Approaching a Corner

Things are going to slide, slide in all directions

Won't be nothing, nothing you can measure any more

The blizzard, the blizzard of the world has crossed the threshold

and it's overturned the order of the soul

When they said, 'Repent', I wondered what they meant

--Leonard Cohen, "The Future"

More ominous rumblings of late. When the United Nations weighs in on the possibility (probability?) of the American dollar's collapse...well, I can't help but wonder: is the shit about to be shat, and has the fan been unpacked, plugged in, and turned on?

Our inability, as a species, to think around corners would be funny if it weren't so tragic. Even now, there are those poo-pooing the notion that there could be a mass abandonment of the US$ as the world's reserve currency, because "what would replace it? The yen? The euro? Don't make me laugh."

The truth is that the entire First World, to varying degrees, is enmeshed in this economic predicament. As such, I can't imagine for a minute that anything would replace the US$. In other words, the world is probably going to get a whole lot smaller.

I likewise find it darkly hilarious that we rarely hear even a mumble about the real reason our economy is so unstable: oil. Or more precisely, the lack of it.

Our civilization has a giant oily blind spot. I have remarked before that if your eyes are open, you are looking at something made of, or with, oil; at the very least it was almost certainly transported to your line of sight by a machine running on, or made of, oil. We have put all our eggs in one basket, and the warp and weft of that basket is slowly unravelling.

It's easy to take energy for granted, so much so that we tend to forget its underlying role in economic growth and contraction. For twenty years we have crowed about the collapse of the Soviet Union without a shot being fired, variously attributing this capitalist triumph to Reagan, the Pope, and general Soviet incompetence. Oddly, the U.S.S.R had been largely keeping pace with the West for decades until it suddenly ans shockingly imploded. Most on our side of the world would never have imagined the Soviet Union would just up and go away, even as it was happening.

Only now do I see the communist collapse viewed through a Peak Oil lens. It makes a great deal of sense. Bear in mind that the Soviets operated in a (mostly) closed system where there was little trade in technology (and none in oil) with the West; the oil fields in the Bloc were worked with Soviet technology. When they exhausted their 'easy oil', the collapse of their economy was inevitable. Viewed in this light, the astonishing policy of glasnost suddenly comes clearer. The Soviets desperately needed an influx of new tech, and it's not easy to obtain such a thing from a sworn enemy. Of course, the sudden openness of a formerly ultra-secretive and propaganda-driven society had unintended consequences. But peak oil was likely a catalyst for change.

The price and availability of oil is easily correlated to the strength of the economy that runs on it. Both Reagan and Clinton presided when oil prices were historically low. Thatcher rode the bonanza of the North Sea to prosperity. It's no surprise the economy went down as oil prices skyrocketed in 2008, or that the 'recovery' is in danger from those same prices as we speak.

Caveat: I can't predict with any certainty what either the price of oil or the economy is going to do next. I've been expecting a collapse for four years that has failed to materialize; indeed, the stock markets have pretty much recovered from their lows three years ago. Now, the stock market still seems to me to be increasingly divorced from economic reality. Be that as it may, I expected hell to have broken loose by now. It's still rattling in its cage.

It's fair, I think, to suggest that we'll see the price of oil continue to rise, long term, interrupted by occasional shocks as the economy struggles to absorb higher prices for its energy inputs. The thing is, the Third World wants in on "our" prosperity. That's likely to drag the price of oil higher regardless of what's happening here. And that's what frightens me.

That and U.S. debt. I just don't see how the debt in the United States is in any way sustainable. At some point, the crisis currently affecting the Eurozone is going to metastasize. When that happens, the fecal matter is going to be blowing a hurricane. The aftermath: impossible to predict.

I can't see around corners either.