Peak retirement

As members of America's baby boom generation come to retirement age, they are experiencing an unwelcome confluence of events that is already causing many to postpone or scale down plans for retirement. The swoon in the world's stock markets, the crash in housing prices, low interest rates that reduce income from savings accounts and CDs, and rising costs for basic necessities such as food and fuel are all bedeviling current and would-be retirees.

In the past these circumstances have been viewed as temporary problems that would pass with the inevitable turn of economic cycles. But with the evidence for a nearby peak in world oil production growing--see David Cohen's excellent piece "Peak Oil is a Done Deal" which suggests a peak around 2011--it's possible that many of the adverse circumstances now beleaguering existing and would-be retirees will become long-term fixtures of the economic landscape. In short, we may be seeing peak retirement as those who are expected to retire in coming years find it increasingly difficult to do so.

Let's examine those adverse circumstances to see why this could be the case. For most people real estate investments really mean the homes that they live in. Of course, the appreciation in home prices until recently has been nothing short of spectacular. But now, real estate prices nearly everywhere in America appear to be in freefall. While the S&P Case-Shiller Home Price Index indicates a decline of about 14 percent nationwide in the last year, some the hardest hit areas are those with high concentrations of retirees such as Phoenix (-18.8%), Las Vegas (-22%), San Diego (-26%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).

Perhaps most at risk are homes built in the outer ring suburbs or in the middle of cornfields which are the furthest from retail or employment centers. An oil peak implies continuing high energy prices that will make such homes less and less attractive over time as the cost of commuting to work and to retail centers explodes. And, no matter where one lives, those high energy prices will add substantially to maintaining a home as both heating and cooling costs rise.

Many retirees want to live in condominiums, rental units or retirement communities where much of the daily maintenance is done by others. But to do this they must often sell their homes first. With home prices plunging and the inventory of unsold homes growing, however, they are having to wait. Ultimately, they may be forced to accept much lower prices than they are hoping for.

Since the presumed reservoir of wealth that is the family home is drying up, many retirees are hoping to find salvation in their retirement savings. Here too the effects of the approaching oil peak are beginning to show. Most of those with various retirement vehicles such as 401K plans and IRAs or with substantial savings outside of these vehicles were advised that the best investment for the long run is stocks. And, until now that has largely been the case.

But both the housing collapse and the high price of energy have recently helped to put stocks on U. S. exchanges into bear market territory. A nearby oil peak implies very slow economic growth for the world as a whole and perhaps economic contraction for many years to come after the peak occurs. This presumably will be accompanied by high inflation as energy prices remain high or go higher. And, of course, high energy prices will feed through into inflation in virtually every other part of the economy. That's because almost nothing can be produced or provided without expending energy from some external source and especially without using oil in some form.

None of this can be good for stocks in general except those linked to rising prices for everyday necessities such as food and fuel. It doesn't mean that stocks can't rally from time to time or that the world economy won't be able to manage spurts of growth occasionally. But economic growth will become increasingly difficult to achieve as first oil, then natural gas, and then coal peak. Unless there is a remarkable political turnaround that puts the whole world on a crash program to build a renewable energy economy, the trajectory for energy supplies looks increasingly like it will begin to trend downward in the decade ahead.

The global economy was built on the premise of cheap, ever-increasing supplies of energy. Energy is really at the root of true wealth. Without energy no resources can be extracted from the Earth or subsequently refined, manufactured into products and shipped to their destinations. So dependent has our modern agriculture become on oil and natural gas that without them it would be impossible to feed the 6.7 billion people on the planet unless we put many more of them to work as farmers, planted many more acres including those available in and around cities, and reduced the amount of feed given to animals. Absent increasing energy supplies, the value of financial instruments such as stocks and bonds that represent claims on the production of goods and services in the economy will become increasingly impaired. Ultimately, what we call money in the modern economy is nothing more than the ability to command energy to do what we want it to do.

All this implies that except for those (probably very few) retirees who have put their savings in investments that benefit from rising energy and food prices or in inflation hedges such as precious metals, most will find their savings inadequate for a comfortable retirement. Many may not be able to retire at all without severely curtailing their consumption.

