Heading Toward The Sidewalk
Talking about historical change is one thing when the changes under discussion are at some convenient remove in the past or the future. It’s quite another when the changes are already taking place. That’s one of the things that adds complexity to the project of this blog, because the decline and fall of modern industrial civilization isn’t something that might take place someday, if X or Y or Z happens or doesn’t happen; it’s under way now, all around us, and a good many of the tumults of our time are being driven by the unmentionable but inescapable fact that the process of decline is beginning to pick up speed.
Those tumults are at least as relevant to this blog’s project as the comparable events in the latter years of dead civilizations, and so it’s going to be necessary now and then to pause the current sequence of posts, set aside considerations of the far future for a bit, and take a look at what’s happening here and now. This is going to be one of those weeks, because a signal I’ve been expecting for a couple of years now has finally showed up, and its appearance means that real trouble may be imminent.
This has admittedly happened in a week when the sky is black with birds coming home to roost. I suspect that most of my readers have been paying at least some attention to the Ebola epidemic now spreading across West Africa. Over the last week, the World Health Organization has revealed that official statistics on the epidemic’s toll are significantly understated, the main nongovernmental organization fighting Ebola has admitted that the situation is out of anyone’s control, and a series of events neatly poised between absurdity and horror—a riot in one of Monrovia’s poorest slums directed at an emergency quarantine facility, in which looters made off with linens and bedding contaminated with the Ebola virus, and quarantined patients vanished into the crowd—may shortly plunge Liberia into scenes of a kind not witnessed since the heyday of the Black Death. The possibility that this outbreak may become a global pandemic, while still small, can no longer be dismissed out of hand.
Meanwhile, closer to home, what has become a routine event in today’s America—the casual killing of an unarmed African-American man by the police—has blown up in a decidedly nonroutine fashion, with imagery reminiscent of Cairo’s Tahrir Square being enacted night after night in the St. Louis suburb of Ferguson, Missouri. The culture of militarization and unaccountability that’s entrenched in urban police forces in the United States has been displayed in a highly unflattering light, as police officers dressed for all the world like storm troopers on the set of a bad science fiction movie did their best to act the part, tear-gassing and beating protesters, reporters, and random passersby in an orgy of jackbooted enthusiasm blatant enough that Tea Party Republicans have started to make worried speeches about just how closely this resembles the behavior of a police state.
If the police keep it up, the Arab Spring of a few years back may just be paralleled by an American Autumn. Even if some lingering spark of common sense on the part of state and local authorities heads off that possibility, the next time a white police officer guns down an African-American man for no particular reason—and there will be a next time; such events, as noted above, are routine in the United States these days—the explosion that follows will be even more severe, and the risk that such an explosion may end up driving the emergence of a domestic insurgency is not small. I noted in a post a couple of years back that the American way of war pretty much guarantees that any country conquered by our military will pup an insurgency in short order thereafter; there’s a great deal of irony in the thought that the importation of the same model of warfare into police practice in the US may have exactly the same effect here.
It may come as a surprise to some of my readers that the sign I noted is neither of these things. No, it’s not the big volcano in Iceland that’s showing worrying signs of blowing its top, either. It’s an absurdly little thing—a minor book review in an otherwise undistinguished financial-advice blog—and it matters only because it’s a harbinger of something considerably more important.
A glance at the past may be useful here. On September 9, 1929, no less a financial periodical than Barron’s took time off from its usual cheerleading of the stock market’s grand upward movement to denounce an investment analyst named Roger Babson in heated terms. Babson’s crime? Suggesting that the grand upward movement just mentioned was part of a classic speculative bubble, and the bubble’s inevitable bust would cause an economic depression. Babson had been saying this sort of thing all through the stock market boom of the late 1920s, and until that summer, the mainstream financial media simply ignored him, as they ignored everyone else whose sense of economic reality hadn’t gone out to lunch and forgotten to come back.
For those who followed the media, in fact, the summer and fall of 1929 were notable mostly for the fact that a set of beliefs that most people took for granted—above all else, the claim that the stock market could keep on rising indefinitely—suddenly were being loudly defended all over the place, even though next to nobody was attacking them. The June issue of The American Magazine featured an interview with financier Bernard Baruch, insisting that “the economic condition of the world seems on the verge of a great forward movement.” In the July 8 issue of Barron’s, similarly, an article insisted that people who worried about how much debt was propping up the market didn’t understand the role of broker’s loans as a major new investment outlet for corporate money.
As late as October 15, when the great crash was only days away, Professor Irving Fisher of Yale’s economics department made his famous announcement to the media: “Stock prices have reached what looks like a permanently high plateau.” That sort of puffery was business as usual, then as now. Assaulting the critics of the bubble in print, by name, was not. It was only when the market was sliding toward the abyss of the 1929 crash that financial columnists publicly trained their rhetorical guns on the handful of people who had been saying all along that the boom would inevitably bust.
