on China to shift toward relying on domestic demand for economic growth rather than exports. According to the Bloomberg article, U.S. Trade Representative Ron Kirk said, “They have to build more of a domestic spending society... [If they do,] software, movies and the creative arts will be a great market for the United States.”

This is really funny. The financial and military arrangements which have allowed the First World and the U.S. in particular to expropriate the rest of the world's wealth are now unraveling. China has so far resisted much of the pressure brought to bear by the U.S. to allow its financial markets to be raped by the likes of Goldman Sachs (although the Chinese are rightly concerned that the large amount of U.S. debt they hold might become worthless). Yet the leaders of the U.S. are still enamored of the idea of trying to get something for nothing. Our trade deficit is now huge, we no longer manufacture much of what we use, and we are running out of financiers of additional debt by which we might buy things from other nations.

So we are now calling on China to stimulate their domestic demand for some of the few things we have left to sell to the world – “software, movies and the creative arts.” Shall we thus give out Jonas Brothers' song downloads or copies of People Magazine in exchange for Chinese tractors, heavy machinery and hand tools? Or how about Hannah Montana or America's Got Talent DVD's in exchange for Chinese furniture?

Escaping The Thanatoeconomic System

“For if they do these things in the green tree, what will be done in the dry?”

- Luke 23:31, World English Bible

Thanatos: death (Greek).

Let me begin with some insightful comments made by blogger Stormchild on my recent post, “Airlines And Moral Systems Failure.” That post dealt with the financial squeeze now being experienced by the major airlines due to Peak Oil and economic collapse, and my belief that airlines are now resorting to cost-cutting measures that are beyond the bounds of reasonableness, measures that put the flying public at risk.

Stormchild observed that, “...we live in an economic system that rests, ultimately, on human sacrifice, and almost none of us realize either this fact or its implications.” She also observed that, “In order to function, our system actually requires a permanent underclass, AND needs a certain number of people to be deprived of their livelihoods at regular intervals. [Consider the obscene fact that a company's stock price goes up when it indulges in mass firings.] This same system places little or no value on preserving human lives; business schools in this country will actually teach you how to determine when liability exceeds profitability – a.k.a., how many people you can afford to kill before it gets too expensive.”

These observations are quite accurate. The fact that our present official globalist economy functions in this way speaks volumes about the motivations of the masters of this economy. Our large-scale, energy- and capital-intensive industrial economy is a predatory machine run by predatory masters, and those of us who are not rich enough or well-placed enough to be its masters are its prey. That means that the majority of people on earth are prey. Over the duration of this economy, the conditions imposed on us who are prey have oscillated between moderately decent and horrible, against a backdrop of industrial and economic expansion due to the acquisition of ever larger quantities of natural resources and labor which served as feedstocks for this economy.

Now this economy and its masters are under stress as its resource base declines, and as its base of capital also shrinks. This should be of great concern to us who are the world's prey, because of the well-known tendencies and behaviors exhibited by predators under stress. The recorded history of such tendencies and behaviors give us a clue as to what we can expect from our present globalist, corporatist system and its masters as that system experiences increasing stress.

I have written about the need to foster resilient neighborhoods as preparation for a post-Peak world of economic collapse. My writing has been partly a blind, groping, feeling exploration for solutions to the immediate, present threats that I see in neighborhoods, communities and cities in the U.S. In thinking about these things, I have also read many of the writings of other thinkers, people whom I believe to be far more knowledgeable than me regarding Peak Oil, climate change, and their likely societal effects.

But I have noticed a tendency among many of these writers to think only of the scientific or technical implications of the effects of resource constraints and climate change on our social arrangements. So there are endless discussions about how post-Peak oil production declines will affect finance, global shipping and land-based transportation, or about the importance of mass transit and localized food production, or about personal preparedness along the lines of organic gardening and relocating to ideal “lifeboat” locales. Those who discuss “resilient communities” have tended to approach the subject by laying out high-level theories of optimum social organization, organization whose effectiveness is often bolstered by technological advances (see Global Guerrillas: THE RESILIENT COMMUNITY, for instance). The sense of many such writings is that resilient communities are a futurist vision that's always just around the corner.