There are, of course, the payments from Social Security that retirees receive. Some also have company or public employee pensions that pay them a monthly amount instead of a lump sum at retirement. But these streams of payments are dollar-denominated for American retirees, and with the financial condition of the federal government deteriorating daily and the huge trade deficits that have been around for decades, it is doubtful that the dollar will hold its value. Those Americans living overseas in countries with rising currencies who receive pension payments in dollars already understand this only too well.

But it is all currencies which are losing value against the goods and services we need every day. We could, of course, merely be in another cyclical downswing in economic activity and another cyclical upswing in inflation. The era of long-term energy stringency may lie further in the future.

However, mounting evidence concerning future energy supplies and the unfolding developments in the energy markets suggest that a peak in oil is near. And, if this is, in fact, the case, we can expect a peak in the number of people who can afford to live out their old age without working. In other words, peak retirement may be just around the corner.

This poses another problem. In an energy-constrained future, the economy may not be able to provide jobs to all who want them. That means that even those retirees who want to work to supplement their incomes may have a hard time finding as much work as they would like or, in some cases, finding any work at all.

Could sustainability lead to an authoritarian future?

Those who imagine humans eventually returning to agrarian societies also often imagine that such societies have the potential to be much more democratic and egalitarian than our current world. But, among those who imagine what I'll call a sustainable industrial future, there is little discussion of future political arrangements. It is implied that we will continue with nominally liberal democratic governance in North America and Europe. (It's hard to see, however, how that model will apply to say, the governments of central Africa.) But a sustainable industrial future, if it can be achieved, might require the regimentation of the individual beyond anything we have so far experienced.

One need look no further than the issue of population to realize that this assertion is not overblown. In any sustainable society population cannot grow indefinitely. It must be stabilized at some point. How then to stabilize it? Normally, nature manages this task by making the death rate equal to the birth rate. The question that should concern us is whether we want to allow nature to match high birth rates with high death rates or whether we'd like to keep both birth and death rates low. Presumably, one of the principal advantages of industrial society is that it is able to provide a healthy longevity to many more people. This implies that to stabilize the population we must achieve birth rates low enough to match our low death rates.

The right to bear children, however, is regarded as a fundamental human right not to be interfered with by the state. And, the choice not to bear children is also regarded as a right in many countries. But if the choice is left up to the individual, there is no guarantee of a stable population. How then should we go about matching birth and death rates? Harrison Brown, writing to us from the year 1954 in his book, "The Challenge of Man's Future," suggests a method that would strike us as a crass violation of the rights mentioned above:

Let us suppose that in a given year the birth rate exceeds the death rate by a certain amount, thus resulting in a population increase. During the following year the number of permitted inseminations is decreased, and the number of permitted abortions is increased, in such a way that the birth rate is lowered by the requisite amount. If the death rate exceeds the birth rate, the number of permitted inseminations would be increased while the number of abortions would be decreased. The number of abortions and artificial inseminations permitted in a given year would be determined completely by the difference between the number of deaths and the number of births in the year previous.

But that wouldn't be all. If we are to maintain a worldwide sustainable industrial society, we will need to control population across current borders. If we don't, many members of overpopulated societies will soon be knocking at our doors asking for assistance or even entry.

Brown also suggests that such control over reproduction might be used to slow down the deterioration of the human species. This has occurred in industrial society because humans are no longer subject to natural selection to the same degree that they have been in the past. Those who are healthy and able might be encouraged through incentives to have several offspring, while those who have deficiencies, say, of sight or hearing or mental ability might be discouraged. The problem, he notes, is in deciding what really constitutes "fit" or "unfit" and overcoming our revulsion to such a eugenics scheme. Still, he adds, when one considers the bald evolutionary facts, it behooves human societies, if they want to remain resilient in the face of changing conditions on Earth, to somehow replace nature's cruel hand in pruning the so-called "unfit" with something less drastic. It's that or face eventual extinction.

Brown acknowledges that none of this will seem acceptable to the vast majority of his readers. But, he is concerned that unless population stability and other problems are addressed head on, arrangements that are far more restrictive and objectionable than the ones he proposes may be implemented in their place.

