I thank you for making the connection between Peak Oil and its Political Response.
We have myriad organizations and web sites dedicated to discussing the problem, and many that discuss the TECHNICAL responses. Unfortunately, little will get done without a Political solution wrapped in a technical solution inside a financial response, to paraphrase Churchill.
So here we are, at the cusp of the greatest challenge to mankind since Adam gave up a rib, and our presidential candidates are discussing everything BUT this. Why? Because THEIR constituents, the far left and the far right, have monopolized the candidates.
Warren Buffett described the situation in the U.S. in the following anecdote:
"We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits ... our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than they produce -- that's the trade deficit -- we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own."
The U.S. Taxpayer simply cannot support the sheer size of our federal, state, and local governments, and this is BEFORE we get to the economic compression caused by Peak Oil Imports. This is not up for debate anymore. Every 4 years we have to listen to 2 very intelligent presidential candidates (I don't think we EVER had a dumb guy win the nomination) stand before the nation and tell OUTRAGEOUS lies about cutting taxes (have you EVER heard of a candidate say he was going to RAISE taxed on the poor, working, and middle classes?). Since serious deficit spending began, about the time that oil production peaked in the U.S. (my apologies in advance to the disingenuous seekers of political advantage. This was neither Carter's fault nor Reagan's. Neither caused the peak in U.S. oil production) no candidate, Republican, Democrat, or Independent, stepped up to the microphone and told people he was going to cut the size of the government. It was always "I will cut taxes to the working men and women, blah, blah, blah..."
(Please. Spare me the "budget surplus" of the Clinton second term which was generated by the stock market bubble, not the fiscal discipline of one of best politicians of the 20th century. Why do you deceive yourself so?)
So, here we are. We can take this opportunity to challenge our candidates to addressing something more meaningful than "freedom fries" - or not. Because energy shortages will hit America, and the effects on the economy, and hence our tax revenues, and hence yet again on the size of the government taxpayers can support, will be unassailable.
Yours for a better world.
Mentatt (at) yahoo (d0t) com
15 comments:
Or, the higher prices on shrinking energy supplies will do their job. The Chinese & Indian people will lose their energy subsidies, it will become too costly to send 40 foot containers full of plasma TVs to places like the U.S. anymore, demand destruction/high prices will determine who gets to keep their Fords, and everyone else will make due with local food production, a massive rebuild of factories here to take the place of the Chinese imports, and all the things that matter (food, clothing & shelter) will adapt. It won't be pretty, but thus far, if oil is peaking today, almost everyone seems to be getting on with it. We'll just need a lot of ketchup, mustard, blankets and bicycles. :)
I'd like to take issue with a few points here. Firstly, Peak Oil isn't the greatest challenge to mankind. It may be the greatest challenge to the USA, but the Middle East, Brasil, Russia, and other suppliers are doing just fine. China seems to doing OK too; China is using American dollars to buy up Africa (too long ignored or shafted by the West)which will secure resources for the next 50 years. Did you know 750,000 Chinese are working in Africa right now?
Secondly, American politicians CANNOT talk about Peak Oil or have any meaningful policies to deal with it. America is built on a philosophy of 'The American Dream' paid for with cheap oil, which has been the glue holding together immigrants from all over the World. Take away that glue, remove the possibility of The Dream, and it all falls apart. Once society fails, there are no solutions. Plus the politicians are funded by Big Companies, so.....
Third, its all just too late. To shift the huge US economy from oil to another prime mover, like alternative energy sources, requires a huge investment. No-one will lend you the money for that investment, because you're already broke.(Ever tried asking a Bank for money because you don't have any? What did they say?) Al Gore has great ideas, but reality will stop him, and nothing meaningful is going to get done.
Once you were pitching up there with the best, but now you're exhausted (out of energy), sidelined (by China), on the losing side and just a spectator waiting for the rest of the game to play out.
Donal!
I stand corrected. You are correct that my view is certainly American centric.
Still, the effects of Peak Oil Exports will make their way around the world in due time, but certainly in the U.S. and Europe and Latin American first.
Thanks for helping me with the obvious.
Anonymous:
Yes, markets will force adjustments...
But what is the point of government (the dept of energy, for instance) if not to craft a response to such challenges?
Actually, we all know the point of government, and it has not been to do a shred of good for the taxpayers...
Hi Greg,
sorry if that was a bit blunt!
And Britain is next in line (and Europe soon after) so the luxury of watching the storm hit America from afar will be shortlived - we'll soon be getting your financial weather!
(from the bureaucrat) ---
"Actually, we all know the point of government, and it has not been to do a shred of good for the taxpayers..."
Let's not take your cutting-edge blog that I enjoy reading and turn it into something ridiculously laughable. You want old people not to eat dog food and get basic medical care? The Fed Govt. does that (Social security & Medicare). You want to protect minorities of all shapes (including the one on your lap)? The Feds do that. You want your Treasuries to be worth anything? (Yep, we do that too). You want the croooks locked up? (Yep, that too). The problem with government, lately, is that it does everything it is told to do (funding be damned), and spend whatever it is told to spend. The problem isn't the government. The problem is the deluded taxpayer (and their bratty kids) who think they can get something (LOTS of something) for nothing
Donal has a good point regarding securing further financing for alt. energy.