These theories have value, and I would not discourage them. Yet they do have a blind spot. Pardon me for saying so, but many of these discussions and theorizings sound so very “upper middle-class white.” Therefore, they ignore the present relation between our predatory global economy and the large numbers of people who are its prey. This is a dangerous omission. Consider the dictionary definition of resilience: “an ability to recover from or adjust easily to misfortune or change.” In order to have this ability, one must have a stable resource base from which to draw in order to deal with the stresses of misfortune and change. Those who are deprived of that resource base are not resilient, but brittle and prone to break down. Consider a well-fed, athletic, well-rested teenager who is suddenly thrown into an ice-cold pool. The experience is undoubtedly a shock to him, yet once he swims to the side and gets out, he easily recovers from it. The same is not true of someone who is seriously ill, malnourished and sleep-deprived.

Being treated as prey robs people of the reserves of strength they need in order to be resilient, for all their resources are either consumed in coping with their predators or are taken from them by their predators. Here are some recent examples of our masters treating us as prey:

• The U.S. Congress has been trying to pass broad “food safety” laws in response to public concerns over tainted food and food recalls. The problem is that these laws don't correct the bad practices of the large agribusinesses that produce tainted food, but rather, the laws impose such a huge regulatory burden that they drive small, sustainable farmers out of business. Thus they force us to rely on the big agribusinesses instead. Just last week, the House of Representatives passed such a bill – H.R. 2749.

• U.S. mortgage lenders are, by and large, not cooperating with the recently enacted $75 billion Federal program to prevent foreclosures. This is because lenders who foreclose are able to collect lucrative “junk” fees on delinquent loans. Such fees include late fees, title search fees, legal filings, and appraisal fees. (Sources: Homeowners ask government in lawsuit: Where's the foreclosure relief?, and Profit motive may trump plan to modify mortgages.) Heaven help you if you get in trouble on your mortgage, because the banks sure won't – they get more money from making you homeless.

• Amid California's recent budget crisis, the Governor was proposing a budget that would protect the outlay of State funds to the private prison industry – even though there were many headlines about the need to slash social services. At present, there are three corporations operating private prison chains in the not-so-Golden State. (Sources: Schwarzenegger Talks Private Prisons and Budget Cuts | Youth Radio, and http://reason.org/blog/show/solving-the-ca-budget-governat, from Reason Magazine which should perhaps be named Un-reason Magazine for praising such an evil arrangement.) Meanwhile, “Governator” Schwarzenegger seems uninterested in genuinely rehabilitative ways of dealing with California's prison population, as these might be bad for somebody's business.

• The City of Los Angeles has been criminalizing homelessness under the direction of its police chief, William Bratton and his “Safer City” initiative. Under this initiative, it is illegal to sit, sleep or store personal belongings on sidewalks and other public spaces. Also, if you look shabby and are caught jaywalking or loitering, the police come after you, whereas the police don't seem to notice the same offenses when done by people who don't “look” homeless. Los Angeles is just one example of the broad criminalization of homelessness in America. (Sources: Los Angeles accused of criminalizing homelessness, LA is "Meanest City" for Homeless: Study, and A Dream Denied: The Criminalization of Homelessness in U.S. Cities.)

I believe that these examples illustrate how our present economic masters will increasingly treat us as their opportunities for further enrichment through economic growth disappear. Even while it was expanding, the official economy always had catabolic tendencies – i.e., there were always some members of that economy who were consumed by it rather than being allowed to function as members of that economy. But as our economy continues to contract, its catabolic tendency will be amplified, and may well become its main characteristic. As more and more people slide from middle-class status to poverty, these people will increasingly discover what it means to be preyed upon, as they are consumed in order to satisfy those who are still rich.