Already many of you who are reading this are probably squirming, and we are only getting started down the path of regimentation. In relating Brown's ideas, I am not advocating them. But I recognize that so much of the freedom we now enjoy is premised on access to increasing amounts of energy and other resources. This surfeit reduces the frequency of conflict over resources and makes sharing resources more palatable. Our abundance makes us less inclined to object, for example, to the roughly 80 million new mouths the world needs to feed every year.

There is also a second critical limit on human behavior in the sustainable industrial society. We will not be free to increase our consumption at will. There is, of course, the possibility that people will try to circumvent such a restriction; but to the extent that this occurs, others in society will have to consume less to stay under acceptable limits for consumption that keep the society in balance with the natural resources available to it. It is possible that efficiencies in resource use will allow some growth in perceived consumption, that is, increased satisfaction of wants with the same amount of throughput. But infinite efficiency is not possible and so at some point increased satisfaction of wants will presumably have to cease, at least satisfaction based on boosting the quantity of matter and energy consumed. (Spiritual and perhaps some social satisfactions may not have similar limits.)

Since both production and consumption will have to be carefully controlled, the necessary organization of a sustainable industrial society suggests considerable centralization of governance and regimentation of daily life.

While this rather unattractive outcome is not inevitable, it seems all too likely to materialize if we succeed at making the transition to a sustainable industrial civilization. Those who propose that we can and will make such a transition need also to contemplate what institutions will be required to govern such a society. How might we retain important freedoms that we now enjoy such as freedom of expression and freedom of association while acknowledging that increased control of human activity will be inevitable under such circumstances? And what of love and sex in a world of tight control over reproduction?

Perhaps, you will say, we can inculcate self-restraint in the future denizens of the sustainable industrial society, and this will serve in the place of regimentation. You will certainly be able to do this with some people who find self-restraint a virtue. But, what will you do with those who will not or cannot restrain themselves from violating the principles of sustainability?

As Garrett Hardin, author of "The Tragedy of the Commons," points out, it takes the cooperation of all to maintain the viability of the commons; and that's what a sustainable society must be considered, one big commons. But it takes only one person acting on pure self-interest to bring destruction to the commons by forcing everyone else to overtax it or lose out in the competition over resources.

Those who are selling us the bright green sustainable industrial future must tell us how they plan to regulate the behavior of humans in this future. It is either that or give up any pretense that what they are selling is, in fact, sustainable.

Which future should we prepare for, industrial or agrarian?

The more Harrison Brown talks about the future of industrial society, the more unlikely it seems that it has a future. Brown is the author of a seminal book entitled "The Challenge of Man's Future" which outlines the ecological predicament we find ourselves in today. Perhaps the most remarkable thing about Brown's book is that it was published in 1954 long before our predicament had taken its full shape and when there were only about 2.6 billion people on Earth. (The current world population is estimated to be 6.7 billion.)

Brown's aim was to limn out the obstacles that lay ahead for industrial society and to suggest a course for navigating them. He concluded that the most likely trajectory for industrial society was a reversion back to agrarian society. Only by maneuvering ever so carefully through the narrow passage to sustainability would industrial society be able to continue for an extended period, say, many centuries or millennia.

Brown's views may seem strange to the modern ear accustomed as it is to hearing how thoroughly we have subdued nature through technology. But even back in 1954 it was already well-known in scientific circles that 1) we would one day run short of finite fossil fuels, 2) we were working our way from high-grade metal ores down to low-grade ores, and 3) industrial society would ultimately be faced with the task of obtaining its required metals and other basic resources from nothing more than air, rock and seawater. The key to making a successful transition, Brown reasoned, would be finding the necessary energy since if one has enough energy, getting needed materials from the ultra-low-grade resources of air, rock and seawater would be feasible.

Of course, he realized that recycling would have to be enforced to keep as much of the previously extracted metals in circulation and that certain destabilizing dangers had to be avoided. Chief among them was nuclear war which he believed would so undermine the complex systems of industrial society that those systems might never recover. He also recognized that if the whole world were to industrialize--he made special mention of India and China--then population would have to be stabilized so as not to overwhelm the ability of the Earth to provide the necessary food and other materials.

