Down the Ratholes of the Future
The new year now upon us has brought out the usual quota of predictions about what 2016 has in store, and I propose as usual to make my own contribution to that theme. I’ve noted more than once in the past that people who make predictions about the future really ought to glance back at those predictions from time to time and check how well they’re doing. With that in mind, before we go on to 2016, I’d like to take a moment to look back over the predictions I made last year. My post on the subject covered a lot of territory in the course of offering those predictions, and I’ve trimmed down the discussion a bit here for the sake of readability; those who want to read the whole thing as originally published will find it here. In summarized form, though, this is what I predicted:
“The first and most obvious [thing to expect] is the headlong collapse of the fracking bubble [...] Wall Street has been using the fracking industry in all the same ways it used the real estate industry in the runup to the 2008 crash, churning out what we still laughably call “securities” on the back of a rapidly inflating speculative bubble. As the slumping price of oil kicks the props out from under the fracking boom, the vast majority of that paper—the junk bonds issued by fracking-industry firms, the securitized loans those same firms used to make up for the fact that they lost money every single quarter, the chopped and packaged shale leases, the volumetric production agreements, and all the rest of it—will revert to its actual value, which in most cases approximates pretty closely to zero.
“Thus one of the entertainments 2015 has in store for us is a thumping economic crisis here in the US, and in every other country that depends on our economy for its bread and butter. The scale of the crash depends on how many people bet how much of their financial future on the fantasy of an endless frack-propelled boom, but my guess is it’ll be somewhere around the scale of the 2008 real estate bust.
“Something else that’s baked into the baby new year’s birthday cake at this point is a rising spiral of political unrest here in the United States. [...] Will an American insurgency funded by one or more hostile foreign powers get under way in 2015? I don’t think so, though I’m prepared to be wrong. More likely, I think, is another year of rising tensions, political gridlock, scattered gunfire, and rhetoric heated to the point of incandescence, while the various players in the game get into position for actual conflict: the sort of thing the United States last saw in the second half of the 1850s, as sectional tensions built toward the bloody opening rounds of the Civil War. [...]
“Meanwhile, back behind these foreground events, the broader trends this blog has been tracking since its outset are moving relentlessly on their own trajectories. The world’s finite supplies of petroleum, along with most other resources on which industrial civilization depends for survival, are depleting further with each day that passes; the ecological consequences of treating the atmosphere as an aerial sewer for the output of our tailpipes and smokestacks, along with all the other frankly brainless ways our civilization maltreats the biosphere that sustains us all, builds apace; caught between these two jaws of a tightening vise, industrial civilization has entered the rising spiral of crisis about which so many environmental scientists tried to warn the world back in the 1970s, and only a very small minority of people out on the fringes of our collective discourse has shown the least willingness to recognize the mess we’re in and start changing their own lives in response: the foundation, it bears repeating, of any constructive response to the crisis of our era.”
What I missed, and should have anticipated, is the extent to which the failure of the fracking fantasy has been hushed up by the mainstream US media. I should have anticipated that, too, because the same thing happened with the last energy boom that was going to save us all, the corn ethanol bubble that inflated so dramatically a decade ago and crumpled not long thereafter. Plenty of firms in the fracking industry have gone bankrupt, the junk bonds that propped up the industry are selling for pennies on the dollar to anyone willing to gamble on them, and all those grand claims that fracking was going to bring a new era of US energy independence have been quietly roundfiled next to the identical claims made for ethanol not that many years before; still, this hasn’t yielded the sudden shock I expected.
The ripple effect on the US economy has been slower than I anticipated, too. Thus, instead of the thumping economic crisis I predicted, we’ve seen a slow grinding contraction, papered over by the usual frantic maneuvers on the part of the Fed. In effect, instead of popping, the fracking bubble sprang a slow leak, which has played out in a muffled drumbeat of worsening economic news rather than a sudden plunge. So I missed on that one. The rest of the year’s predictions? Once again, I called it.
