The recession is dead … long live the recession!

The world’s first peak-oil recession has come to a close, according to third-quarter numbers invented by the federal government. Apparently dumping trillions of dollars onto big banks, insurance companies, and automobile manufacturers interrupted the plummeting descent of American Empire. The stock markets skyrocketed expectedly. Predictably, so did the commodities markets.

In fact, the lifeblood of western civilization is bumping up against the “Goldilocks” limit of $80/bbl, as I predicted would occur under economic growth. A minimum price of $60/bbl allows oil suppliers to make enough money to justify new projects, so per-barrel prices between $60 and $80 are supposed to be “just right,” even though today’s price is four times higher than the 20-year average. The “Goldilocks” minimum price of $60/bbl matches the “Goldilocks” maximum price of 2005. As recently as 2003, OPEC had an official “Goldilocks” zone between $22/bbl and $28/bbl. For a little historical context, consider this: In 1969, the U.S. refused a ten-year, locked-in offer of $1/bbl oil from the Shah of Iran because the price was too high.
Among the many consequences of passing the world oil peak: the days of cheap inexpensive food are behind us. And, too, every time the inflation-adjusted price of oil tops $80/bbl, we head into a recession. Most commentators think Saudi Arabia will continue to bail us out, but the kingdom clearly has reached peak extraction. Thanks to renewed growth in the world’s industrial economy, led by China’s 9% annual growth, we’re headed for triple-digit oil in the short term, and double that by 2012. If you thought $147 oil put the brakes on economic growth, it’s not too tough to imagine a full-scale meltdown of the industrial economy with $200 oil. We can hope $150 oil next year will do the trick, rapidly crashing the stock markets and transforming globalization into relocalization.
When localization is back in style, and globalization is dead, we won’t need to worry about politicians ignoring — and even mandating — torture in the name of greed. Not to mention a host of other nasties. That’ll be a nice change.
Maybe, just maybe, completion of the imperial decline will lead us to real wealth instead of encouraging us to pursue the phantom wealth of money, as described by David Korten:

So what is real wealth? We might say it is anything that has a real intrinsic value: land, labor, knowledge, food, education.
Most valuable of all are those forms of wealth that are beyond price: Love, a healthy, happy child, a job that provides a sense of self-worth and contribution, membership in a strong caring community, a healthy vibrant natural environment, peace–none of which find any place on Wall Street balance sheets or in our calculations of GDP.
Pull back the curtain, as the financial crash has done, and the truth is revealed that Wall Street acquires its power by destroying real living wealth to create phantom financial wealth. Wall Street is more than immoral, it is an institutional manifestation of evil.

I don’t think we will overcome the ideology of evil (i.e., empire) by nibbling around the edges, as most people believe, or even by restructuring the economy in the ways Korten suggests. For one thing, the people who benefit from the current economy are the ones who would need to take leadership as we make the necessary changes, and I don’t think they’re interested.
In my mind, at least, and even in my dreams, that leaves one solution: the industrial economy has to run its course. As I’ve indicated before, that’s the route we’ll need to save what’s left of the living planet, including our own species, as well as restoring our long-lost humanity.
This entry is permalinked at Energy Bulletin and Counter Currents.

Comments 9

  • Something is definitely bass-ackward. The Federal Government is supposed to be funded by taxing the real economy. Instead, the Federal Government is funding what is left of the real economy by ignoring taxation and funding through borrowing from future generations. Instead of taxing and spending, we are borrowing and spending money that does not belong to us, but which will put our children and grandchildren in debt to foreigners for generations. When are our savvy young intellectuals going to get the Big Picture?
    In my mind, a big turning point will have been reached when consumer credit of the generic Visa Card type goes kaput because lenders figure out they cannot get paid back. Even free government money becomes too expensive when loaned for no returns or inadequate returns. When Joe Sixpack cannot buy beer and cigarettes and baby formula on his Visa Card and his tummy starts to flatten and his lungs start to burn from fresh air, the feces will hit the blower.
    And it could happen very soon.
    But other dynamics may emerge simultaneously, or near so. If farmers next spring cannot borrow to buy seed, we will spend all summer wondering how to eat freshly printed dollar bills.
    If we bomb Iran and upset the Chinese and Russians, we might face assymetrical warfare at a scale that could make Obama want to return to community service, or he may quit his day job and accept an offer to be the new chairman of Goldman Sachs.
    Almost anything could happen, with the exception of a recanting by Glenn Beck with the apologetic “What was I thinking?” because apologies and/or thinking are beyond that talking head’s capabilities.
    Fire and brimstone are what lie ahead. Hell and Australia will be inextinguishable, except there will be beer in Australia as long as the rivers run (which may not be long). Matt may want to immigrate, but he will not be allowed into Texas (my home state) or Louisiana without proof of prior gun ownership. Sorry Matt you are going to have to take your chances with sunburn or drowning in coastal urban submerged Oz. No worries.
    Stan Moore

  • The economy grew by 3.5% in the last quarter and I can fly to the moon.Both statements are equally valid.That is why the stock market is tanking today,giving back yesterdays gain of almost 200 points in
    the Dow and much more.
    This occured after Prof Em Guy took Wall Street to task yesterday–and proves once again that this is the world’s preeminent and most influential web blog.
    Marc Faber,one of the few sane voices in the world of the markets summed it up best on CNBC,”I wouldn’t rely on GDP figures,you can manipulate them”.
    Cognitive Dissonance has finally prevailed on Wall Street.

  • reference link =
    Here is a very good essay by one of my favorite writers (a red-neck intellectual!) writing from Mexico and observing the cultural differences between “th=em” and “us”. It seems particularly relevant in these times of economic do=wnturn to examine these differences in light of the reality that some of us=Americans point fingers at “them” and decry their population numbers while=simultaneously trying to tempt them to consume more, produce more and damage the planet as much as we do on a per capita basis, while stressing themselves even as we do.
    I am not a Christian, but I do like to think that the meek will inherit t=he earth one day.
    Stan Moore

  • In my opinion, a large pivot point will have been got to when consumer credit cards fail because lenders in the government have come to believe that they will not be reimbursed on their loans. Even free government money becomes too expensive when loaned for no returns or inadequate returns, and this is a critical law of the financial world which is waiting to be broken.

  • Stan,
    Thanks for the Joe Bageant tip. Reminds me of a piece I just read in a two year old “Rifle” magazine (of all places) by John Barsness in which he is describing the place he lives (eastern Montana) and comparing it and other parts of “flyover” America to what’s considered normal. Much of what he says sounds a lot like what Bageant was describing.
    Michael Irving

  • Our country was also hit hard by the Economic Recession. At least we are seeing some signs of economic recovery now. I hope that we could recover soon from this recession.

  • Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.