If these things are so, then figuring out how to build resilient communities must take into account what sort of people are the prospective members of that community. Are they poor? Are they people of color? Are they both? If so, then they must not only contend with the general exigencies of post-Peak Oil, climate change and general economic collapse, but they must also be able to devise effective protection from their predators. (By the way, most of us are going to get a lot poorer.)

This is something that I don't hear many resource and sustainability activists talking about. I don't think, for instance, that the Transition Towns movement has thought about this. But this is what concerns me. How does someone keep from having his house repossessed? How do people of color protect themselves from police racial profiling and selective arrest? Where can homeless people go to find a place of stability where they can regroup? If you get thrown in jail – even for a stupid reason – how do you find a job afterward? Some of the abandoned houses I showed in my last post are in my neighborhood. How do we fix problems like this? How can poor people rebuild social safety nets that are now being dismantled by the rich? How can we stop getting jacked?

These are questions I've tried to answer in my posts on neighborhood resilience. I'm a little frustrated right now, because I haven't come up with satisfactory answers. Maybe I'm just not clever enough. But why are there so few other “collapse-aware” thinkers who are trying to tackle these things? We need answers, and right now.

The Abandoned House Syndrome

Recently, the following houses caught my eye:

House #1, Lake Oswego, OR. This house has been abandoned for several months.

House #2, Lake Oswego, OR. This house has been abandoned for a year. The bank that owns it attempted an auction, but it failed.

House #3, East Portland. See the lockbox on the front door, as well as the trash and weeds in the front yard.

House #4, East Portland, OR. Note the broken rear window. It looks like someone kicked it in.

House #5, East Portland, OR. This house has been abandoned for a year. The City had recently put a ticket on the house for weeds and "public nuisance." When I took the picture, however, someone from a property management company was mowing the lawn. This house was the subject of another failed auction.

Four of these houses are in various stages of tracing out the same trajectory of history. They were all offered for sale by homeowners who found themselves in trouble of one kind or another and who could no longer pay their mortgages. None of the owners was able to sell at the desired asking price. All these homes fell into foreclosure and became bank-owned. All are now abandoned.

House #3 does indeed have a lockbox on the front door, indicating that it may have been purchased by a new owner who simply hasn't arrived yet. But in that case, where is the realtor's sign with a big “SOLD” sticker on it? Also, notice the signs of abandonment here as well – the trash in the unkempt front yard, for instance.

I didn't go intentionally searching for houses like these; rather, I noticed them as I was going about my daily business. However, I am sure that searchers could find many houses like these by now, not only in Portland and Lake Oswego, but in many other cities.

These houses illustrate a few interesting trends. First, at the very beginning of the present economic collapse, there were some writers on the subject of collapse and preparation who suggested that it might be possible for homeowners in trouble to negotiate more lenient loan payment terms with their lenders, because it was assumed that banks really don't want to own homes. But while it may or may not be true that banks don't look forward to owning homes, it has definitely proven to be true that banks are quite willing to take homes away from people who are unable to pay their home loans under terms originally negotiated.

Why are banks taking houses? Because the assets counted on the balance sheets of most banks consist of interest-bearing loans made to supposedly credit-worthy borrowers. When those loans became worthless due to the default of the debtors, the only other assets banks could carry on their balance sheets were the items of collateral used to secure the original loans. Such collateral included the houses of people who could no longer make their house payments.

Why are the banks holding these houses for such a long time? Because a huge gulf has arisen between the prices that banks and other holders of real estate would like to charge for their assets versus the actual price that most people can afford. Yet these houses and other real estate are still being carried on the banks' books at the price that they would have commanded near the height of the recent real estate bubble, when prices were high. For banks to sell foreclosed and repossessed properties at a price that would actually work in our present market, the banks would have to admit that their so-called assets had lost a huge percentage of their notional value. This would shrink the balance sheets of banks to such an extent that many more of them would fail.