Now of course, as my critics like to point out, it’s easy to look at everything that’s getting worse each year, and predict that all those things are just going to keep getting worse in the year to come. What those same critics tend to forget is that this strategy may be easy but, unlike the alternatives, it works. Every January, with a predictability that puts clockwork to shame, people trot out the same shopworn predictions of game-changing breakthroughs and game-over catastrophes; one blogger announces that this will be the year that renewable energy reaches critical mass, while another insists with equal enthusiasm that this will be the year when the wheels come off the global economy once and for all; another year passes, the breakthroughs and the catastrophes pull a no-show yet again, and here we are, 365 days further down the long ragged trajectory that leads to the end of the industrial age.
Thus my core prediction for 2016 is that all the things that got worse in 2015 will keep on getting worse over the year to come. The ongoing depletion of fossil fuels and other nonrenewable resources will keep squeezing the global economy, as the real (i.e., nonfinancial) costs of resource extraction eat up more and more of the world’s total economic output, and this will drive drastic swings in the price of energy and commodities—currently those are still headed down, but they’ll soar again in a few years as demand destruction completes its work. The empty words in Paris a few weeks ago will do nothing to slow the rate at which greenhouse gases are dumped into the atmosphere, raising the economic and human cost of climate-related disasters above 2015’s ghastly totals—and once again, the hard fact that leaving carbon in the ground means giving up the lifestyles that depend on digging it up and burning it is not something that more than a few people will be willing to face.
Meanwhile, the US economy will continue to sputter and stumble as politicians and financiers try to make up for ongoing declines in real (i.e., nonfinancial) wealth by manufacturing paper wealth at an even more preposterous pace than before, and frantic jerryrigging will keep the stock market from reflecting the actual, increasingly dismal state of the economy. We’re already in a steep economic downturn, and it’s going to get worse over the year to come, but you won’t find out about that from the mainstream media, which will be full of the usual fact-free cheerleading; you’ll have to watch the rates at which the people you know are being laid off and businesses are shutting their doors instead.
All that’s a slam-dunk at this point. Still, for those readers who want to see me taking on a little more predictive risk, I have something to offer. There’s a wild card in play in the US economy just now, and it’s the tech sector—no, let’s call things by less evasive names, shall we? The current tech bubble. My financially savvy readers will know that a standard way to compare a company’s notional value to its real prospects is the ratio of the total price of all its stock to its annual earnings—the price/earnings or P/E ratio for short. Healthy companies in a normal economy usually have P/E ratios between 10 and 20; that is, their total stock value is between ten and twenty times their annual earnings. Care to guess what the P/E ratio is for Amazon as of last Friday’s close? A jawdropping 985.
At that, Amazon is in better shape than some other big-name tech firms these days, as it actually has earnings. Twitter, for example, has never gotten around to making a profit at all, and so its P/E ratio is its current absurd stock value divided by zero. Valuations this detached from reality haven’t been seen since immediately before the “Tech Wreck” of 2000, and the reason is exactly the same: vast amounts of easy money have flooded into the tech sector, and that torrent of cash has propped up an assortment of schemes and scams that make no economic sense at all. Sooner or later, as a function of the same hard math that brings every bubble to an end, Tech Wreck II is going to hit, vast amounts of money are going to evaporate, and a lot of currently famous tech companies are going to go the way of Pets.com.
Exactly when that will happen is a good question, but I’m going to go out on a limb here and say that the next tech bust will be under way by the end of 2016. That’s specific prediction #1.
Another aspect of economic reality that’s going to hit hard in the year ahead is the ongoing deflation of the fracking bubble. Aside from the straightforward financial impact of that deflation, the failure of fracking to live up to the cornucopian fantasies piled onto it means that a lot of people who relied on it as a way of ignoring the harsh realities of planetary limits are going to have to find something else, so they can have new excuses for living the lifestyles that are wrecking the planet. There’s no shortage of candidates just now; no doubt billions of dollars, Euros, et al. will continue to be poured down the bottomless rathole of fusion research, and the government feed trough will doubtless have plenty of other corporate swine lined up and grunting for their share, but my best guess at this point is that photovoltaic (PV) solar energy is going to be the next big energy bubble.
