Monday, September 22, 2008

Whack a Mole

The Fed and Treasury's massive and unprecedented bailout of the financial industry has given momentary respite to the American economic system, but the assumption of over a trillion dollars in new public debt has now raised the specter of national insolvency and runaway inflation. The economy is still in decline and the only way that the government will "pay" for these bad loans is by printing money. Accordingly, the price of gold has jumped in the past week from the mid-$700's per ounce to $910, including a $45 per ounce jump today alone. The dollar has fallen over 2% against the Euro, meaning that we are effectively poorer relative to the world economy. In the meantime, oil has returned to being an alternative to the U.S. dollar - combined with the belief that an economy that doesn't outright collapse will again return absorb all available oil production - resulting in a rise in the price of oil as high as $23 to $127 bbl. Having prevented one crisis, we are fueling (no pun intended) the next crisis, particularly a reinflation of commodity prices and a corresponding drop in the purchasing power of Americans. Pick your poison - insolvency through financial collapse or commodity inflation.

While the drop in oil prices was interpreted by many as a passing of the insanity and the harbinger of a return to modest gas prices of previous decades, the fact remains that the long-term trend in oil prices is up - and way up. An article on today's Fortune/CNN website discusses oil investor and 2001 Cheney Energy Commission member Matthew Simmons educated view on the matter, who foresees a not-too-distant price of $500 bbl. If we think the economy is in danger of imploding due to bad debt, we ain't seen nothing yet. And, unlike our current situation, where salvation can come from overworking of government printing presses, there's no government program imaginable that can come up with a way to replace rapidly decreasing quantities of oil. Our military can expect to be working overtime - more than ever - to secure what overseas oil reserves are still underground, while we lazily and heedlessly continue our happy motoring paradise blithely unaware of the coming day when we won't be able to afford to fill our tanks with worthless dollars. Neither of our Presidential candidates dare speak the truth about this issue to the American electorate, with the one candidate who claims "country first" telling us that our future energy policy will be "drill, baby, drill" and the other candidate delusively pandering to the eco-Left by promising that we can run our military-industrial civilization on diffused sunlight and french fry oil. Neither is willing to level with the public that we have to change our behavior, because each knows that such a suggestion is the sure path to electoral defeat. Simmons, on the other hand - having no public office in his future - tells it like it has to be:

Simmons believes that a radical change in the way we live is inevitable. "We should basically be going back to creating a village economy, so that we really reduce the energy intensity of how we live," he says. "We need bigtime conservation, not feel-good conservation. Make things where they're used. You'll end long-distance commuting, and we have the tools to do that now with webcams. Grow food locally. Grow food in your backyard. If they're not commuting, people will have time to do that.

A democracy that cannot govern itself is arguably not a democracy at all, which makes the craven appeals that mark each candidate in the upcoming election less a symbol and accomplishment of our self-sovereignty than an indication of our enslavement to appetites over which we have no control. This latter condition was defined by the ancients as a condition of servitude, not liberty. Our leaders fear to tell us the truth, but their fear of electoral defeat pales in comparison to our unwillingness to level with ourselves.


Anonymous said...

I'm new here. I take it you've read Andrew Bacevich's latest? It's centered on these same themes. Reviewers I've seen in our most "august" (ha!) papers, the WaPo and the NYT, criticize Bacevich because he doesn't offer "solutions" -- revealing just how far out of their depth they are.

For about a decade now the neurotic, reality-averse state of our "democratic" (small 'd') politics has reminded me of the leadership paralysis and demoralization that finally did in the USSR in the 80's. Similarly, where they had the command economy, we have the subsidized-petroleum one.

One big difference: At least the Communists built housing and functioning transit systems in their cities. I've been there; though the towns are ramshackle, they're servicable. But we reached such a pinnacle of sophistication that we've thrown away whole cities. It's horrifying to hear politicians yammer on about how we've got to keep acres of exurban McMansions out of foreclosure, when the things were never economically viable from the start. I can't wait to see how my freedom-loving fellow "citizens" are going to react when that little reality hits home.

Tonight's news is that the Chinese are, apparently, about to cut off the credit line. Christ, I should've put in for Canadian residency decades ago....
-- sglover

Patrick Deneen said...

Welcome. I've read Bacevich's piece in the "American Conservative," drawn from the newest book. I've written previously about this for quite a while - scroll back and read some of my earliest posts, particularly "Peak Oil and Political Theory," parts 1-5.

I've also written previously about quite a number of the other points you make here. Particularly, see the post "What I Saw in Europe" written in August, 2007. It was soundly attacked by many "conservatives" who think that Europe is the seedbed of all that is bad in the world. Our level of self-satisfaction knows nearly no bounds, though that's beginning to undergo "revision."