Thursday, March 17, 2011

Mega Cities, Cont...

The give and take among thinking people on very complicated social outcomes requires all of us to be willing to evolve our beliefs and opinions.  Not a few of the people commenting here have turned my head around... and not a few times, either. One has to be willing to evolve...

I have been noodling ChrisinGa's comments in my previous post. One of his lines really got my attention:


I guess I will just have to disagree with all of you. We already see today suburbia contracting back into the core of the cities today. We already see the highway system, its bridges, and drainage systems falling apart.
Resources will be drawn into the cities all along the way. Sure large scale farming will receive resources. Most especially those along rail lines and those that are drawn into what was once suburbia. And we are also likely to see manufacturing come back to the states.
There is no doubt that there will be a process the transforms us from what we are today to what we will be. But I can assure you with the vast majority of the population in the cities that with the exception of farming rural America will get the short end of the stick in nearly every category first.

"Resources will be drawn into cities along the way." That line went on, over and over again in my mind all day... "along the way"... My sense is that Chris is right, only he puts the "along the way" well into the future, and I am starting to believe (not finished thinking about it, but wanted to expand the discussion) that his "Resources will be drawn into cities along the way" has likely been going on for some time, may well continue for some time, but is closer to the end than the beginning.

Look at the U.S. banking center, New York.  The only thing keeping the lights on in New York is the Federal Reserve. The Fed has engineered an environment whereby the big New York banks and hedge funds can borrow money for nearly ZERO and take the proceeds and buy long maturity bonds. The Fed has telegraphed every move to this crew along the way, and these folks are printing money.

That does not mean that that strategy won't end badly... I think it will... but it does comport with Chris' idea about resources being drawn in. The money these banks/funds are making on the spread is coming from somewhere... the gain is somebody's loss.

My view of Mega Cities as technological islands that need to import everything ALSO comports with Chris' view AND my assertion that this is already well under way. The resources HAVE been being drawn into the large cities, and I would assert that the tipping point for the failure of that phenomenon is not that far in the future for the mega-cities in the nations importing the most Oil.

15 comments:

westexas said...

First few paragraphs of first draft of an essay on infrastructure in a post-Peak Exports world:

Developed countries worldwide are facing enormous financial costs associated with replacing their aging energy and transportation infrastructure, things such as pipelines, refineries, powerplants, electric transmission lines, roads, bridges, tunnels, dams, etc. Given the reality of an energy constrained global economy, especially in the context of a long term decline in global net oil exports, it seems inevitable that—at best—our current energy and transportation infrastructure will only be partially replaced. And given this long-term expectation of partial infrastructure replacement, it seems likely that inevitable natural disasters like earthquakes/tsunamis, e.g., the one that just hit Japan, and hurricanes, e.g. Hurricanes Katrina and Rita that hit the US Gulf Coast in 2005, will only aggravate the infrastructure problem.

In the US, civil engineers have been warning about failing infrastructure for years. In 2009, they gave US infrastructure a “D” ranking, just barely above failing. Patrick Natale, the executive director of the American Society of Civil Engineers told CNN in 2009 that “The bottom line is that a failing infrastructure cannot support a thriving economy.”

Unfortunately, when we consider the probability of an ongoing decline in global net oil exports, we have to consider the predicament of failing infrastructure combined with a declining economy.

Of course, the conventional wisdom is that we can have a virtually infinite rate of increase in our consumption of a finite fossil fuel resource base, and most governmental planners in the US are still making plans to cope with a vast increase in US automobile traffic in future decades. The irony of this point of view is that there is already evidence that we can’t fully maintain, let alone consider replacing, the current road system. Already, many county governments in the US are being forced to stop paving county roads and turn them back to gravel roads. In Texas, in order to help balance the state budget, legislators are debating a proposal to completely eliminate state funding for county road maintenance.

However, when we look at the global economy from the point of view of a long-term decline in global net oil exports, it seems very probable that, to paraphrase a famous quote, what can’t be funded won’t be funded, and the funding problem will probably become most apparent in the short term in American suburbia and exurbia (very remote housing developments at great distances from job centers).

