Prediction: where only fools and angels dare to tread

I'm reading a wonderful book at the moment: "The Black Swan: the Impact of the Highly Improbable" by Nassim Nicholas Taleb. Lots of academics and bureaucrats hate him, and no wonder. Like one of my other heroes, John Kenneth Galbraith, he is an expert at pricking the pomposities of experts and other overpaid drones, especially those suffering from anxieties caused by their suppressed fear of their own basic fraudulence and incompetence.

Let me quote:

There are those people who produce forecasts uncritically. When asked why they forecast, they answer, "Well, that's what we're paid to do here."

My suggestion: get another job.

This suggestion is not too demanding: unless you are a slave, I assume you have some control over your job selection. Otherwise this becomes a problem of ethics, and a grave one at that. People who are trapped in their jobs who simply forecast because "that's my job", knowing pretty well their forecast is ineffectual, are not what I would call ethical. What they do is no different from repeating lies simply because "it's my job".

Anyone who causes harm by forecasting should be treated as either a fool or a liar. Some forecasters cause more damage to society than criminals. Please, don't drive a school bus blindfolded.

With this in mind, recall my recent comments about Glenn Stevens, Governor of the Reserve Bank of Australia. Is he a fool, or a liar? I invite you to judge. Remember that this man and others like him are presently controlling your destiny.

I wish I had read this book in 1980. It would have saved me a great deal of angst. In fact I spent some time trying to develop some sort of algorithm or model to help me forecast risks when building complicated scientific models in a business which I've been operating for many years, and which has on more than one occasion brought me badly undone. "The Black Swan" is about precisely these types of problems. Unfortunately the book was not published until 2007!

He talks about a very difficult subject but manages to give us some simple tools and concepts to help manage it. For me, one of his key ideas is the division of our world into two sections, which he names Mediocristan and Extremistan. Mediocristan is where most of us live: it's where you need to turn up and do a fair days work to get paid, and where rewards will always be modest but reasonably predictable. Extremistan is the country inhabited by the sorts of people you read about in magazines while waiting to see the doctor. The super-rich: Nicole Kidman, Donald Trump, Mick Jagger, Eddie McGuire. And a whole lot of other people who are less visible but no less extreme in their wealth or power. What he discusses are the characteristics of these two worlds and how they interpenetrate and interact with each other. Extremistan has the characteristic that there are many, many more losers than winners, but the winners may reap astronomical rewards.

Some professions may move from one world to the other. This is what happened to musicians when recording was invented: the majority of musicians lost their livelihood or it became very precarious, while the lucky few became incredibly rich.

But in a certain sense we inhabitants of the modern world are all inhabitants of Extremistan, with its huge rewards and equally huge risks. The present financial crisis comes precisely from this cause, and is the outcome of large numbers of people confusing one world for the other and believing it was possible to get something for nothing. That's what trading on the stock market is all about. That is why asset bubbles occur. That is the basis of gambling.

Anyway I recommend you read this book if what I've said so far intrigues you.

An interesting post by Dmitry Orlov after quite a long lull on his blog. I haven't been posting of late, mostly because I feel that my job is more or less done. I called it as I saw it, and, unfortunately, I seem to have called it correctly. The US is collapsing before our eyes. Stage 1 collapse is very advanced now; stages 2 and 3 are picking up momentum.

I have a similar sense that there will come a time when I feel no further purpose will be served by riffing on the same old themes. I had an interesting experience yesterday where a very young girl, perhaps seven or eight years old, came into our shop to look at our aquarium fish. She began talking about the financial situation in the US (I can't remember what triggered this!) and started by saying "the depression in America" and then corrected herself, "I mean it's only a recession now, but it might turn into a depression". I asked her where she had heard about all this and she said something vague about school. Some time later my former bookeeper came in and told me her bookeeping guru had said the coming downturn could last forty years.

When two unrelated people from such wildly different backgrounds have some grasp of what the situation facing us could entail, there's no need for me to use a megaphone. On the other hand the practicalities of how we're going to deal with all this are still of interest, and perhaps this blog may serve some function in that regard.

In fact my task for the next couple of weeks is to sit down and produce a new business plan for our nursery, something which we have to do if we're to face up to the reality of what's coming towards us. There is no guarantee I'll get it right but failure is guaranteed if I don't do it at all.

