Waiting for the other shoe
Picking a route down the far side of Hubbert’s peak requires some of the same skills hikers use when navigating any other mountain trail, and one of those skills is a curious sort of double vision. On the one hand, you have to pay attention to the terrain around you, watching for places where the footing might prove treacherous or other hazards such as falling rocks might make the trip a little too exciting. On the other hand, you have to pay attention to the bigger picture, the way the land lies, so the trail you choose will actually take you in the direction you want to go.
In the last few months here on The Archdruid Report I’ve dealt mostly with that longer view, partly out of disquiet with the peak oil community’s fixation on immediate issues, partly in an attempt to lay foundations for a conversation about how choices we make today can help shape the far future. I’d planned on continuing that this week with another exploration of the successional process that bids fair to shape the next few centuries of human social evolution. Still, sometimes you have to set the long view aside and concentrate on the ground in front of your feet, and that may turn out to be a good idea just now.
I suspect most people whose interest in the news doesn’t center on Britney Spears’ taste in underwear have noticed some very unsettling data points in the last three months or so. Since August 15 of this year, the price of crude oil has shot up $25 a barrel and the price of gold has rocketed $175 an ounce, and these are just the poster children for soaring commodity prices that have affected nearly every raw material for sale in the world. Part of this is driven by real scarcities. The usually optimistic International Energy Agency, for example, has issued an uncharacteristically harsh report warning that global petroleum supply is failing to keep up with demand, creating an energy crunch that will only get worse in the decades to come
Another part of this shift, though, tracks the continuing collapse in the US dollar. Since August 15, the British pound is up 6% and the Euro 9% relative to the dollar. The only currencies that buy as many dollars as they did a month ago are those locked to the dollar by government edict, and some of those governments, at least, are having second thoughts. The latest round of panic selling of dollars today was sparked by a comment by a Chinese banker that his government was really going to have to get more of its reserves out of the dollar and into some stronger currency.
At the same time, the subprime mortgage collapse – a misnomer, really, since many billions of dollars in supposedly AAA mortgages and other speculative instruments have turned out to have values just as evanescent as the most dubious subprime loan – is continuing to worsen. Citibank, the world’s largest bank just now, announced over the weekend that they had lost $11 billion over the last month. Several other big banks have made similar admissions in the last two weeks or so. One of this morning’s news stories mentions that US investment banks will shortly have to write off approximately $100 billion of paper value on top of this; other stories hint at even larger losses waiting further down the road.
Meanwhile, the New York Stock Exchange has announced that the controls on computer trading put in place to damp down volatility after the huge 1987 stock market crash are being discontinued. According to NYSE officials the controls, which were triggered eleven times last month, are “no longer necessary.” On a day when the Dow plunged 360 points amid panic selling of banking and real estate stocks, this is not exactly a comforting claim.
The last of these unsettling news stories comes from an unexpected place: the pen of Francis Fukuyama, the Johns Hopkins professor whose 1989 essay “An End to History?” attempted to portray America’s victory in the Cold War as the culmination of human history and provided the intellectual underpinnings, such as they were, for the Bush I and Clinton administrations. More recently Fukuyama made the news again as part of the right-wing revolt against the current administration’s disastrous policies in Iraq and the resulting wreck of the post-Cold War international order.
His latest essay starts with a commentary on the rise and fall of American hegemony in the post-9/11 era. At the end of the essay, though, he suggests that maybe the world would be better off if the US were kept in line by a balance of power – even if not all the players in the balance of power were not, in his delicate phrase, “fully democratic.”
This is an astounding admission. What Fukuyama is suggesting is that he – and by extension, the faction of the US political class for whom he has long been the spokesperson – would be willing to accept the end of America’s global dominance and the emergence of a world order in which Russia and China – the less-than-fully-democratic powers he clearly has in mind – have some measure of parity with the US. From anybody in the American political class, this would be a remarkable statement; from the onetime prophet of a unipolar world under American leadership, it looks suspiciously like a white flag.
I am an archdruid, not an economist or a political scientist, and my exposure to the worlds of high finance and international politics consists entirely of interested observation at a distance. The precise meaning of each of these scraps of information can be left to specialists. Their broader significance, though, may be of much greater importance. None of these data points is a symptom of business as usual. Combine them with the many other troubling stories moving through the media, the internet, and specialist journals, and it’s hard to miss the implication that a major discontinuity may be approaching.
One of the reasons I find ecology a useful guide to history is that the natural world and the human world relate to time and change in similar ways. Most of the time, in an ecosystem or a human society, change happens gradually, cycling through predictable patterns or bridging the space between one set of conditions and another. Watch a vacant lot turning back into woodland or a pond moving through its annual cycle and the continuities are much more striking than the changes, at least in the time scales the human senses and mind pick up most easily. Similarly, human societies change through the cumulative impact of many small changes over time, and it’s often only in retrospect that we blink in surprise, wondering where a once-familiar world went.
Sudden change is the exception, not the rule, but it does happen. The implosion of the global economy after the September 1929 stock market crash, the dizzying plunges into war in the summer months of 1914 and 1939, and the disintegration of the Communist bloc at the end of the 1980s are examples of the way radical changes can sweep over a society. In each case, human affairs continued along their normal course while pressures built beneath the surface, and warnings of the coming crisis fell on deaf ears, until the deluge hit and swept every trace of business as usual before it. In each case it took years for stability to return, and when it did, much of the old order of things had vanished forever.
Prophecy is a risky business at best, and archdruids are not necessarily any better at it than anyone else. Still, the possibility that another such wave of dramatic change might be about to break over the industrial world has been much on my mind of late. The model of the future I’ve been discussing on The Archdruid Report for the last year and a half envisions a stairstep process of decline, with sudden discontinuities followed by periods of respite and partial recovery. A real chance exists that the tremors in the commodities and credit markets are foreshocks of the first such downward lurch, an economic crisis that might leave most of today’s conventional wisdom in shreds.
If this is the case, there may not be much time to make preparations before the pressure of events puts anything beyond day-to-day crisis management out of reach. Still, this might not be a bad time for my readers to shed any speculative investments they might have, to be particularly wary of economic risks, and to keep more food than usual in the pantry, while we wait to see if the other shoe will drop.
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