Solar PV is a good deal less environmentally benign than its promoters like to claim—like so many so-called “green” technologies, the environmental damage it causes happens mostly in the trajectory from mining the raw materials to manufacture and deployment, not in day-to-day operation—and the economics of grid-tied solar power are so dubious that in practice, grid-tied PV is a subsidy dumpster rather than a serious energy source. Nonetheless, I expect to see such points brushed aside, airily or angrily as the case may be, as the solar lobby and its wholly-owned subsidiaries in the green movement make an all-out push to sell solar PV as the next big thing. The same rhetoric deployed to sell ethanol and fracking as game-changing innovations, which of course they weren’t, will be trotted out again for PV, as the empty promises made at the recent COP-21 meeting in Paris find their inevitable destiny as sales pitches for yet another alleged energy miracle that won’t fulfill the overinflated promises made on its behalf.
There’s still some uncertainty involved, but I’m going to predict that the mass marketing of what will inevitably be called “the PV revolution” will get under way in 2016. That’s specific prediction #2.
Meanwhile the political context of American life is heating steadily toward an explosion. As I write this, a heavily armed band of militiamen is holed up in a building on a Federal wildlife refuge in the deserts of southeastern Oregon, trying to provoke a standoff. Clownish as such stunts unquestionably are, it bears remembering that the activities of such violent abolitionists as John Brown looked just as pointless in their time; their importance was purely as a gauge of the pressures building toward civil war—and that’s exactly the same reading I give to the event just described.
That said, I don’t expect an armed insurgency of any scale to break out in the United States this year. The era of rural and urban guerrilla warfare, roadside bombs, internment camps, horrific human rights violations by all sides, and millions of refugees fleeing in all directions, that will bring down the United States of America is still a little while off yet, for one crucial reason: a large enough fraction of the people most likely to launch the insurgencies of the near future have decided to give the political process one last try, and the thing that has induced them to do this is the candidacy of Donald Trump.
The significance of Trump’s astonishing progress to front-runner status is large and complex enough that it’s going to get a post of its own here in the near future. For the moment, the point that matters is that a vast number of nominal Republicans are so sick of the business as usual being marketed by their party’s officially approved candidates that they’re willing to vote for absolutely anyone who is willing to break with the bipartisan consensus of what we might as well call the Dubyobama era: a consensus that has brought misery to the vast majority of Americans, but continues to benefit a privileged minority—not just the much-belabored 1%, but the top 20% or so of Americans by income.
Hillary Clinton is the candidate of that 20%, the choice of those who want things to keep going the way they’ve gone for the last two decades or so. More precisely, she’s the one candidate of the business-as-usual brigade left standing, since the half of the 20% that votes Democrat has rallied around her and done their best to shut down the competition, while the half that votes Republican failed to rally around Jeb Bush or one of his bland and interchangeable rivals, and thus got sidelined when the 80% made their own choice. It’s still possible that Bernie Sanders could pull off an upset, if he trounces Clinton in a couple of early primaries and the Democrat end of the 80% makes its voice heard, but that’s a long shot. Far more likely at this point is an election pitting Hillary Clinton against Donald Trump—and though Sanders could probably beat Trump, Clinton almost certainly can’t.
Granted, there are plenty of twists and turns ahead as America stumbles through its long, unwieldy, and gaudily corrupt election process. It’s possible that the GOP will find some way to keep Trump from gettng the nomination, in which case whoever gets the Republican nod will lose by a landslide as the GOP end of the 80% stays home. It’s possible that given enough election fraud—anyone who thinks this is purely a GOP habit should read Seymour Hirsch’s The Dark Side of Camelot, which details how Joe Kennedy bought the 1960 election for his son—Clinton might still squeak through and get into the White House. It’s even possible that Sanders will claw his way over the barriers raised against him by the Democrat establishment and win the race.
At this point, though, little though I like to say this, the most likely outcome of the 2016 election is the inauguration of Donald Trump as President in January 2017. That’s specific prediction #3.
Then there’s the wider context, the international political situation that’s dominated by a fact next to nobody in this country is willing to discuss: the rapid acceleration of America’s imperial decline and fall over the last year. That’s something I’ve been expecting—I discussed it at length in my book Decline and Fall and also in my near-future political-military thriller novel Twilight’s Last Gleaming—but the details came as a surprise, not only to me, but apparently to everyone outside a few tightly guarded office buildings in Moscow. The Russian intervention in Syria has turned out to be one of the few real game-changing events in recent years, shifting the balance of power decisively against the US in a pivotal part of the world and revealing weaknesses that the illusion of US omnipotence has heretofore concealed. As a result, probably though not certainly before 2016 is over, the Daesh jihadi militia—the so-called “Islamic State”—is going to get hammered into irrelevance.
