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Peak Money
James Howard Kunstler, blog
The multi-dimensional meltdown underway in the finance sector illustrates perfectly how the complex systems we depend on start to wobble and fail as soon as peak oil establishes itself as a fact in the public imagination. Mainly what it shows is that we don’t have to run out of oil — or even come close to that — before the trouble starts. Just going over the peak and heading down the slippery slope of depletion is enough. Peak oil, it turns out, is also peak money. Or should we say, peak “money?”
First of all, what is finance exactly? I’d bet that a lot of people these days don’t know, including many working in the financial “industry,” as it has taken to calling itself. Finance, until very recently, was the means by which investment was raised for useful economic activities and productive ventures — in other words, the deployment of capital, which is to say accumulated wealth. Historically, this accumulated wealth was pretty meager. There wasn’t a whole lot to deploy and the deployment was controlled by a tiny handful of people statistically greater only than the number of Martians in the general population. They operated as families or clans, and everybody knew who they were: the Medici, the Rothschilds. Even the Roman Empire was a kind of financial Flintstones operation compared to what we see on CNBC these days. Not having the printing press, the Romans had to inflate their currency the old-fashioned way, by adding base metals to their gold coins.
(12 November 2007)
Is $100 Oil As Lethal As It Looks?
Not by itself. But combined with the housing bust, maybe so
Staff, Business Week
At around $96 a barrel, oil is on the verge of smashing through two psychological barriers: the first-ever triple-digit price and the highest price ever in inflation-adjusted terms. (The previous inflation-adjusted high, in 1980, was right around $100 in today’s dollars, depending on who’s calculating.)
(19 November 2007 issue)
Supercycle Buster
David DuByne, Language Matters
You can’t really talk about economic expansion today without muttering a sentence or two about a commodities supercycle. To a large extent, growth in the BRIC countries – Brazil, Russia, India and China – are fuelling this supercycle by gobbling up ever-greater shares of the world’s available resources.
…Perhaps this commodity supercycle will be the shortest cycle of them all. Perhaps peak oil will bring on its collapse.
Enter the Dragon: Here in China, there is a palpable frenzy of about the birth of a new commodities supercycle driven by the BRIC countries as they industrialize and modernize. That takes a lot of material and newly created money. In the last 130 years, there have been three commodity supercycles – periods of intense demand and rapid price escalation. The first lasted from the 1880s to the 1920s – 45 years – and was followed by the Great Depression. The era of post-war reconstruction lasted from 1945-75 – 30 years – and sank into a morass of stagflation.
The new supercycle began barely five years ago. Will it be shorter than the last? How will it end?
China’s economy is at least 50 per cent manufacturing driven. New foreign direct investment, joint ventures and factory construction is the main force behind expanding internal demand for commodities. It’s the factory owner who is purchasing the new apartment, the factory manager who is buying the latest-model car, the factory employees that go to stores and buy drinks in plastic bottles from hyper-marts or corner stores.
…Supercycle Buster: If the buying outside China stops, so will its internal consumption. The supercycle buster will be a reduction in manufacturing orders from other countries also affected by constricting economies in recession or depression due to soaring prices for fuels and other commodities. China is highly vulnerable to and dependent on a system that relies on the consumption of manufactured by customers outside its borders.
…An age of insufficiency is beginning. The super-contractionary phase of the world economy is getting underway. Only the economies of the large oil-producing regions of the world will prosper.
As this supercycle slides to a halt, I believe we will begin to think differently. Instead of focusing on consumption and profit, perhaps our mind-set will shift toward conservation, durability and sustainability. If we don’t, it will be because we have not learned from our past.
(10 November 2007)