Finally, the conclusion of Jim Kuntsler's latest post:

The big theme for 2009 economically will be contraction. The end of the cheap energy era will announce itself as the end of conventional "growth" and the shrinking back of activity, wealth, and populations. Contraction will come as a great shock to a world of conventionally programmed economists. They will toil and sweat to account for it, and they will probably be wrong. Unfortunately, this contraction will do its work in unpleasant ways, driving down standards of living, shearing away hopes and expectations for a particular life of comfort, and introducing disorder to so many of the systems we have depended on for so long. People will starve, lose their homes, lose incomes and status, and lose the security of living in peaceful societies. It will become clear that the Long Emergency is underway.
My hope for the year, at least for my own society, is that we will transition away from being a nation of complacent, distracted, over-fed clowns, to become a purposeful and responsible people willing to put their shoulders to the wheel to get some things done. My motto for the new year: "no more crybabies!"

Read the whole thing if you haven't got time to read The Long Emergency. It's a lengthy and comprehensive examination which may seem excessively dire until you realise how accurate he's been so far.

Less balance, less nuance, just a fine old rant

From Amanda Kovattana, an aha! moment...The implications of this suddenly hit me. We are under contract to fleece the planet! The fractional reserve banking system is designed so that it must keep on giving out loans just to stay solvent, but there aren't enough resources in the world to be sold for all the money that needs to be paid back...

All over the planet, people are suddenly waking up to reality. We may or may not have seen it coming, but we know it has arrived. And the oddest people are starting to talk about it. Take Jeremy Clarkson, host of the BBC show Top Gear, here posted on Rob Windt's The Naked Mechanic...I was in Dublin last weekend, and had a very real sense I'd been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that's now extinct...how could the Irish ever have generated the cash for so many trips to the hairdressers, so many lobsters and so many Rollers? And how, now, as they become the first country in Europe to go officially into recession, can they not see the financial meteorite coming? Why are they not all at home, singing mournful songs?

Read the whole article. It's a hoot in the inimitable Clarkson style.

It's a temptation — for me at least — to get angry at the blindness of those who should have known better, and who've led us into this mess. Or maybe they just shuffled along at the head of the crowd, walking backwards reading the polls. But what about Glenn Stevens, Governor of the Reserve Bank of Australia..."I do not know anyone who predicted this course of events"...oh for chrissakes, if some insignificant shitkicker like myself loading potting mix into cars for little old ladies in an obscure country town saw this coming years ago and you didn't, why the hell have my taxes been paying your wages, you turkey? If this is the standard of leadership and governance in this country, we are in serious, serious trouble folks. Because morons like this are now supposed to solve the problem which they didn't see coming.

At least in America, they were crooks and liars, real red blooded devils. Here in Australia they are, to quote Joseph Conrad, "flabby, weak-eyed devils"... bureaucratic place-holders, masters of the morning flight to Canberra, the etiolated white-shirted eunuchs of state. And the Head Eunuch is of course our Kevin. Another weak-eyed devil? Or will he astonish me and say something real? Oh yes I know, he's way up in the polls, beating the tripe out of rich boy Malcolm, but how much of the public's comfortable perception of him comes from his resemblance, as Philip Adams puts it, to a suburban dentist? Will he develop the sombre reserve needed to deal with what comes next? Or will he melt down in private or worse, spectacularly in public, when the complete disjunction between the reality we are facing and the bureaucratic fantasy world he inhabits becomes impossible for his focused-on-detail-and-process mind to deal with. I invite you all to send me your opinion.

Opportunity

I had a meeting the other day with my friend Linda who has been asked by the local Shire Council to come up with some ideas to help address some of the intractable unemployment and poverty in several communities in our district. Now it occurs to me that in times of change, it's people with the least to lose who are often in the best position to try something new. Yes I know, those at the bottom of the heap often have major personal issues which prevent them functioning very well, and sometimes these dysfunctions become generational and are handed on as a culture of failure. How else can you explain how some parts of our district have been mired in poverty seemingly forever?

All the same, I also know how those of us whose lives generally run smoothly tend to get stuck in our rut and can find a changed reality difficult to accept, let alone coming up with responses to take advantage of it. That's natural — we humans are innately conservative. Those of us who do experience major disjunctions in our lives often are often disabled by them for some time, sometimes permanently. But sometimes we learn things we never expected, and humility can be one lesson. We learn how even the most confident and seemingly solid personality can crumble, and we get some inkling of how well those who perhaps we have looked down on in the past deal with things day to day which we might find overwhelming even for a brief period.

This is why I am wary of the habit of seeing society being divided into winners and losers, or victims and perpetrators. Life deals us a hand of cards and we must play them as best we can. Which is my roundabout way of coming to the point: opportunity is most present in times of change or threat. And those most open to opportunity are those not imprisoned by their prior investments, be it social, financial or mental. So I see this initiative by the Council as a great opportunity to kick-start some new thinking about our local economy, at a time when big change is coming for us all whether we are ready or not.