That latter may turn out to be a significant turning point in more ways than one, because the Daesh phenomenon is considerably more complex than the one-dimensional caricature being presented by the US media. The evidence at this point makes it pretty clear that Daesh is being funded and supported by a number of Middle Eastern nations, with Turkey and Saudi Arabia probably the biggest contributors; those iconic white pickup trucks aren’t popping into being in the middle of the Syrian desert by the sheer grace of Allah, after all. It’s also at least suggestive that the US, in a year of supposed air war against Daesh, not only failed to slow it down, but somehow never managed to notice, much less target, the miles-long convoys of tanker trucks hauling oil north to Turkey to cover the costs of jihad.
Something very murky has been going on in the northern Tigris-Euphrates river valley, and it deserves a post of its own here, since it will very likely will play a major role in the decline of American empire and the rise of a new global hegemony under different management. Regular readers may find it helpful to review this blog’s previous discussion of geopolitics, or even find a stray volume of Halford Mackinder and read it, keeping in mind that regions and continents have Pivot Areas of their own. Still, there’s a specific consequence that’s likely to follow from all this.
The Kingdom of Saudi Arabia is a fine example of a phemomenon all too familiar to students of history: a crumbling, clueless despotism which never got the memo warning that it couldn’t get away any longer with acting like a major power. The steady decline in the price of oil has left the kingdom in ghastly financial condition, forced to borrow money on international credit markets to pay its bills, while slashing the lavish subsidies that keep its citizens compliant. A prudent ruling class in that position would avoid foreign adventures and cultivate the kind of good relationships with neighboring powers that would give it room to maneuver in a crisis. As so often happens in such cases, though, the rulers of Saudi Arabia are anything but prudent, and they’ve plunged openly into a shooting war just over its southern borders in Yemen, and covertly but massively into the ongoing mess in Syria and Iraq.
The war in Yemen is not going well—Yemeni forces have crossed the Saudi border repeatedly in raids on southern military bases—and the war in Syria and Iraq is turning out even worse. At this point, the kingdom can’t effectively withdraw from either struggle, nor can it win either one; its internal affairs are becoming more and more troubled, and the treasury is running low. It’s a familiar recipe, and one that has an even more familiar outcome: the abrupt collapse of the monarchy, followed by prolonged chaos until one or more new governments consolidate their power. (Those of my readers who know about the collapse of the Russian, Austro-Hungarian, and Ottoman Empires at the end of the First World War have a heads-up on tomorrow’s news.) When that happens—and at this point, it’s a matter of when rather than if—the impact on the world’s petroleum markets, investment markets, and politics will be jarring and profound, and almost impossible to predict in detail in advance.
The timing of political collapse is not much easier to predict, but here again, I’m going to plop for a date and say that the Saudi regime will be gone by the end of 2016. That’s specific prediction #4.
I admit quite cheerfully that all four of these predictions may turn out to be dead wrong. That the current tech bubble will pop messily, and that the House of Saud will implode just as messily, are to my mind done deals—in both cases, there’s a reliable historical pattern well under way, which will proceed to its predictable conclusion—but the timing is impossible to know in advance. That something or other will be loudly ballyhooed as the next reason privileged Americans don’t have to change their lifestyles, and that the collision between the policies of the Dubyobama era and the resentment and rage of those who’ve paid the cost of those policies will set US politics ablaze, are just as certain, but it’s impossible to be sure in advance that solar PV and Donald Trump will be the beneficiaries.
The simple reality remains that here in America, we’ve poured nearly all our remaining options for constructive change down the ratholes of the future, and the one option that could still accomplish something—the option of changing our lifestyles now, in order to decrease the burden we place on the planet and what’s left of the industrial economy—is considered unthinkable right across the political spectrum. That being the case, those of us who are doing the unthinkable, while we insulate our homes, sell our cars and other energy-wasting items, learn useful skills, and pursue the other pragmatic steps that matter just now, might want to lay in a good supply of popcorn, too; it’s going to be quite a show.
Photo credit: "Glaskugel CrystalBall" by Eva K. / Eva K. - Eva K. / Eva K.. Licensed under FAL via Commons.
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