That’s a remarkably common feature of speculative bubbles, and could be traced in any number of historical examples, starting with the tulip bubble in the 17th century Netherlands and going on from there. Some of my readers may well have experienced the same thing for themselves in the not too distant past, during the last stages of the gargantuan real estate bubble that popped so messily in 2008. I certainly did, and a glance back at that experience will help clarify the implications of the signal I noticed in the week just past.
Back when the real estate bubble was soaring to vertiginous and hopelessly unsustainable heights, I used to track its progress on a couple of news aggregator sites, especially Keith Brand’s lively HousingPanic blog. Now and then, as the bubble peaked and began losing air, I would sit down with a glass of scotch, a series of links to the latest absurd comments by real estate promoters, and my copy of John Kenneth Galbraith’s The Great Crash 1929—the source, by the way, of the anecdotes cited above—and enjoyed watching the rhetoric used to insist that the 2008 bubble wasn’t a bubble duplicate, in some cases word for word, the rhetoric used for the same purpose in 1929.
All the anti-bubble blogs fielded a steady stream of hostile comments from real estate investors who apparently couldn’t handle the thought that anyone might question their guaranteed ticket to unearned wealth, and Brand’s in particular saw no shortage of bare-knuckle verbal brawls. It was only in the last few months before the bubble burst, though, that pro-bubble blogs started posting personal attacks on Brand and his fellow critics, denouncing them by name in heated and usually inaccurate terms. At the time, I noted the parallel with the Barron’s attack on Roger Babson, and wondered if it meant the same thing; the events that followed showed pretty clearly that it did.
That same point may just have arrived in the fracking bubble—unsurprisingly, since that has followed the standard trajectory of speculative booms in all other respects so far. For some time now, the media has been full of proclamations about America’s allegely limitless petroleum supply, which resemble nothing so much as the airy claims about stocks made by Bernard Baruch and Irving Fisher back in 1929. Week after week, bloggers and commentators have belabored the concept of peak oil, finding new and ingenious ways to insist that it must somehow be possible to extract infinite amounts of oil from a finite planet; oddly enough, though it’s rare for anyone to speak up for peak oil on these forums, the arguments leveled against it have been getting louder and more shrill as time passes. Until recently, though, I hadn’t encountered the personal attacks that announce the imminence of the bust.
That was before this week. On August 11th, a financial-advice website hosted a fine example of the species, and rather to my surprise—I’m hardly the most influential or widely read critic of the fracking bubble, after all—it was directed at me.
Mind you, I have no objection to hostile reviews of my writing. A number of books by other people have come in for various kinds of rough treatment on this blog, and turnabout here as elsewhere is fair play. I do prefer reviewers, hostile or otherwise, to take the time to read a book of mine before they review it, but that’s not something any writer can count on; reviewers who clearly haven’t so much as opened the cover of the book on which they pass judgment have been the target of barbed remarks in literary circles since at least the 18th century. Still, a review of a book the reviewer hasn’t read is one thing, and a review of a book the author hasn’t written and the publisher hasn’t published is something else again.
That’s basically the case here. The reviewer, a stock market blogger named Andew McKillop, set out to critique a newly re-edited version of my 2008 book The Long Descent. That came as quite a surprise to me, as well as to New Society Publications, the publisher of the earlier book, since no such reissue exists. The Long Descent remains in print in its original edition, and my six other books on peak oil and the future of industrial society are, ahem, different books.
My best guess is that McKillop spotted my new title Decline and Fall: The End of Empire and the Future of Democracy in 21st Century America in a bookshop window, and simply jumped to the conclusion that it must be a new release of the earlier book. I’m still not sure whether the result counts as a brilliant bit of surrealist performance art or a new low in what we still jokingly call journalistic ethics; in either case, it’s definitely broken new ground. Still, I hope that McKillop does better research for the people who count on him for stock advice.
Given that starting point, the rest of the review is about what you would expect. I gather that McKillop read a couple of online reviews of The Long Descent and a couple more of Decline and Fall, skimmed over a few randomly chosen posts on this blog, tossed the results together all anyhow, and jumped to the conclusion that the resulting mess was what the book was about. The result is quite a lively little bricolage of misunderstandings, non sequiturs, and straightforward fabrications—I invite anyone who cares to make the attempt to point out the place in my writings, for example, where I contrast catabolic collapse with “anabolic collapse,” whatever on earth that latter might be.
There’s a certain wry amusement to be had from going through the review and trying to figure out exactly how McKillop might have gotten this or that bit of misinformation wedged into his brain, but I’ll leave that as a party game for my readers. The point I’d like to make here is that the appearance of this attempted counterblast in a mainstream financial blog is a warning sign. It suggests that the fracking boom, like previous bubbles when they reached the shoot-the-messenger stage, may well be teetering on the brink of a really spectacular crash—and it’s not the only such sign, either.
