How I got this way.......This is for you, John

Pat McManus devotes a whole book to telling how he got to be the way that he is. He decided that he better explain himself after his friend almost laughed himself to death as Pat recounted that when he was five he fell out of a bus and landed on his head. This is what set his friend off in gales of laughter that ended with him weakly gasping that 'it explains so much.....".

As far as I know, I don't share Pat's history with the head injury. But I had a nice talk with my mom tonight, and she told me that my brother is wondering about the head injury, or maybe brain tumor or something. How did I get so weird?

Here is the deal:

The name of this blog contains the phrase: The End of The World as We Know It. That is what is happening. In the next few years will will look back on these times with wonder. We know a world of no limits. We have all the energy that we want, all that we can use. People all through out the world work and save, and we import their savings to fund our debt, and provide a market for their goods and services. We are a nation of consumers. We are a nation of debtor drones.

Short Story 1
A ship runs into a reef and sinks. Several of the passengers manage to swim to a nearby island where they dry themselves out and set about making up the rules of the island. Bill becomes the coconut gatherer. Jane becomes the weaver of sleeping mats. Don gatherers the fronds and grasses that Jane uses. Dale and Sally comb the beach and bring back useful things, and a lot of clams and shellfish. Susan learns to make pots and dishes from a deposit of clay. Merlin is the consumer. He doesn't gather, sew, weave or pot, but pays each of his fellow islanders with a hand full of special sand. Now this sand is just the same old sand that is on the beach and has no special value, but Merlin has worked his magic, and between the force of his personaility and the fact that he is big, somewhat unstable and has the only functional handgun on the island, his fellow islanders accept his leadership and fall all over each other saving the sand that he gives them.

Now, if this seems like a healthy and sustainable and just kind of a situation, I suppose we don't have much more of substance to say to each other. If this seems like the biggest crock of crap that you have ever run into, welcome to Global Economics 101. We are living in an economic twilight zone.

This is the world that we know. A world where saving is not a virtue, but a vice. Where conservation is discouraged, and waste is built into everything we use, everything we do. Weirdly, we are kind of an economic lynch pin for the global economy. Mr. Bernake and our other friends from the Federal government want to give us some of our money back so that we can patriotically spend it and keep the ponzi game going.

Hubberts Curve: Short Story 2

A man heats his home with wood, as did his father, and his grandfather. This happy and warm family made it a point to map out all the trees in their valley, and for years it was the job of the younger men to go out and find new groves of trees. All of the grandfather's children, and all of the grand children continued to live in this valley. They never planted new trees.

Each year they would write down in a book how many trees they had discovered. Each year, for years they found more than the previous year. Until about the mid 1960's That was they year the found the most trees, and every year since then they found fewer and fewer, even though they worked harder, rode longer, and even flew above the valley in a large balloon.

Each family continued to heat with wood and since they had always found some more trees, they believed that the tree finders would always find more, or that someone would think of a way to heat their homes. Some vile malcontents asked how firewood could be made and trees cut down if they had found fewer and fewer trees, and indeed had used more trees then they had found for more than a generation. These malcontents were stoned and ran out of town for their depressing questions. And everyone lived happily ever after until some of them had cold houses because of a wood shortage. So they decided then it would be a good idea to plant some trees, and maybe to dig some coal..... although they needed wood for cross ties to make the rails to bring the coal from the next valley, and they needed timbers to mine into the mountain, but the trees were all gone and the people were cold and very grouchy, but they were glad they had run the gloomy malcontents out of town. Bunch of trouble makers. The End.

If you have been reading these blog, I think it abundantly clear that we are very near peak oil production, or that we have passed the peak, probably in 2005. Does that mean that we are 'running out of oil'? Yes, and no. No we as a planet still have a lot of oil in the ground that we know about, and probably quite a bit that can still be found and extracted. Yes in that the oil that remains is increasingly not in the hands of the international oil companies.

For all that we curse them, Exxon, Mobil, Chevron, BP etc. want to sell us a product. They want to get out all the oil that they can, and they want our economy to flourish. But they are holding less and less of the reserves. National oil companies are holding more and more. It isn't in their best interest to sell us their valuable oil and get electronic chits in return. It is in the interest of the countries that still have significant reserves to use them carefully and to get the most return for each barrel of oil that they produce. For example, Saudi Arabia is building four new cities. They will be based on petroleum refineries and petrochemical production plants. They will sell these to us as refined product, basically 'retail'.

'Oh, don't be so gloomy - we can run more alternative fuels. They will think of something.' Well, that is comforting. We actually are producing a lot of ethanol. Food prices are skyrocketing. Wheat is selling for close to, or at $10/BUSHEL (56 lbs.) Grain stocks are lower than that have been since 1947. I think you can call this a manifistation of the 'Law of Unintended Consequences'.