Now as a battled-scarred small business person of long standing, I'm under no illusions as to the success rate of innovative ideas, especially in a time of flux and possibly with participants with little prior experience. So my idea is that ideas and talk are cheap and provide the seed stock if you like, general skills are universally useful, and specific projects should involve more of a journey of discovery and learning than any dependency for measurable success on a definite final outcome. If ideas are planted, what does it matter if they take some time to mature and sprout? And if the skills needed to carry them out have already been learned, away we go.

What ideas do I have in mind for projects? For a start I think every town should have a community garden, for all kinds of reasons. First, food is going to get more expensive and many if not most of us will get used to the idea of growing at least some of our own. Second, for people suffering some degree of social isolation, working on their own plot in a community garden is a very healthy and helpful thing. Thirdly, you get top quality fresh produce. And fourthly, you do it in an environment where help and advice is close at hand.

Linda and I thought metal and wood-working skills are always good things to learn. And it occurred to me that traditional boat-building is a great one for a number of reasons. First, it teaches a high degree of wood-working skill. Second, the materials, wood, nails and a bit of other metal and paint are relatively cheap. Third, anyone can do it. And finally you get something at the end which is beautiful, useful and marketable. And while we've had a great excursion into building boats with all sorts of exotic, high-tech high-performance materials, boats built in the traditional way will almost certainly come back as the most common type in the future when we become more dependent on local resources for manufacture. It's also relevant that one of the target communities for the Council's scheme is Port Welshpool, where as a kid I remember on several occasions visiting Charley Norling with my Dad, when Charley was building a new fishing boat for himself next to his house.

Linda and I discussed lots of similar things, and I'm sure all of you could contribute quite a few more ideas (please do!). I will keep posting any new information (and your suggestions) about this scheme as it comes to hand.

Lots of parallel events

Sharon Astyk has a disturbing post on the use of credit cards in the US: "McDonalds is now the second-largest merchant vendor on credit cards - that is, people are now buying their Big Macs on plastic - in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays".

And this: Commodity Online: The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting revolution in America, food riots and tax rebellions - all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.

Gerald Celente, the CEO of Trends Research Institute, is renowned for his accuracy in predicting future world and economic events, which will send a chill down your spine considering what he told Fox News this week.

Celente says that by 2012 America will become an undeveloped nation, that there will be a revolution marked by food riots, squatter rebellions, tax revolts and job marches, and that holidays will be more about obtaining food, not gifts.

"We're going to see the end of the retail Christmas....we're going to see a fundamental shift take place....putting food on the table is going to be more important that putting gifts under the Christmas tree," said Celente, adding that the situation would be "worse than the great depression". Read the rest of the article.

What is going on? Could any of this happen here, and how could it happen so quickly anyway? Consider the many parallel events which point to the unraveling of the world we have so laboriously built up over the past six decades. Piracy: critical points of the world's shipping routes are vulnerable and this is pushing up the price of shipping and slowing it down. Oil production will fall next year and is unlikely to rise in response to future demand for intractable technical and financial reasons. Terrorism: the Mumbai attacks are unfortunately the shape of things to come in crowded world with huge numbers of alienated young men and women, whose lack of connectedness and community makes them easy prey for movements which promise immediate power and significance through violence. And it only requires a tiny, statistically insignificant number with cheap and easily available weapons and well-known tactics to bring a city to its knees.

Couple this with the financial crisis and you have a perfect storm of events which are to say the very least, adverse to any further extension of our current system. How much energy we waste on trying to save the irrevocably doomed depends mainly on us: our ability to face the facts and let go of those unproductive activities and turn our focus to those which will better suit the new situations which are rapidly coming up over the horizon.

It also depends on the quality of our leadership. A lot of hope is being invested in Obama, and while he is to a huge extent hemmed in by the legacies of the system of which he will soon be President, his demeanor as leader will matter at least as much as his acts. As for our own Prime Minister, the most generous assessment I can make of him is that he means well. But to me, most of his actions smack of folly: trying to stimulate spending when overspending has been the cause of the current crisis, clinging to the absurd notion that we along with the armed forces of other nations can impose a political system on the Afghans, when that country has been the graveyard of countless imperial dreams. Rudds Blairite/Bushite dream of "Western" liberal democracy being exported to the rest of the world at the point of a gun died in Iraq but he doesn't seen to have noticed. In any case, the money to run these schemes to "improve" the lives of those with browner skins and different shaped noses will soon no longer be available.

His mistake is thinking he can act as the Chief Executive Officer of the country when what we need is a leader with the vision of a Churchill or Roosevelt, someone with a sense of the great tragedy which is unfolding around us.

Well, there's not much we can do about that now. Best to get on with doing what we can and need to do.

