An Armchair Diagnosis

It has been said that the definition of insanity is doing the same thing over and over again and expecting a different result. I would like to add another aspect to this which is that insanity is also doing and saying things for the absolute hell of it and expecting a good result. The United States of America seems to suffer from both of these forms of insanity all at once at the current moment in it's history. One doesn't have to look very far to see these two types of insanity at play since most everyone has access to a television or two. But it isn't enough to point out the obvious (that the country has gone mad), though it often helps to do so to people who manage to miss it or to cause it. The people who miss and cause it do so because they are swimming in it. It is all around them and they live it and breath it and eat it for breakfast without providing themselves the opportunity or the means to take the long view. Seeing as the long view is one of the main features of this blog I will take a swing at what I believe is going on.

It's hard for me to imagine someone taking an optimistic view on the present situation. Maybe I'm jaded but whenever someone declares him- or herself an optimist, I see a person in denial. One can be an optimist once one has taken a full accounting of the circumstances and sees bad outcomes as not only possible, but even likely, and then finding the best outcome from what is possible. It is only in this way that I can see myself as an optimist. But a survey of the political discourse in this country, the realm in which the two forms of insanity are made most public, shows me and many others that there is little reason to be optimistic.

Of recent events, the one most emblematic of the first form of insanity is the bail-out by the government of the banking system. Certainly, the banking system needed saving as we would be in the throes of the sequel to the Great Depression right at this moment. No elected official would have allowed that to happen if they could, though the right wing of the political spectrum talks as though they would indeed be willing to let that happen. But I digress. What this has become in practice thus far is to restore the same system that existed before the meltdown. Some reforms have been proposed but so far not much that will lead to the complete restructuring that would be in the offing if we had a responsive government. The attempt to modify the health care system falls into this catagory of insanity as well.

The second form of insanity manifests itself largely in the form of the popular media and right wing media in particular. For the sake of full disclosure, I am an ideological big government liberal, a disenchanted Democrat who is perhaps a former Democrat. I may even just be a democrat, one who believes that rule by the people is best and however that is realized is better than any alternative. The particulars are too many to go into here, but whenever a right wing screamer can call health care reform a Nazi scheme then this alone may suffice to say that any two words can be put together and made sensible to large numbers of people. But more seriously, it points to a true attempt by the right to undermine demonstrable reality for the purpose of destroying attempts at confronting a failing status quo.

The Grand Unified Cause (GUC) for the two forms of insanity spring from the same purpose. It is to keep the American power machine running for a little while longer. The stage we are in is retrenchment by the ones who benefit from the system, e.g. the bankers and the health insurance industry, to keep the system going. Necessarily, predictably, it will come at the expense of the citizenry as the pie grows smaller and the fraudulant practices by which our corporate elite generally operate are used to maintain the flawed growth model of our contemporary capitalist scheme.

I will return to this subject later. Next weeks post will be nonexistent, or will become the post of a week after that as I will be visiting my brother in Houston and drinking little amber beverages.

Evidence for Anthropogenic Climate Change

Here is a presentation by Dr. Richard Alley, a geologist at Penn State University on the evidence for global warming caused by CO2 from the burning of fossil fuels. Gets a little technical at times but friendly to non-scientists.

http://www.agu.org/meetings/fm09/lectures/lecture_videos/A23A.shtml

He demonstrates, though it is not his purpose, how a true empirical skeptic views the evidence. In my view, in order to disprove that increased CO2 concentration is the cause of the current warming you'd have to show some other cause or show that CO2 is not a greenhouse gas. The question of higher concentrations of CO2 is not controversial, it is simply a fact. To believe otherwise is akin to denying any scientific understanding of chemistry and physics.

The Deflation Monster

Seeing that it is already pretty late, this will wind up being a short post. My thoughts want to go to the economic situation, which is the most immediate crisis we face. Several signs right now point to a new crunch and a debt deflation, which means that parties will scramble to cover debts and bets as the economic performance fails to impress. When these parties scramble to cover, they have to sell something else that has value, like stocks or property. When a party can't find a buyer, or a potential buyer smells desperation, then the seller has to settle for less. Generally speaking, the price will drop, which is one measure of deflation. Worse, many will be unable to cover their debt and will default on the loan, setting off a chain reaction of defaults on money borrowed to buy assets. When everyone does this at once, as sometimes happens, like in 2008, then the value of everything drops and most involved lose lots of money. In fact, money itself is destroyed because much of the money used in transactions never left the idea stage.

There's good reason to believe that something like this will happen again, maybe this year or next year. There are many signs pointing to this, as I said, but the reason is a pretty simple one: There is too much stuff and not enough buyers. Economists call this problem over-capacity and it isn't going away any time soon. It means that a whole lot of businesses who sell things will go out of business. It also means that a whole lot of businesses will not be taking on new credit to invest in new production because they don't see it paying off. The last crisis of over-production was called the Great Depression. It is not by accident that it has been cited so often these days because the causes are very similar. It is what happens when wealth becomes concentrated into so few hands and when there is too much money floating around the system to begin with.

