Unless you've had your head in the sand you cannot help but be wondering what is going on. Or, if you are like me you may think you understand exactly what the problems are, and more importantly what is the root cause. The last two weeks have been wild WRT the global economy and social unrest. And with the kickoff of the political season for the Republicans, the entertainment value of all of this has skyrocketed.
I've had three or four blog topics in various stages of write up that I have been wanting to get finished and posted. But every day some new extreme event has distracted me. It has been hard enough to keep on task with my book writing with what has been going on in the world. It has been essentially impossible to give any mind time to these blog topics (more on education, judgment, and, of course, biophysical economics principles).
Most of the recent events have actually not surprised me much. They are all in one way or another tied to economics and I have been long suggesting that the net energy decline we are in will cause economic activity to contract with all sorts of consequences. So seeing some of those consequences come to pass is not what bothers me. I think what tends to cause me the greatest distress is the fact that the people who are in front of the cameras and microphones, the ones who purport to be the pundits and experts on politics and economics, have still not got a clue and don't seem inclined to find one. They are all still trying to gen up stories about what is happening based on their conventional wisdom and so completely miss the root problem. They will probably never really understand what is happening because most of them probably never took a college-level physics course in their lives.
In order to take the temperature of the punditry world I do try to listen in on shows like Diane Rehm's and Warren Olney's “To The Point” when they are talking about something I know (or think I do) something about. I read a few opinion columns by people like Tom Friedman, Paul Krugman, and Robert Reich. Occasionally I will catch a commentary by Arianna Huffington. I know this latter group tend to be liberal leaning, but I gave up completely on conservative pundits a long time ago (I do listen to Tony Blankely on “Left, Right, and Center” and always get confirmation of my decision to ignore the right wing). It is a good thing I am a calm man. I could very easily become apoplectic at what I hear Diane's and Warren's guest, as well as the other pundits listed say or write. I have used up a few blogs lambasting Friedman and Krugman here. The left gets no pass from me; they are just as ignorant about the real cause as the right is. They're just not as batshit crazy as the right.
What I have noticed recently is that many of these people are expressing various levels of perplexity at both the kinds of events that are taking place and the sheer scope of the events. Some, like Friedman and Krugman and Reich claim to know how to fix the American economy by government spending to create jobs. They see the future health of the economy in terms of getting back to a consumer-led growing GDP; you know, the way it was before the Great Recession. These are presumably smart men and women. They didn't get to where they are (or were) by being dummies or rhetoric alone. And yet they do not seem to be able to get beyond this neoclassical ideology about growth and consumption. They don't seem to have any sense at all about the real physical limits to economic activity imposed by peak oil and declining EROI.
Moreover, they firmly believe that the US government should borrow more money to pay for jobs programs. It is OK because just like we have always done in the past we will be able to pay back the loans by growing our way into prosperity. They believe this because it has historical precedence and they lack the basic understanding of the relationship between energy and work (and wealth generation). If they think about it at all, and Friedman has, they assume that if we just borrowed the money and gave the right policy incentives to innovation that new wonderful renewable energy sources will take care of all of our needs in the future and so we can just go on with BAU now. They are sincerely and naively puzzled as to why Obama can't see this and put his foot down to start doing something about it.
I am just as sincerely (and most likely naively) puzzled why people with this level of intelligence cannot see reality.
Longtime readers will know that I have a very dim view of the magic of innovation finding some miraculous way around the Second Law of Thermodynamics. And you will also know that I have analyzed the likelihood of scaling up current known technologies such as wind and solar to supply our current and future needs, replacing and supplanting fossil fuels in time to prevent societal collapse, and found it extremely unlikely. All of these pundits are guilty of magical thinking and if they do have a clue, then they are lying through their teeth, telling people what they want to hear, probably just to keep their jobs as pundits.
As long as global net energy is in decline the economy will continue to contract in real wealth terms. We will not be able to generate more net wealth in the future because we don't have the energy to do so. We will not be able to pay back debt created in the recent past nor being created now (both personal and national). We cannot go on pretending that the paper stuff we print or magically create through debt instruments, or appreciate via increasing demand, means that the GDP is growing. The real wealth of nations is declining and sooner or later, such as when we contemplate repairing or building new infrastructure, we are going to come face to face with this reality. The Chinese are currently working furiously to build some kind of infrastructure before the oil runs out. But even they are hitting limits and their mad rush will be unraveling within a decade I suspect, if it isn't already.