It's happened...we're past Peak, courtesy of the credit crisis

Gail the Actuary (Gail Tverberg) has made a post on the Oil Drum which lists many oil and gas projects which will now not go ahead due to credit availability problems. From now on it is highly unlikely there will be increases in world total liquid fuel production year on year. While demand is undoubtedly falling due to the onset of the world-wide recession, if there is any increase in demand in the future it will not be possible to meet it from here on out. So now we are post Peak Oil.

The implications of this, coupled with the precipitous decline in manufacturing both here and elsewhere due to the financial crisis, are profound. Whatever economy and society we rebuild in the years ahead will begin to diverge radically from the one we've all been used to for the past sixty years. This will not stop our leaders and many of us from trying to resuscitate the drowning body of industrial civilisation, but such efforts will almost certainly be wasted.

There are arguments for ameliorating the distress of those most affected by the changes coming down the line, but how do you subsidise the pending insolvency of the majority of the population in an industrial civilisation?

The Archdruid talks planning

It's worth a look at John Michael Greer's latest post which is a meditation on planning in the face of a large number of unknowns: precisely the situation which we are all faced with now, and which will be with us for the foreseeable future.

In order not to waste our time and our limited resources this is, in my opinion, the one crucial area where we have to get our thinking right.

Tuesday night's meeting

I need to try and summarise what happened at the meeting. It was too windy to have it in the garden, so we moved inside the Community House. Thank you to the Writing Group who happily moved into the kitchen to make way for us!

There were fifteen of us, some of whom had been at the first meeting in October. I wasn't sure what to expect and had been prepared to split us into two groups, one to deliver my background lecture to and one to continue into on into personal action using a planning document (the Vulnerability Assessment sheet available for download in the Links & resources column).

In the event the meeting ended up being about the meeting! It took a very long time to get around the room and for everyone to introduce themselves. And then the meeting went in search of a purpose for itself. I put in my two bobs worth, which was that I want to be primarily an information provider and not the convenor of a group which has some other purpose. I agreed to provide members of the group with my lecture notes which I have linked to on this site so anyone can access them. Then other people can go off and talk to other groups too, which is a necessary first step in this business. Feel free to alter the content to suit, but acknowledge the sources.

We agreed to have another meeting on the 12th of February, 7:00pm at Foster Community House where hopefully the group will be able to set some useful goals for itself. Thank you everyone for coming along and having the interest to try and do something concrete to deal with the big changes we are all going to have to face.

The waves of history as seen from Prince Edward Island

Here's an interesting post from Robert Paterson on Canada's Prince Edward Island with a long view of the financial crisis. Some nice analogies in there...

He's much gentler on our political leaders than I am. He says they have no choice but to try and maintain business-as-usual until the dam finally breaks. On reflection I think he is right. However if we are to survive we must not make the mistake of following our doomed leaders. They may have no choice but to desperately patch the machine which made them what they are. But we do have choice (if we are able to step back from our own doomed investments). We must get to work and build the new working paradigms.

Quickie financial lesson

An easily understood explanation of the beginnings of the current financial crisis...

Club Orlov post+next meeting

A new guest post over at Club Orlov is worth a look. Chris, an Australian living in the Philippines, talks about how Peak Oil might play out in poorer countries: in fact he believes they may have some advantages over advanced industrial nations.

He gets a little testy with me over a comment I've posted but it has provoked some interesting discussion!

Also our next meeting is Tuesday evening from 6:00 pm on at Manna Community Garden behind Foster Community House: bring your dinner if you're coming early. The weather looks as if it will be OK outside.

I'll be bringing along a few books for those who may be interested in further information. My idea is that if we have a lot of people who weren't at our first meeting I will run through the basic information with them while everyone else works on some analysis and planning: I'll have some material ready for you all to work with.

When I get time I'll post some reviews of the more interesting and pertinent books I've been reading lately too.

John Robb's musings on solutions to the world financial crisis

The question now becomes, what will these "solutions" that mitigate the effects of the "coming" Depression look like? The natural reflex is to assume that our nation-states will formulate a response. However, that doesn't appear to be a well founded assumption since this global problem is MUCH bigger, faster and more complex than they can handle. Further, nation-states have been in decline for nearly 35 years as they gradually ceded elements of sovereignty to a now dominant global marketplace (which was built to help America's ideological solution triumph over Communism during the Cold War).

Read more....

Podcasts of the October Forum temporarily unavailable

Nick Franklin from Radio National has kindly provided me with recordings of our meeting at Foster Hall on October the 14th, but I'm having server issues at the moment so they're temporarily unavailable.