Jim Kunstler famously called American suburbia the “Greatest misallocation of resources in the history of the world.” In a number of books and lectures, Jim has described how the US had a pretty good and highly energy efficient urban system, up until immediately after the Second World War, when the long national nightmare of out of control suburban development really began.

I would argue that 1948 was really the inflection point, for a number of reasons. First, it probably is a good a starting point as any for the post-war boom in the US. Second, in 1948 the US slipped into net oil importer status, after serving as a primary source of oil for the Allies in the Second World War only a few years earlier. Third, 1948 marked the high water point for many urban electrified rail mass transit systems, e.g. in the Dallas/Fort Worth area in the Forties there were up to 250 miles of electrified streetcar lines, which began to be abandoned in 1948.

Donal Lang said...

The way I see it, the decline continues with everyone doing the best they can to keep 'The System' in place, until some catastrophe comes along to tip it all over the edge. By its nature, we don't know what that is; a storm, a flood, a political event (mid-east oil production, for example?), a terrorist attack, who can tell?

The big difference between city and country is resilience; in the country there's land, and food, and water, and people who know how to do stuff. In the city, all those highly specialised tasks people do have no reality outside of their glass box, and nothing to do with providing the basics of life without money changing hands.

The Fed has done a good job of kicking the can (for much longer than I could have believed possible) but sooner or later there'll be something....

Anonymous said...

I'm famous now.. ;)

Greg, I think you and I think much more alike then I care to admit sometimes with maybe the exception of our view of the markets.

I don't disagree with you that the process of drawing into the cities has already begun. In fact it began in earnest after the first world war and accelerated greatly under FDR during the depression.

And you're right we are at the tail end of it but I would guess we have another 10 to 15 years of it at a minimum (probably more like 30 years) unless the banking system collapses before then. And it may, although I think those in power will do anything to prevent it.

But you can stick a fork in suburbia. Its done and buried already. Those who live on the outer edges of it already know it and those who live further in will discover it in the next 5 years.

Some of what today is suburbia can be had for pretty low prices. It could and probably will make for great farm land over the next decade or two if you can get the price down right.. Longer term it might not be so great. But how long do any of us really live anyway. In an era of declining everything including health care and retirement vehicles I would bet we've probably seen peek average lifespan too or we will within the next few years.

Anonymous said...

Opps.. Anon 6:09 is

ChisinGa

Greg T. Jeffers said...

Chris:

We don't have 15 years of imported Oil (with the exception of Canada) left.

Why then, would anyone in their right mind make a 15 or 30 year commitment to buy a $2 million apartment in a mega city? Or even a $500k apartment?

I think the problem will come from the lack of tax base to support the infrastructure... think about the sewage of 20 million people.

Anonymous said...

No one is moving back to the cities guys! Do you really think it is cheaper to refurbish cities, then to stay where you are and buy more expensive gas? These foreclosed homes are being snapped up a little closer to suburbs around me like Livonia, Canton, and Novi for half the price as the selling price 3 yrs ago. That is a lot of extra cash to throw at fuel. The suburbs have stopped growing no doubt, but this was always going to happen just because of the demographic changes. Families are not growing as fast (barely at replacement rate in the black and white communities). The boomers are becoming old folks, which indicates less actives, which equals less energy usage making a home in the suburbs not that big of a deal. Going to the grocer down the street or the orthopedic doctors does not take much energy, so I don’t really see the suburbs dying off the way you all do, shrinking somewhat is a high probability though.

People like my grandparents and parents grew up in West Detroit and Redford and when the riots happened they ran from there, they sold their homes for nothing to escape. Maybe you need to be next to one of these dying cities to see the truth (Detroit for me). Are the suburbs actually losing any population? I doubt it. Many of the Florida and Phoenix were strategic defaults by speculators and people with second homes. Show me the stats that point to urban renewal outside of Miami, Boston, New York, maybe LA.

Dextred,
wont let me post under account

russell1200 said...

If you look at: Homer Hoyt, One Hundred Years of Land Values in Chicago (Chicago, 1933)- you will see that it is normal for the large swings in real estate values to be on the periphery.

My point is not to disagree with the point about the future demise of suburbia, but to warn against reading the wrong lesson into current trends.

