“Be kind, for everyone you meet is fighting a hard battle” - Often attributed to Plato but likely from Ian McLaren (pseudonym of Reverend John Watson)

Monday, April 06, 2009

I've stopped reading James Kunstler

Yes, I've done it. James Howard Kunstler, for those who don't know, is a journalist who's written for Rolling Stone Magazine, among others. As always, the most authoritative source of information about him can be found at Wikipedia, the source of all truth (or truthiness), here.

Kunstler's schtick, and I use the word quite intentionally, is that we're headed to hell in a hand basket. He covers so much ground that a small post such as this really can't do it justice, but fundamentally suburbia is a waste of resources, he doesn't care for fried foods, strip malls are appalling, big box stores worse, the automobile is doomed, airlines will be history, stocks worthless, the U.S. dollar not worth the paper upon which it's printed, "big agriculture" is doomed, NASCAR fans have low IQ's, nearly everybody is shallow and self-indulgent, etc. Most of these things are are either symptoms or causes (or both) of peak oil and living on credit.

Fundamentally, Kunstler's complaints are always the same, or at least extremely similar though a little topical, and his recommendations are few and simple. We need to rebuild our intercity rail transport system, abandon suburbia and the automobile, farm close to where we eat with dramatically less "inputs," and let broken things (the banking system, the so-called "warehouse on wheels" system, the capital allocation system, the airline system, among others) crash and burn. He's written several fictional and non-fictional books on these topics, such as "The Long Emergency," "The Geography of Nowhere," and "World Made by Hand."

Now, please don't misunderstand, I agree with many of Kunstler's positions and quite a few of his recommendations. As regular readers will know, I've expressed views along these lines and still hold them. But I do reject his strident tone, his incessant badgering and finger pointing, and the repetitiveness of his screed. There's a place for that but it's not everyplace.

To impart the flavor of his writing, Kunstler's column is entitled "The Clusterfuck Nation Chronicles." He uses "Cheez Doodles," the "Banker Boyz," Salad Shooters, and NASCAR as his metaphors for the descent of the nation into hopeless and mindless consumerism and rampant something-for-nothing thievery and grift. He comes across as smug and self-righteous, and clearly thinks he's the smartest guy in the room, no matter the room. He has quite a following, he's often quoted and most people in the peak oil community know of him and read him.

Kunstler also made similar predictions of catastrophe for Y2K and, as I wrote, Y2K WAS a disaster. It just wasn't the kind of disaster he anticipated. As usual, he rationalizes the reasons.

I also detect just the slightest whiff of hypocrisy; he's recently blogged about his trips to Aspen, CO and to Johannesburg, South Africa. He didn't bicycle to Aspen or take a sailboat to South Africa. But I'm sure it was for a good cause.

OK, I get it. We're short sighted, narrow minded, selfish, lazy, arrogant, self-indulgent fools. That's what Kunstler has taught me. I think I've learned all I can from him and I'm moving on. Anyway, John Lennon said it better.

Sunday, April 05, 2009

Debt is a commodity too

I've been reviewing some of my posts (self-indulgent but, in a way, gratifying too) and they caused me to wonder. I've complained and I've listened to others complain that the United States is getting out of the business of producing things. We're running out of many natural resources (uranium, crude oil, iron ore, etc.) and we've decided to outsource much of our manufacturing. And yet we have the highest standard, or at least among the highest standards, of living in the world. Certainly we have, by far, the highest per capita rate of energy usage which is a reasonably good proxy for standard of living. The things comprising this standard aren't free, and since we aren't selling manufactured products or raw materials, what are we exchanging?

The answer is obvious, we're exchanging debt. But what is debt? It's the right to collect something of value from us at a future time or at future times. In that sense, it's a commodity. When I buy an "oil future" I exchange cash (not even the actual amount of the quantity of oil I'm committing to purchase times the unit price at which I'm committing to purchase it) for the right and the obligation to accept delivery of the oil at a fixed date and price. In this way, U.S. debt can be regarded as a "production future." China, for example, exchanges yuan for the right to receive dollars at or over a future period of time. The value of those dollars may rise and fall.

U.S. debt's value as a commodity is tied to our ability to, at some future time, produce or extract things of actual value. In this way, it's also like oil. We don't want oil to have it, we want oil to use to do things. The Chinese (and the various other governments, NGO's, pension funds, etc.) buyers of our debt want to use it to do things as well. Given that our ability to extract natural resources, manufacture durable and non-durable goods, etc. is declining, what would these holders like in exchange for the debt that they own?

One thing is intellectual property, but this is quite risky since any such property is easily copied. Ask Sony, the RIAA, any drug manufacturer, Microsoft, etc. One might say the holders of the U.S. debt could want dollars, but only if those dollars can be exchanged for things with some intrinsic utility.

For this reason, U.S. debt is a commodity whose value is dependent upon the perceived ability of the United States to produce a surplus of something of value. It's been amazingly resilient considering the amount of the commodity already produced and the trends for our ability to produce things of value. It's hard for me to see how perception of the ability to exchange U.S. debt for things of real value can withstand the facts on the ground.