Back to the Main Game

Right! Coming down from the Olympian heights, we need to define clearly what is to be done. The steps in order are:

(a) Educate yourself as to what the real issues are. Do Chris Martenson's Crash Course. Look at the article on Peak Oil in Wikipedia, visit Matt Savinar's "Life After the Oil Crash", read Jim Kunstler's "Long Emergency" article (I have his book if anyone wants to borrow it: he's a great writer in the excoriating American tradition of J.K. Gailbraith or Gore Vidal). Read The Oil Drum. Read Richard Heinberg (I've got his books too).

(b) Think about your own life: your strengths and vulnerabilities in terms of what you've learned in (a).

(c) Plan mitigation strategies. Hey, here's a chance to remake your life! It's not all doom and gloom and some of it might even be fun.

(d) Ignore the nonsensical spoutings of our esteemed leaders. Remember that they are products of the system which is currently failing, and have difficulties imagining solutions outside of the world that they know. Their top priority is to try and keep business as usual operating no matter what the cost to us. Seek your own salvation!

Remember our meeting in the Community Garden behind Foster Community House on November 25th at 6:00 pm (bring something to eat).

From the viewpoint of the Gods

Aeldric, an Australian contributor to The Oil Drum, has posted an article today entitled "The Failure of Networked Systems: The Repercussions of Systematic Risk" which has provoked a discussion which goes far and deep. If you're willing to take the plunge, dive in. I'd particularly recommend paying attention to posts in the discussion by Memmel who is a true genius, but severely dyslexic, so a little self-translation is in order while reading his stuff.

In a nutshell, the originating article is difficult to understand because it's highly technical, but the discussion following (which is of the highest quality) is where the true jewels lie.

A vital first step for us all (if you haven't done it yet!)

If you haven't already done so, I urge you to do Chris Martenson's Crash Course right now, as he has just posted the final chapter. It is the single clearest and most accessible way I have found to understand the crisis which is now upon us. It's broken up into many short sections, many of which you could easily fit into a coffee break in front of your computer. It is so lucid and simple that any average teenager should understand it.

Chris makes the reasons for the present financial crisis completely clear and further than that, provides an excellent set of tools for remedial actions for individuals, businesses and communities.

At future meetings we will be using his methods to analyse our situation and prepare strategies for action so it's important you familiarise yourself with the material.

Also we are shifting our next meeting date at the Community Garden to November 25th at 6:00 pm, as it clashed with another important event: Doctor Barbara Hoare's MADGE (GM foods) meeting.

For the more adventurous...

"For the engineers out there, our current situation is akin to trying to fly an F-22 at the edge of its performance envelope with only cables and pulleys for control inputs." John Robb is worth a look if you want a view of the current world situation from a student of complex system theory. It's not easy, but it's profound. A link here to a podcast he talks about featuring Benoit Mandelbrot and Nassim Taleb: well worth a listen.

OK: an F-22 is inherently unstable and is only kept in the air by a sophisticated computer-controlled flight system which the pilot interacts with to direct the aircraft. When it's flying, everything happens way too fast for normal human reflexes. Benoit Mandelbrot is a mathematician, a pioneer of chaos theory (we have a local resident, Michael Barnsley, who is a mate of his, another pioneer of chaos theory and who has a couple of properties on Corner Inlet): Nassim Taleb is the author of "The Black Swan: The Impact of the Highly Improbable", a profound and insightful look at the risks of complex and brittle systems such as our current global financial setup.

What are these guys smoking?

I just saw this story on the BBC News site. Quote from Dieter Zetsche, chairman of the management board at Daimler and head of Mercedes Cars : "There are many studies that say it took 120 years to get to 800 million cars around the globe, and that it will take only another 30 years to double that volume," he says. "If that is true, the best is still ahead of us." Don't you just love the blind optimism: the faith? And of course, it's all good!

The Seductive Thrill of the Horror Movie & the Hell-fire Sermon

I came across an interesting thought posted by Nate Hagens on The Oil Drum. “In writing this post, it dawned on me that much of the work we do in raising peak oil awareness is received by readers as kind of an interesting horror movie. Yes - tell me more scary facts and I will sit at my computer and read them. But its the rational brain that is receiving this information. And its not budging behaviour much.”

I think many people feel the same way when presented with the concept of Peak Oil at a meeting such as we had the other night. I felt like a fire-and-brimstone preacher: “Repent, ye sinners! The wrath of the Lord is terrible indeed, and all those who do not believe shall burn in everlasting hellfire!”

In certain perhaps not particularly edifying but all-too-human ways, we love a hell-fire sermon for the same reason we love horror films. We can get a big fright without confronting any real immediate danger. And additionally we can go away in the smug knowledge that we know something the ignorant do not. We are “insiders”. But what can we actually do with the things we have learned? I think after a meeting such as we had the other night, a lot of people on sober reflection would say “Not much”. Why is this so?