The Market (I capitalize because it is like a god) is saying that money must disappear from the system. Bernanke and the Fed, in an effort to stem the tide of losses, has guaranteed somewhere around $13 trillion dollars in asset values for the banks so that they can continue lending money. The purpose of the stimulus is to create demand, indirectly, for new loans. This is largely a vain effort, though it is impressive what can be done when $13 trillion dollars is thrown at a problem. What this reveals is the magnitude of the crisis. What always happens after a burst credit bubble is a dearth of new demand. The Fed is trying to uphold the value of assets (read debt) for the banks so the banks don't have to write them off. The Fed didn't need to uphold the value of good loans, only the bad, and it is most likely the case that these assets guaranteed by the Fed are worthless because the Market has already said so. The effort to shore up these values is vain because of the sheer size of the problem and of the pre-existing debt load built in to the government's balance sheet, and ultimately because there are no good investment prospects for businesses.

So the case for another meltdown looks pretty strong. What it means for us is something only the Market knows. But some practical measures to prepare yourself would be prudent, and, in case it doesn't happen so catastrophically, then at the very least you've learned a few things. First of all, pay off debt and save money. The Market doesn't recommend you do that but the Market has failed us. When you buy things, buy them with the understanding that the thing must be useful and long-lasting. Thinking about what could be traded for something else you might need in a deflated world is a good measure for deciding what to buy. Gardening is probably the most immediately useful skill to learn, though it is a skill that takes many years to develop. And then find people who already think that the future will look something like the way I and many others have outlined and try to convince others who are inclined to believe it already to prepare for harder times ahead.

The various governments in the U.S. and around the world will respond to this in any way possible. Their assumptions about what is happening will affect the response. What is important for them is to realize that the old failed system cannot be resuscitated and it will have to form new measures for dealing with higher unemployment, disappearing wealth, and the prospect of different economic arrangements based on a new set of principles. This will require persuasion on the part of the citizenry. A better informed citizenry is badly needed to mitigate the freak out which will occur when masses of uninformed Americans decide to act. It will require a new understanding of what is fair and just based on principles other than what the free market has convinced us is the case during the past decades of bubble economics.

This discussion seems like a good direction for this blog to go to over the next couple of months so that is what I'll do.

Thoughts on Quality

The relocalization of the means by which people acquire stuff is an inevitable consequense of the energy descent we will soon be facing. As I've said before, it is to be a time to reassess the value of everything we currently possess and use on a daily or weekly basis in order to determine what is to be kept and what is to be chucked. People, by and large, value things differently. This is what the free market is supposed to do by allowing consumers the power to vote with their wallets. This is certain to be the case as the individual decisions are made to buy or not to buy. With this in mind, it is also necessary to point out that collective decisions are needed to guide or to even coerce some people into recognizing that there are, or can be, particular measures of quality. That is, these decisions are made within perameters determined by groups of people that, ideally, have some qualities in mind.

The impossible situation, by any measure, is the attempt to maintain the throw away consumer economy. The reigning values which define this way of life are disposability and convenience. What has brought this about, and why it has made sense for upwards of half a century, is that it's aim was financial efficiency above all else. To be sure, it was seen as an enhancement to people's quality of life but as the half century after it's implementation has passed, we can see the fatal errors in this way of thinking. These errors are visible in the costs that are now being borne and will continue to be borne by everyone as resource constraints enter the stage. This will mean that resource efficiency and conservation will trump financial efficiency and convenience.

Two qualities I would offer, as have many others, for us to embrace to guide our decisions as the old, high entropy economy falls to ruin are durability and resilience. Things that are durable last a long time. We must design the things we use with longevity in mind as it is a sure way to reduce the materials required for the manufacture of the same thing that wears out more quickly. A question we could ask is; How can I use this thing, a broom for example, for five times longer than I might have if I were to get a new one because I am sick of the color or it has worn out because the company which manufactured it used the cheapest materials avaiable. Durability is low entropy i.e., long-lasting. Fashion is the market of personal preference. This can be very easy to manipulate for the purpose of profit and drives our current throw-away system.

Resilience describes a system able to withstand shocks. Cars can have resilience but I'm talking about societal resilience. What has happened since the advent of the throw-away consumer society is that people have forgotten the basics of what people one hundred years ago generally understood. Primarily, it is the urban culture that is least resilient in this regard. The skills the inhabitants learn and that are useful in the urban environment are those most dependant on the system run on fossil fuels. Here, the complexity of channels would have value, rather than the complexity of scale that we see in a Wall Mart system. Efficiency would give way to redundancy so that folks could rely on multiple sources for goods and that surpluses in one area can relieve deficits in others.

I will explore these qualities of society further as I go to a discussion of ideas like steady state economics, no-growth societies and other like notions.