The Twang Factor
Readers all around the the blogosphere have been twanging on me this week on two counts: one, that seven years ago I took the Y2K computer scare seriously, and two, that I have so far failed to correctly predict the end of the world.
For those of you too young to remember, the Y2K scare was about an esoteric little programming glitch that existed almost universally in older "legacy" computer systems around the world. The glitch in essence would have prevented older systems from recognizing the date beyond 12/31/99, and this, it was widely believed, would have pranged the interdependent complex institutions and public services that ran on these computers. There was fear that everything from municipal sewage treatment plants, to international banks, to big electric grids, to government agencies would stumble, that equipment for running these things would be badly damaged in the process, and that financial records would be lost on a broad basis.
As it turned out, very little happened on New Years Day, 2000. Scoffers exulted in their righteous rightness. The truth, though, was that immense sums of money had been spent -- hundreds of billions worldwide -- and countless work hours put in by programmers to avert the problem. It was a problem with a very definite deadline, and they made the deadline.
The Y2K event would have been a harsh lesson in the diminishing returns of technology and especially over-investments in complexity. Ironically, the work done, and the new equipment purchased by companies, institutions, and agencies may have played a major role in the tech boom of the late 1990s -- which, of course, eventuated in the tech bust that immediately followed.
My own involvement in Y2K in the early days of blogging derived from my observation that a lot of knowledgeable tech people were taking the Y2K problem seriously, and yakking about it on the Net, and so I concluded the issue deserved attention. In retrospect, I also suppose that the one thing nobody really knew was how the programmers working on their own individual projects around the world were coming along, because a lot of that work and expenditure was going on in secret -- big government agencies, big companies, and big utilities did not want to scare the public, queer their stock values, or let on about the difficulties involved in fixing the problem. And of course, the inter-connectivity of many of these complex systems -- banks especially -- was precisely the scariest part of the problem, meaning that it would not be okay for some of them to fix their problems and some of them to fail. As it happened, enough of them fixed their problems -- at great cost -- and their were no cascading failures. Score one for advanced civilization.
Now that I have written a book titled The Long Emergency, there is a new wave of disappointment gathering that life as we know it has not come to an immediate end, and I am being reproached for suggesting that we have some problems. Of course, that was never the point, as a reflection on the book's title ought to suggest. One funny element of this is that the reproach reached a crescendo the very week that crude oil prices reached record levels above $75 a barrel.
So this might just be a good point to step back and ask where are we now at mid-year, 2006. In January, I predicted that the US economy would get into a lot of trouble, specifically that the Dow would melt down to around 4000 and that we would see carnage on the real estate scene. When you figure in inflation, the Dow has just gone sideways for six months. What is propping it up? Last week I referred to Doug Noland's theory that investments in alt.fuels and technology are starting a new boom. I doubt this can work as a prop to support the huge losses in previous misinvestments. For instance, sooner or later General Motors will go up in a vapor for its failure to sell cars, pure and simple.
In any case, we are faced with the essential problem of ever-increasing prices for far less net energy. That is a recipe, perhaps, for an American peristroika, but not for continuing to benefit from the old arrangements. And so far, America at all levels, in leadership and the public, resists the sort restructuring we require. For example, we are still systematically starving and dismantling the railroad system instead of rebuilding it. There is still plenty of time left in 2006 for the stock market to start reflecting the true character of our phony-baloney economy -- namely that it is based on consuming goods and resources without producing things of value.
It is my observation that the housing market is tanking broadly and steeply around the nation. In my own town, a mini "hot market," there have never been so many "for sale" signs planted in so many yards (and remaining there month after month). Some even have "price reduced" shingles added to them. But there remains mutual reinforcement between the sellers and their realtor agents to keep a happy face on the situation (to avoid panic selling).
Since house prices here, in a tourist town, are falling when the tourist season has hardly gotten underway, I have to surmise that the local market is in deep shit. A few months from now when the tourists depart, and the last golden leaves flutter down from the maples, I expect we'll see psychological capitulation among the sellers and their realtor cheerleaders.
The energy picture, as alluded to above, is certainly cause for concern. Oil prices are creeping up relentlessly into territory that will, at least, stall the consumption orgy among the WalMart shoppers. We are one hurricane or one geo-political incident away from an energy trauma. The natural gas supply situation is another storm lurking on the far horizon.
So, here at high noon of 2006, I'll stand pat with what I have said more than once: we have already entered the zone of The Long Emergency.