The same questions about debt that were asked about the stock market in 1929 and the housing market in 2008 are being asked now, with increasing urgency, about the immense volume of junk bonds that are currently propping up the shale boom. Meanwhile gas and oil companies are having to drill ever more frantically and invest ever more money to keep production rates from dropping like a rock Get past the vacuous handwaving about “Saudi America,” and it’s embarrassingly clear that the fracking boom is simply one more debt-fueled speculative orgy destined for one more messy bust. It’s disguised as an energy revolution in exactly the same way that the real estate bubble was disguised as a housing revolution, the tech-stock bubble as a technological revolution, and so on back through the annals of financial delusion as far as you care to go.
Sooner or later—and much more likely sooner than later—the fracking bubble is going to pop. Just how and when that will happen is impossible to know in advance. Even making an intelligent guess at this point would require a detailed knowledge of which banks and investment firms have gotten furthest over their heads in shale leases and the like, which petroleum and natural gas firms have gone out furthest on a financial limb, and so on. That’s the kind of information that the companies in question like to hide from one another, not to mention the general public; it’s thus effectively inaccessible to archdruids, which means that we’ll just have to wait for the bankruptcies, the panic selling, and the wet thud of financiers hitting Wall Street sidewalks to find out which firms won the fiscal irresponsibility sweepstakes this time around.
One way or another, the collapse of the fracking boom bids fair to deliver a body blow to the US economy, at a time when most sectors of that economy have yet to recover from the bruising they received at the hands of the real estate bubble and bust. Depending on how heavily and cluelessly foreign banks and investors have been sucked into the boom—again, hard to say without inside access to closely guarded financial information—the popping of the bubble could sucker-punch national economies elsewhere in the world as well. Either way, it’s going to be messy, and the consequences will likely include a second helping of the same unsavory stew of bailouts for the rich, austerity for the poor, bullying of weaker countries by their stronger neighbors, and the like, that was dished up with such reckless abandon in the aftermath of the 2008 real estate bust. Nor is any of this going to make it easier to deal with potential pandemics, simmering proto-insurgencies in the American heartland, or any of the other entertaining consequences of our headfirst collision with the sidewalks of reality.
The consequences may go further than this. The one detail that sets the fracking bubble apart from the real estate bubble, the tech stock bubble, and their kin further back in economic history is that fracking wasn’t just sold to investors as a way to get rich quick; it was also sold to them, and to the wider public as well, as a way to evade the otherwise inexorable reality of peak oil. 2008, it bears remembering, was not just the year that the real estate bubble crashed, and dragged much of the global economy down with it; it was also the year when all those prophets of perpetual business as usual who insisted that petroleum would never break $60 a barrel or so got to eat crow, deep-fried in light sweet crude, when prices spiked upwards of $140 a barrel. All of a sudden, all those warnings about peak oil that experts had been issuing since the 1950s became a great deal harder to dismiss out of hand.
The fracking bubble thus had mixed parentage; its father may have been the same merciless passion for fleecing the innocent that always sets the cold sick heart of Wall Street aflutter, but its mother was the uneasy dawn of recognition that by ignoring decades of warnings and recklessly burning through the Earth’s finite reserves of fossil fuels just as fast as they could be extracted, the industrial world has backed itself into a corner from which the only way out leads straight down. White’s Law, one of the core concepts of human ecology, points out that economic development is directly correlated with energy per capita; as depletion overtakes production and energy per capita begins to decline, the inevitable result is a long era of economic contraction, in which a galaxy of economic and cultural institutions predicated on continued growth will stop working, and those whose wealth and influence depend on those institutions will be left with few choices short of jumping out a Wall Street window.
The last few years of meretricious handwaving about fracking as the salvation of our fossil-fueled society may thus mark something rather more significant than another round of the pervasive financial fraud that’s become the lifeblood of the US economy in these latter days. It’s one of the latest—and maybe, just maybe, one of the last—of the mental evasions that people in the industrial world have used in the futile but fateful attempt to pretend that pursuing limitless economic growth on a finite and fragile planet is anything other than a guaranteed recipe for disaster. When the fracking bubble goes to its inevitable fate, and most of a decade of babbling about limitless shale oil takes its proper place in the annals of human idiocy, it’s just possible that some significant number of people will realize that the universe is under no obligation to provide us will all the energy and other resources we want, just because we happen to want them. I wouldn’t bet the farm on that, but I think the possibility is there.
One swallow does not a summer make, mind you, and one fumbled attempt at a hostile book review on one website doesn’t prove that the same stage in the speculative bubble cycle that saw frantic denunciations flung at Roger Babson and Keith Brand—the stage that comes immediately before the crash—has arrived this time around. I would encourage my readers to watch for similar denunciations aimed at more influential and respectable fracking-bubble critics such as Richard Heinberg or Kurt Cobb. Once those start showing up, hang onto your hat; it’s going to be a wild ride.
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