Or how about hydrogen. This is one of my favorites. You need a lot of electricity to split water to obtain hydrogen. Right now our national electrical grid is challenged to keep the lights on. Never mind make hydrogen for 200 million cars. There isn't enough electricity to run a nation of plug in cars either. There just isn't the capacity. Power plants are expensive to build and people don't want them in the back yard, or off in the hills where they might want to recreate some day. And we certainly don't want nukes. To have enough extra electricity to make enough hydrogen to power the cars in the U.S is staggering. Mind boggling. Would we need 100 big plants? 500? We haven't built even one new nuke plant in the last twenty years. So, as my first daughter often says: 'There you have it.'

So there you have it: You can't win or quit or break even. We just won't have infinite energy. Sadly, increased energy consumption, and particularly liquid fuels consumption has gone hand in hand with economic growth. That isn't to say that we can't live quite comfortably on less energy, but it is institutional bedrock philosophy that economies need to expand 1-2%/year. At some point, and fairly soon I think, it will become impossible to continue to have the new energy to use. That isn't to say that we won't work our way around it eventually, but it takes a while to change the minds of all the economics, bussiness people, and polititians in the country. This way of thinking won't change until it is forced to change by circumstance.

All this is just energy related items. There is a whole list of financial problems and seem to be rocketing out of anyones control. I could make this page blue with links, but to what end?

I am not sure where to go from here. If this doesn't make you want to adapt in some ways to these new circumstances, I don't know what to say. To the extent that we can adapt and prepare for reasonable and probable failures in our financial and physical sytems, it seems only wise a prudent. I guess that if you think that increased petroleum costs or loss of availability won't change your life, then you should ignore all of the above. If you are content with the FED and the Federal governments assurances that the markets are sound, and the financial well being of the global economy is intact, then forget anything I might have said or say in the future.

This next part is IMPORTANT:

Risk= Probability X Consequences This is how the math works. I am working on a project for the scrubbers where I needed a lot of money to fix a system that hasn't been needed since 1994. Fourteen years it has been idle, and has fallen into disrepair. I needed several million dollars to fix it. "Please give me 3 million dollars to fix the quench system. No, we haven't needed it for the last fourteen years......." The thing is, that if we lose all station power, probably from and earth quake or something like that, we could suffer damage and loss of generation that would equal 100 million dollars..... with that in the equation, it starts to make sense.

So what is the probability of a financial meltdown with multiple bank failures? I don't know. But it is probably several orders of magnitude greater than what you would think if your only knowledge of the system is the 6:00 news. Don McAlvany thinks it is probable that it will happen in the next 6 to 18 months. I don't know. Those calculations you can only really make with your gut, as we will never have enough information to make a good calculation.

What would be the result to you and your family if you couldn't use your ATM, online banking or direct deposit for two weeks? What if your bank did fail and you had to wait for the FDIC to refund your money? Obviously no matter how well we are prepared for something like this, it will still be a giant pain in the postierior to all of us. But would you be able to eat? Would you have water to drink, at least for a few days if the power went out? Even more important, would you have enough water to flush the toilet?

In the next few years, I think it is very likely that we will see that we are on the down side of the petroleum production curve. There will be no going back, and possibly only some flattening of the curve due to conservation measures and poor economic production. Tar Sands won't make up the difference, and neither will oil shale. Ethanol and bio-diesel will make us chose driving or eating.

How will you be doing then? Remember, at the present time your food travels an average of 1500 miles before you eat it. How about a garden? What a radical concept. Seriously, this will impact everyone, and I guess the reason I get spun up about it is that as a nation we are just so complacent. Dick Cheney summed up our collective attitude when he said the 'the American way of life is not negotiable'. Not even by geological depletion it seems. What is your risk factor? It will be pretty hard to lower the probability of this happening. About the only thing you can do is to change the consequences of how you will be affected.

People in countries that are too poor to buy fuel will lose their agriculture, their electrical grid, their manufacturing capability. I am hoping that we will still be rich enough that we won't see starvation like many other countries are seeing even now. There are about 6.6 billion people on the earth today. It is doubtful that the earth can feed more than about 2 billion without a lot of fertilizer and mechanized farm machinery. You do the math on what kind of pressures will develop over the next 10 years. Right out of 'Revelation'.

So, that is how I got this way. Sorry if I am a little to worried, and grim. This is for you John, you were wondering what has gotten into me. Well, now you know. I see window of a year or two that we might be able to make a difference in preparing for what is likely to come. I will be trying to make a difference in our lives and help my kids if they want help. Comments are welcome.