The changes threatened by a paradigm altering event such as the end of cheap oil would seem to undermine many of the plans and assumptions we have made about our lives. We feel trapped and relatively powerless to respond in a thoroughgoing way. And so we change things at the periphery. We cut down our consumption of plastic bags, we think about buying a Toyota Prius instead of a Landcruiser. But we feel our choices are limited.

This is because we have a lot of prior investment in the situation as it is. It might be our career, where we live, our relationships, our business. We don’t see ourselves as having much freedom of movement. We are very aware of what economists call ”sunk costs”, irrecoverable investments of time, money or intellectual or emotional energy we have made to get where we are. They may not fit the new reality with which we’ve been presented, but we have extreme reluctance in giving them up as a dead loss. And this is a perfectly rational response.

Major change not only trashes our prior investments but it also comes at a big psychological cost. We are much more likely to become ill or have an accident when we go through a major change. And what constitutes major change? Well, in no particular order or ranking, going to school, finishing school, getting a job, having a baby or a last child leaving home, losing a job, getting married or divorced, starting a business, having a nervous breakdown, moving house, going broke, death of friends or family, serious illness. Hopefully not all these things will happen and not too close together, thank you very much. We are naturally averse to big changes because they are costly and hard.

So the paradox is that usually our only chance to make basic changes to our life is during one of these great cataclysms. And our choices at these times then determine our fate for the next epoch of our life. The choices we make are determined at least partly by our world-view at the time and the information swirling about us. This is where the value of these big-picture events like the Peak Oil information evening can really kick in. And when we’re up against it and the situation is in flux, we can often find unexpected strength, wisdom and courage.

“To be thrown upon one's own resources, is to be cast into the very lap of fortune; for our faculties then undergo a development and display an energy of which they were previously unsusceptible.”—Benjamin Franklin


“Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”— Samuel Johnson, "The Life of Samuel Johnson" (1791)

The Folly Of A Depression Thesis

"We have several things working against us this time around, and few things working for us, compared to the 1930s. Here's a short list:

In the 1930s we were resource-independent. Today we are near-absolutely dependent on foreign oil. We import about 2/3rds of our consumption, and while Canada's supply is probably assured irrespective of our economic condition, the same is not true for the net creditors to the United States, particularly Arab nations. They both can and might cut us off, and so may Venezuela.
In the 1930s we had debt owned by foreigners, but nothing like today. Today we require about $2 billion in foreign capital per day to remain solvent as a nation at the government level. This has been almost-entirely financed through the purchase of cheap foreign goods from China and oil from the Middle East. If either of those sources of foreign capital flows are disrupted, things get very bad very fast. There is no reason to believe that either of these blocks of nations will continue to provide this funding as our consumption of their goods decreases and thus their need to recycle dollars disappears.
In the 1930s we had heavy industry out the wazoo in America. Today we have very little. Yes, we produce more now here than ever before - but as a proportion of what we consume, it is at all-time lows. What this means for us is that as those trade imbalances disappear prices are going to go up as the "recycling" trade goes away and production is forcibly repatriated here to the United States. (The alternative, a refusal to repatriate that production, is far worse, as that will result in a currency dislocation that will produce the same sort of price increases but no wage improvement for Americans. Down that road lies really serious trouble for us.)
On the good side, we have technology we didn't have then. This means we may be able to find efficiencies that were the stuff of fancy 50 or 100 years ago. The counter-balance to this is that the really big efficiency gains are likely behind us, having been gained in the 80s, 90s and the first part of the 00s."

Read the rest of this article. It applies to the US situation but in essence I see little difference for us. We don't import quite as much oil in percentage terms, and our debt level as a proportion of GDP is not quite so bad. But when you look at likely outcomes, the differences may turn out to be marginal. What we have going in our favour (possibly, IMHO!) is greater social cohesion and the concept of the fair go, which will hopefully see us share the pain more equitably.

Jim Kunstler strikes again (Warning: strong language if you follow the link at the bottom)

"To switch metaphors, let's say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts cancelled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious little monkey-humans stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand. Then comes the second stage, the tidal wave itself -- which in this case will be horrific monetary inflation -- roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle."
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An opinion piece on Peak Oil at the ABC news site

A succinct summary of the dilemma for Australia. I'm not sure how long the ABC keeps stories archived. The comments are worth going through too.

Will people head bush when The Long Emergency begins to bite?

One of the enduring themes of apocalyptic thinking is the flight from the city. It's a common thread in discussion groups devoted to Peak Oil, reinforced by a long list of movies and books plus the burgeoning Survivalist movement in the US. Because so much of our media content originates in the US we tend to swallow big chunks of it undigested, often without paying close attention to how well it fits our rather different Australian situation.