Rural America is facing many of the same issues as the inner city did when jobs went away. It is not always the safe apple pie place that people imagine.

I think it is generally true that the inner cities within the United States have not really grown much. But we are taking about the "Greater City" regions, and the size of that area will fluctuate with available transportation. Hub and spoke (slow train) systems like New York Cities (but above ground) would be one possible (viable?) option to keeping at least the near suburbia intact.

westexas said...

Some pretty amazing numbers follow. France's per capita oil consumption in 2005, 12 BO/year per person, was BELOW US per capita oil consumption in 1949, 14.2 BO/year per person:

US Population (Census Bureau):

1949: 149 million
1978: 223
2005: 296
2010: 309

Oil Product Supplied to US (EIA):

1949: 5.8 mbpd, 2117 mb/year
1978: 18.8, 6862
2005: 20.8, 7,592
2010: 19.3, 7045 (est.)

US Barrels per year per capita:

1949: 14.2
1978: 30.8
2005: 25.6
2010: 22.8

Barrels per year per capita for France in 2005 (Natiomaster): 12 BO/year per capita

A pretty strong argument for Alan Drake's electrification of transportation proposals.

westexas said...

Some "Interesting" comments by Chris Martenson:

http://www.financialsense.com/contributors/chris-martenson/alert-nuclear-and-economic-meltdown-in-progress

Greg T. Jeffers said...

Dex:

I don't think anybody is moving anywhere!

People are where they are, and births, deaths, and family formation will dictate demographics, me thinks - not moving per se (with the exception of young people living in mega cities... i think they will go "home").

As Coal Guy once said on this blog:

When this is all over the houses will be here and the people will live in them".

To me, the question is: "where will me and mine thrive"? Since My old job at Bear Stearns, Bluestone, and Laidlaw does not exist anymore! I now live in small town America.

Greg T. Jeffers said...

Russel:

Forget rural America. I live on a small, family farm a 40 minute train ride from one of America's mid sized cities. Northern Montana? Central Nebraska? I'd rather beat my toes off with a ball pean hammer.

Think small town/small city America. Think river transportation, rail service, hospitals, and universities. I am not talking Grizzly Adams here.

Greg T. Jeffers said...

And 5 miles to our local "city"...county seat of a county of 100,000 people.

This city has been here for 200 years. There's a reason for that.

Anonymous said...

@Greg:

Yes that city has been there for 200 years, but it has been under siege once before, and it will be again. This time however, it'll come from the inside out. I'm sorry to be "baggin" on someone's town, but when you have %20+ of the population "skrillin' on da skreet" waiting for their checks, and that check doesn't come (or doesn't purchase anything because the monetary unit it comes in is devalued), they'll be walking the 40 miles out to your farm.

Anonymous said...

Suburbia is designed to fail! What is the life expectancy of a house or condo built in the last 30 years? Think about all of that pvc, stucco, and what-not. It is just not designed to last like homes build 100 years ago. Will the next generation have the resources to repair and maintain those houses? If the economy and employment keep going the way most of us think it will the answer is no so no after all of this shakes out much of the existing housing will not be livable and will end up being raised and the land hopefully will be used for farming or other small family businesses.

We are watching the death of globalization, oil and energy as we know it will never be the same. Black swans are turning up almost monthly : Japan, Australia, New Zealand, Gulf oil spill, Russia farming, India farming, China farming, Brazil farming, Another 100 by 10 mile oil patch in the gulf yesterday.

It is all degrading as we sit here an post. we have pasted the point were it can be saved and so we are entering a new era. It will be unlike any era in history.

Take care all,

s4r

oOOo said...

Have a read of this book: http://www.amazon.com/When-money-dies-nightmare-collapse/dp/0718302141

You can find cheaper versions on the UK amazon site. It details exactly how the farmers behaved when hyperinflation hit Germany and basically the farmers kept the food for themselves rather than trade for worthless currency. In the end roving hordes of famished townspeople headed to the countryside to find food. Hyperinflation is a different affliction than energy shortage, however there are surely some parallels.

Simply put if money is still worth something, the food should find it's way in the cities.