In fact, I was recently sent packing by my own financial institutions, as I wished to borrow many tens of thousands with which to install a grid-tied PV system on my roof.
Neither bank considered it a good investment, but would gladly loan me money for a new car!
The last figures I saw, US taxes only bring in about 35% of what the US spends each annum. The rest is made up via foreign investment, sales of Treasuries, and naked money/credit expansion/dollar devaluation. Warren Buffet (and before him former Comptroller General David Walker) recently expressed some concern that at the going rate, in a few years taxes will only barely keep up with maintenance costs on the existing debt. Forget any further spending.
Further, using GAAP rules, total debt in the U.S. alone is about $48 trillion dollars, or just over three times the size of the current U.S. gross domestic product.
A shrinking economy due to permanently declining oil means that the debt on the books will never be repaid. It can’t be paid back because oil is really a form of stored work. Less oil means less ability for businesses and individuals to make a profit and thus service the debt.
When the world’s financiers realize that because of peak oil the debt they counted on being repaid will never be repaid, one would expect the entire financial system to respond extremely poorly.
Recently even the The Economist magazine has started seriously talking about a US debt default.
As Greg has brought up before, what about pensions and entitlement programs that depend on a functioning (and ever-growing) economy? Greg is sadly right, I believe they won’t exist. At all. They require a functioning and growing economy to be worth anything.
Dear Anonymous Regulator:
Of course these are all things that people want!
The question is: Where is the money going to come from? What do we do if the money simply isn't there? When do we cut our losses?
Folks also want ALL of these benefits without paying for them, along with a great many other benefits like free universal healthcare, 6 weeks paid vacation, their own home, a 30 hour work week, a fully funded retirement without having to actually to anything unpleasant like save some money, and spouse that is 20 years younger and rubs their feet before they go to bed...
Who wouldn't want these things? And our politicians continue to promise/pander to get elected. Washington DC has, what 537 ELECTED officials, and several hundred thousand government employees... please, tell me who is measuring the productivity of this multitude. Who is calculating the cost/benefit analysis of all of these services?
This is no laughing matter. We cannot pay for the benefits we receive NOW. How will we pay for them, in real terms, in an environment of declining real GDP??
I call a good many of them harassment services.
There is no good, nor even a moderately bad solution. They could be reduced for two years at best; then after the following election they would be restored. There is nothing to be done until their true cost is revealed.
Nixon couldn’t even get rid of the tea tasters.
(from the NON-regulator bureaucrat :)):
Hmmm, natural gas went from $13/million BTU to less than $10 right now -- still high, but it could have been higher. Oil went from a high of $147 to the present $124 (down 20%!) Everytime you think the world is gonna end, the sun comes out. If we are lucky, the rest of the world's authoritarian governments (Russia, China and most of oil-producing states) will transition back to being communist, and their demand for all these commodities will go back to zero. Americans will continue to be on top with the greatest capacity to buy resources, and everything will be fine. The price will be some inflated dollars, but as long as I get my cost of living raise, who cares? Congress is already talking about a 3.9% pay increase next year. Yeehaw! :)
Take a look at this article:
http://harpers.org/archive/2008/02/0081908
Don't let the fact that it's printed in Harpers fool you, it's written by a guy who was a managing director of a VC firm in the mid-late 90s. So he's qualified to speak about economics of bubbles and what-not.
He calls the US economy since about 73-75 (last year the US had a trade surplus on manufactured goods) or so FIRE economics: Finance, Insurance, Real Estate.
This is totally unsustainable. You're not actually creating real wealth, (that is, stuff that's actually useful) but just shuffling paper and creating paper profits, which are essentially pure inflation.
You wanna talk budgets, isn't about 1/2 the US federal spending on defense? So, if the US could get off of foreign oil dependency, then the enormous defense spending wouldn't be necessary.
(From the bureaucrat):
Feel free to check out the Budget of the United States online, somewhere. Defense is nowhere near half the budget. It is around 20%, if you count everything. The overwhelming majority of Federal dollars go to old people (like my parents): social security, medicare, (and sometimes medicaid), and interest on the national debt (I'll bet a lot of domestic Federal debt is held one way or another by old people here.) On the other subject, we're never going to get rid of importing oil. There are no realistic alternatives. It's just going to get more expensive.
Unfortunately, defense really is close to 50% of the total budget, once you factor in DOD spending, the military portion of other depts, special supplemental war funding, etc.
According to an analysis of Budget of the United States Government, Fiscal Year 2009, military spending accounts for 54% of the total US budget.
From the "War Resisters League"? A group whose pie chart shows NO money spent on social security or medicare, and then tries to explain it?? Yer a yahoo, buddy. When I talk on here, it's based on facts, not dreamyeyed convoluted statistics used to push nonsense. Defense is 20%. Old people cost a lot more than guns.
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