The last thirty years or so, where increasingly our view of the world comes not from the stories of our ancestors or any sort of local cultural memory but from this electronic media soup we all swim in, has seen a certain set of ideas about the Australian Bush, current when I was a kid, gradually fade away. In the fifties the idea of the Bush as something to be tamed and conquered was current. The sense of the difficulty of whitefellas surviving unaided in the Bush (think Burke & Wills), the idea of the almost superhuman strength and endurance of the early settlers, hacking their way through a dripping primeval wilderness up to their knees in mud to turn the hills of South Gippsland into productive farms.

These ways of thinking about rural Australia have faded, to be replaced by other memes: the beauty of unspoiled nature (to be enjoyed from the air-conditioned comfort of the Landcruiser or tourist boat), or the managerial notion that with the proper application of modern knowledge plus plenty of industrial fertilizer and horsepower, the return on agricultural investment will rise in a steady and predictable way.

Our Australian landscape is far from tamed though, very far from the vision of say rural France with its patchwork of small productive farms and tidy vineyards, or of the American Midwest with its wheat lands growing on a rich bed of recent glacial tilth left over from the Ice Ages.

It's tough living outside of the cities in Australia, even in green South Gippsland. Our soil is ancient and leached and our weather unpredictable even before we had the phrase Climate Change to kick around. There will be no flight from the cities to the country in Australia if things get tough. Our battle will be to stop the traffic going the other way. We need to think of ways of making our life out here more stable, more sustainable (to use a word that is rapidly becoming worn and useless from overwork), and more attractive for the young people whose intelligence and strength will be needed to keep our communities viable and vibrant. It's easy to mistake our growing population of retirees with their comfortable houses on the skylines of the district as guarantors of continuing prosperity. However if Peak Oil means our rural economy wilts as less energy is available, and the cities prop themselves up by sucking the countryside around them dry of every resource, the next generation of retirees will be looking out on a landscape covered in regrowth and feral pines, with a few half derelict towns scattered along crumbling roads.

We need to rethink how we can live in this landscape if this vision is not to become reality. Our present pattern of settlement is no more than a thinly spread industrial suburb of the city, to be abandoned once it makes no further economic sense. We need to build communities which can live self-reliantly in this landscape and which are self-directed as well.

A balanced and nuanced view of what's coming

Go and have a look at this thoughtful post by Sharon Astyk on her "Casaubon's Book" blog. She runs over a lot of the ground I covered in my talk last night but has a shot at predicting how things might unfold for individuals. Of course she's talking about the US situation but a lot is applicable, or will be, to our Australian one.

Forum on Fuel, Finance and the Future of South Gippsland

Our forum was well attended, with twenty-five coming along in total. After Lloyd presented a lecture on Peak Oil and the current financial crisis, we had a short break and then resumed to discuss where we should go from here. The proceedings were recorded by Nick Franklin from ABC Radio Nationals 'Radio Eye' for incorporation in a program for broadcast later in the year.

Many ideas were batted around during the discussion, with Joe Pinzone talking about the way he had restructured his fishing business to make it more financially sustainable, using less fuel and less capital intensive equipment. He also pointed to the revival of the co-operative system as a possible model to use where business people with a community of interests could carry out joint activities such as transport of goods to market.

Peter felt that Lloyd's rather gloomy outlook for future economic prospects was unjustified, and he was confident that technological solutions would be found on due course for the fossil fuel dilemma.

It was generally agreed that re-localisation was something to be aimed for, where goods and services currently provided by suppliers from outside the district which may be vulnerable to interruption as the fuel and financial crisis develops are replaced where possible through local suppliers.

Wendy brought up the possibility of setting up a LETS type barter scheme or local currency, and that local food production on a more intensive scale for local consumption could become important part of community self-reliance.

Janine mentioned the plastic bag problem and there was a discussion about ways to reduce plastic bag usage. Ross and Fiona told us about the recycling systems they had seen in Europe and Tiare told us about the retailers in Melbourne who no longer supply plastic bags. Linda saw this as an excellent opportunity for Foster to re-brand itself as a clean green town. Peter and Jan Fell mentioned the possibility of getting funds to assist us to set this up through Philip Milbourne from the State government.

Bryan told us about similar action groups in other towns, and will help us make contact with them to save us having to re-invent the wheel. He thinks it may be possible to get people from these groups to come and address us.

We discussed whether the business of the group might be better carried out by an existing group such as the Foster Community Association. We have decided to continue as a separate group for the time being. Those with memberships of another group can liaise between the two.