The only jobs that will be created in the future will be skills-based, like handymen, working by barter or some more trusted currency. The US economy is falling in shambles. So is the EU. No one knows how to stop this or deal with it because they still think in the old ideological ways of neoclassical economics. They simply haven't the imagination, nor the knowledge, to understand what is really happening so they can't consider plans to mitigate or minimize the pain that people will feel.
Those who do have an inkling of what needs to be done and how to do it are coming to the realization that such programs will never be possible in the US and Europe. Our so-called democracies are incapable of even talking about the problems let alone what the solutions will entail. China may have a shot at doing the right things given that it is an autocratic government but only if they can assuage their people to prevent mass rioting. They oversold the whole consumer-growth society thing (we can have everything the decadent westerners have!) and now their populace has really high expectations that are about to be dashed.
Democracies cannot act fast enough or with enough clout to deal with what we are facing. I expect that once it becomes so blatantly obvious that the economy is tanking for good, the masses will, in desperation, turn to some strongman to take over and do whatever it takes to save them. But we all know how that story plays out don't we? It is just what a fat, stupid, ignorant, spoiled population deserve, I suppose. I would not have it be so. After all, aren't people more like dumb sheep? It isn't their fault. They were led down a primrose lane by smarter people who told them nice stories and promised great fun. Only those smart people outsmarted themselves. They were just as ignorant of reality. They were simply trying to get the masses to do their bidding to help them accumulate what they thought of as wealth. Only it really isn't true wealth.
I will not be surprised to see the US and OECD fall into another, even deeper recession fairly soon. I don't expect it to be as rapid a descent as the last one simply because I don't know of another bubble of the magnitude of the sub-prime/mortgage-backed derivatives market on top of a huge housing price bubble. When the impact of high energy costs hit in 2007-08 it triggered the implosion of that bubble that left the country and the world reeling. Since housing and the attendant financial systems are so core to the American economy, the implosion wreaked havoc on so many other parts of the economy. The higher energy prices channeled more spending on energy and away from consumption and debt service. Ergo job losses and foreclosures. There may be some kinds of similar expectations bubbles left in the markets now. The stock market is certainly primed. But I just don't see the same kind of magnitude in these bubbles, so they may just whimper away, more like popping a bubblegum bubble than popping a hugely overfilled balloon. But I could be surprised.
As things stand now we are just trending downward at a relatively steady pace. There are a few up ticks, like in the stock market, but overall, the long term trend has been down. In many ways we never did actually recover from the Great Recession as economist claim. Most of the growth in GDP has been from a rebound in financialization thanks to the bailouts supplied by government to the banks and Wall Street (and to the car manufacturers). If you subtract all of that phoney money from the equation computed over the last several years you will see that the GDP grew very little or even actually declined. Take out defense spending for the wars and you will see an even bleaker picture.
What won't surprise me is the decline and its social consequences (picture the riots in Greece, Egypt, and now England going on everywhere!). There will be significantly more pain to be felt by everyone. I even expect bankers and Wall Streeters to start feeling it (actually already happening - many employees at Goldman Sachs got laid off!) No one will be immune because all those rich cats' wealth is in paper form and most of that based on debt or betting and will simply disappear into the ether. Let them try to buy real food with pieces of paper no one wants.
What is going on? Simple. The world IS going to HELL in a HANDBASKET. Or maybe more like heading for a brick wall on a roller coaster. I'm not sure which metaphor is more appropriate. Probably none of them since we are dealing with completely unprecedented situations. It really is simple. We are running down on high-power energy available to do truly useful economic work. You do less work, you have less wealth. What on earth more could you have expected? What do our genius pundits expect?
Late breaking: I just learned that Michele Bachman won the Ames Iowa straw poll! This from the people who apparently think eating deep fried butter on a stick is a good idea too. On the other hand, they didn't exactly have much to choose from.