The recent government bailouts of the banking system should have allowed more banks to remain solvent even as these banks either negotiated more merciful loan payment plans with homeowners or as the banks sold repossessed homes for a more reasonable price. Yet the bailout money was not used by the banks to enable mercy and fair play. Rather, it was used to increase shareholder dividends and CEO bonuses. Now, therefore, the banks hold “auctions” in which they try to sell foreclosed properties for inflated prices. When no one is willing to submit a satisfactory bid, these houses are taken off the market in the hope that one day, market conditions will magically improve, at which point another auction or sale will be attempted. Some banks, desperate to raise homebuyer demand by limiting supply, are now paying demolition crews to bulldoze abandoned homes, including recently built or nearly built McMansions. (Sources: http://www.cnbc.com/id/30580830; http://blog.mlive.com/flint-city-beat/2009/07/kildee_a_smaller_flint_equals.html; and this - http://www.jsonline.com/watchdog/watchdogreports/50548282.html for a slightly different twist.)

Meanwhile, the weeds and moss grow, the trash piles up, the paint peels, the banks must pay a property management company to look in on their properties and clean up the places, and the occasional window gets kicked in...

Airlines And Moral Systems Failure

Soon after returning home from my last trip to Southern California, I got into a short conversation with a married couple who are my next door neighbors about my trip. They too had recently traveled to So. Cal., not for work, but to visit relatives. Whereas they flew there and back, I drove. I think they have come to the conclusion that I'm a slightly peculiar character, so they saw my choice to drive as just one more proof of oddity. When they asked if I would be returning anytime soon, I told them that I wouldn't be going back for a couple of months, and that when I returned, it would only be to visit family. One of them asked, “Are you going to fly this time?” “No way,” I said. “Planes crash!” “So do cars,” they both chuckled.

But in all seriousness, I have given up flying for the time being. It's not because of an “irrational fear of flying.” Rather, as I have said before, it's because during the last oil price super-spike, we all witnessed the death of several airlines and the consolidation and extreme cost-cutting measures of several of the survivors. I also know that the surviving airlines are still being squeezed by rising oil prices and falling revenues caused by the general economic collapse. This is hindering their ability to maximize profits. Knowing how big business operates nowadays, I expect that their cutbacks have extended far beyond such visible things as carry-on luggage charges and elimination of in-flight snacks, and that they have been cutting back on things essential to keeping their planes safe in the sky. I therefore expect that as our economic collapse progresses and oil prices go through further spikes, there will be a significant increase of in-flight safety incidents (including crashes).

Is there any evidence to support such an expectation? I haven't done a rigorous statistical categorization and analysis of airline in-flight incidents over the last few years. Such an analysis, while valuable, would take a significant amount of effort, and I don't have the time right now to undertake such an effort. But it is interesting to note that over the last month and a half, during the time when I drove to Southern California twice, there have been at least five crashes of planes used either for passengers or cargo.

One particular crash that caught my attention is the loss of Air France Flight 447, an Airbus A330 that fell out of the sky into the Atlantic Ocean on 1 June 2009. According to initial reports, the plane was in international airspace under the watch of Brazilian air traffic control when it flew into a band of thunderstorm activity. As it entered the storm zone, it experienced a rapidly cascading failure of its highly complex, computer-controlled avionics, leaving the pilots with progressively less information about flight attitude and speed, and less ability to control the plane. There came a point when something critical happened, and the plane fell out of the sky.

What's interesting is how independent investigators drew certain initial conclusions from the crash data, how the French corporation Airbus Industrie responded to these conclusions, the French oversight of the debris recovery operation and their inability to find the plane's “black boxes,” and the preliminary conclusions of the French Government's BEA (Bureau d'Enquêtes et d'Analyses pour la Sécurité de l'Aviation Civile), an agency similar to the American FAA.

Initially, the conclusion of many independent investigators was that the plane broke up in midair. The injuries seen on recovered bodies and the fact that many of those bodies were missing clothing, supported this conclusion, as well as the fact that the crash debris field was several miles long and several miles wide. Airbus spokesmen then began to blame the pilots for flying the plane in a way that exceeded its design limitations, secondarily blaming flight sensors for giving the pilots faulty speed and attitude information.