The next meeting will be on Tuesday the 11th of November from 6pm onwards, at the Manna Community Garden behind the Community House. It would be great if each of us can tell other people who may be able to contribute to the discussion about this next meeting. Bring them along. And don't forget to bring something to eat!

Local currencies and changing the way we do food

Another excellent post by Big Gav over at the The Oil Drum on the use of local currencies, which are really a more sophisticated form of barter. Mind you, central governments hate them!

Also have a look at this long article, written as an open letter to the next president-elect in the New York Times, on food security, food health and public policy.

Career advice

There's an interesting new post on the Oil Drum with career advice for an energy constrained future. Check it out!

Forum on Fuel, Finance & the Future of South Gippsland October 14th Foster War Memorial Arts Centre

The fundamentals underpinning our economy and way of life for fifty years are changing, and we're about to enter a different world. It's a world offering both threats and opportunities in equal measure. To look at the changes we are facing and how we need to take them into account when planning our individual lives, our businesses and our community, a forum will be held at the Foster War memorial Arts Centre on Tuesday October the 14th at 7:30 PM. After a brief lecture to explain Australia's current and growing oil supply vulnerabilities, the forum will explore what this will mean for us as individuals and as a community. What are the threats? What are the opportunities? What does the current crisis in the World financial markets mean for us and how is it linked to our energy dependence?

The last fifty years, the era of cheap and abundant energy, have seen extraordinary changes in how we live and work. The cost of consumer goods and food has fallen dramatically, while the cost of housing and the number of hours we work in paid employment and devote to education and training have increased equally dramatically. The kinds of work we do now would have been difficult to imagine fifty years ago. Who would have thought a large part of the population would spend at least fifteen years in the education system, and then spend most of their working lives looking at screens and tapping on keyboards, no matter what their chosen career path?

For several generations there have been great increases in productivity in the agricultural sector, and a corresponding steep decline in the number of jobs. This has led in turn to a simplification of our local community as many trades and auxiliary occupations have disappeared. The low cost of distribution has meant the end of small-scale local manufacture. Could an increase in distribution costs because of the end of cheap oil coupled with the costs of greenhouse gas abatement policies reopen opportunities for small-scale manufacturing businesses servicing local populations? Will public transport need to grow to compensate for a shift away from increasingly expensive car dependency? What will this mean for patterns of settlement and municipal planning in country areas? How will our transport and distribution of goods change with the end of cheap oil, when at the moment our community is crucially dependant on reliable and timely deliveries in an era of low inventories and with an enormous range of key components needed to keep our complex systems functioning? How will education need to change to better equip young people for this very different world?

In tandem with the end of cheap oil we seem to be coming the end of cheap and easily available finance. How will we fund our future business and community enterprises? Can community based banking step into the gap left by the crash of the giants of international finance? Are other, older ways of financing business, such as simple partnerships and long-term family enterprises likely to re-emerge?

All societies depend on a certain level of trust. At the moment our level of trust in politics and the large-scale enterprises, and corporations controlling much of our lives, is eroding. A good example has been the recent milk contamination scare in China, which has spread globally to goods on supermarket shelves everywhere. The controversy over GM foods is another, which has seriously damaged public confidence in the benign intentions of large, faceless corporations. We are likely to see this malaise spread even wider as superannuation funds suffer big losses in the current share market decline and people who trusted a complex system beyond their control and their understanding to take care of them in old age are left feeling betrayed and bitter. Politics has undergone a similar public disenchantment, where a weary public turn away from engagement in a process which produces governments promising popular policies, but which are quickly captured by powerful special interests and work only for their benefit. Again the complexity of the international economy means no-one understands it or can control it, so that the legitimacy of leaders is further undermined by their seeming incompetence when faced with crises like the one we are currently seeing. This disenchantment and disengagement can cause a power vacuum to be produced, hollowing out the state and allowing alternative centres of power to arise. These power centres can be cults, criminal gangs or religious or tribally based alternative governments. To respond to this threat pro-actively should we re-energise local politics and take back responsibility for areas of our lives, which we have formerly been happy to surrender to anonymous and distant organizations? Can local government grow to fill this gap in political trust? Can local businesses run by members of the local community grow through capitalising on a perception that they are more likely to act in an ethical manner?

In five, ten, fifty and one hundred years time there will be people living and working in South Gippsland. By coming along to this community forum, you can help shape your future and the futures of generations succeeding us. There is no one answer to all the questions already mentioned, and many more questions needing to be asked. No one person can do this alone, but if we can tap the wisdom of the whole community (because each one of us, no matter how humble, has something to contribute) we can be far stronger and more effective discussing and acting together than if we remain isolated individuals. See you there!