But this provoked further questions about the safety of the heavy reliance of Airbus on composite-fiber components in their aircraft, in places like wings, rudders and other control surfaces. These suspicions were amplified when the nearly intact tail of the plane was found near the extreme end of the debris field, suggesting that it had sheared from the aircraft while in flight. Such incidents had happened before with Airbus aircraft.

The voicing of these suspicions prompted many vehement assurances from Airbus that their airplanes are well-designed, and perfectly safe to fly. In this Airbus was joined by an unlikely ally, namely Boeing, who are in the process of producing a next-generation plane, the 787 Dreamliner, that will be made up of over 50 percent composites.

Why are composites so important to passenger jet manufacturers right now? It boils down to fuel prices. Those who build the lightest jetliners capture the biggest share of the market, because the person who buys and flies those jetliners can carry the most cargo or the largest number of people for the lowest operational cost.

But aircraft manufacturers have reached a point where their craft are so lightly built that they must be outfitted with extremely complex computer-controlled avionics, to prevent pilots from overstressing their aircraft while in flight. Safety margins have been shaved to the minimum, since generous margins would add weight and operational cost.

A word about composites is in order. It is well known that composites tend to delaminate and develop voids when subjected to the cyclic loading and extreme temperature variations experienced by passenger jets. While the military uses composites in many of its most advanced jet aircraft, it is also true that the military subjects its planes to very rigorous maintenance and inspection regimens. This is not true of planes maintained by airlines, whose manufacturers have convinced the operators of these planes that only visual inspection of components is necessary, or at most, a “tap test.” Hardly any airline does more extensive testing, such as ultrasound scans.

In light of these issues with composites, the outcome of the crash investigation by the BEA is quite interesting. In a report issued on 2 July 2009, the BEA concluded that Flight 447 was brought down by undetermined factors, and that it hit the ocean intact, without breaking up first in midair. They also stated that it was at least six hours from Flight 447's last known transmission before an emergency was declared. This directly contradicts the Brazilian government's assertion that it was less than half an hour after the flight's last transmission before Brazilian air traffic control issued an alert. It is also interesting to note how all the major media outlets have regurgitated the BEA report without questioning the contradictions between its conclusions and the earlier conclusions of investigators not connected to Airbus or the French government.

I believe that Flight 447 and the handling of its aftermath is an indicator of the sorts of things we will see as high-value systems and providers of high-value services are stressed and squeezed by oil depletion and economic collapse, and as these providers struggle to maintain profits. Meanwhile, here are some links for you to enjoy (or maybe not, if you have to fly somewhere anytime soon).

For Further Reading...

• http://www.flightglobal.com/articles/2009/07/21/329793/airline-accident-review-for-first-six-months-of-2009.html

• http://www.bloomberg.com/apps/news?pid=20601109&sid=akXFahAbi3mA

• http://www.upi.com/Top_News/2009/07/16/Airplane-crash-trend-troubling/UPI-26451247755941/

• http://www.counterpunch.com/garcia07012009.html

• http://unsilentgeneration.com/2009/07/03/air-france-447-french-coverup/

• http://www.dailymail.co.uk/news/worldnews/article-1192257/Pilot-tells-desperate-battle-cockpit-packed-passenger-plane-4-000ft.html;jsessionid=1AA489E0D51256BF6450F93D69A504AE

• http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063000249.html?wprss=rss_business

• http://www.guardian.co.uk/world/2009/jun/18/airbus-air-france-crash-autopsies

• http://www.cnn.com/2009/WORLD/americas/07/02/air.france.report/index.html

• http://www.usatoday.com/news/world/2009-07-12-csiplane_N.htm

• http://articles.latimes.com/2009/jun/09/business/fi-airlines9

• http://www.concierge.com/cntraveler/blogs/80days/2009/07/is-the-dreamliner-in-real-trouble.html

• And lastly, this: http://articles.latimes.com/2009/jun/14/opinion/oe-garrison14. If you don't read anything else, please read this – it's an eye-opener.