He describes the problem this way:

Once a machine civilization has been in operation for some time, the lives of the people within the society become dependent upon the machines. The vast interlocking industrial network provides them with food, vaccines, antibiotics, and hospitals. If such a population should suddenly be deprived of a substantial fraction of its machines and forced to revert to an agrarian society, the resultant havoc would be enormous. Indeed, it is quite possible that a society within which there has been little natural selection based upon disease resistance for several generations, a society in which the people have come to depend increasingly upon surgery for repairs during early life and where there is little natural selection operating among women, relative to the ability to bear children--such a society could easily become extinct in a relatively short time following the disruption of the machine network.

In saying these things, Brown is not at all deploring industrial society which he believes provides substantial material benefits for humans and which frees them from the drudgery of much manual labor allowing them to pursue other interests. But, by stating the bald ecological facts, he demonstrates that such a society could easily be lost.

Of equal concern to him was that efforts be made far enough in advance to prepare for what he believed will be an inevitable transition for industrial society. Below he describes what is now sometimes referred to as the rate-of-conversion problem:

Continuance of vigorous machine culture beyond another century or so is clearly dependent upon the development and utilization of atomic or solar power. If these sources of newly applied energy are to be available in time, the basic research and development must be pursued actively during the coming decades. And even if the knowledge is available soon enough, it is quite possible that the political and economic situation in the world at the time the new transition becomes necessary will be of such a nature that the transition will be effectively hindered. Time and again during the course of human history we have seen advance halted by unfavorable political and economic conditions. We have seen societies in which technical knowledge and resources were both present, but where adequate capital and organization were not in existence and could not be accumulated sufficiently rapidly.

Today, it is all too easy to see the pattern which Brown feared developing. For example, we know how to build breeder reactors which could supply us abundant energy for centuries and perhaps much longer; but we have not pursued perfecting such reactors, in part, because they pose a nuclear proliferation danger. We were on our way to deploying wind and solar power on a broad basis in the late 1970s when fossil fuel energy prices fell dramatically due to vast new supplies. Incentives for deploying wind and solar were soon curtailed or withdrawn, at least in the United States. The public seemed content with the new low energy prices, oblivious to the dangers that lay ahead.

It is clear today as oil prices hit all-time highs on a regular basis that we need alternatives. And yet, the U. S. Congress cannot seem to pass a bill that will continue incentives for alternative energy such as wind and solar. (The dispute seems to be mostly over how to fund those incentives.) In addition, there is even a significant lobby for moving the economy toward greater reliance on coal, another finite fuel which itself may run out sooner than its advocates believe.

The complex systems which Brown feared might crumble are starting to crumble. The world's airlines are on the verge of a rash of bankruptcies. Routes are being dropped and effective fares are being increased even as the traveling public pulls back from its usual travel plans. Truckers from the United States and Europe have been protesting high diesel prices with many small trucking firms going broke. Perhaps society could do without air travel for pleasure. But given the current infrastructure could it function without a viable trucking industry?

Perhaps most worrying is the world food system which seems unable to keep up with demand as many of the industrializing nations of Asia import more and more food. For those at the bottom of the economic ladder, however, the recent dramatic rise in grain prices will be nothing short of catastrophic if it persists.

The record so far seems to indicate that we are not taking the necessary steps far enough in advance to avoid worrisome dislocations in our society. Even worse, the main cry so far has been for more drilling of oil and natural gas, as if making us more dependent on fuels which will soon be in decline is an answer to our predicament.

All of this is a long way of saying that it just might behoove us to focus on the single most important issue facing us in a transition away from our current industrial society: food. Teaching people who know nothing about growing food how to do so and then creating places for them to grow some could be the single most important task facing us. If the technologists and policymakers somehow navigate the narrow passage to a sustainable industrial society, we will be thankful. But we will almost certainly have to grow more food locally in any case because of energy constraints. And so, any effort put into mass agricultural literacy will not have been wasted.

But if human civilization devolves into a set of primarily agrarian societies, the knowledge we have gained so far about plant breeding, soil chemistry and fertility, natural pest control and myriad other things that would be useful in a post-fossil fuel agricultural regime will be critical to human survival and happiness.

Free speech and the fate of humanity

We all know that even in the United States the guarantee of free speech has limits. The Supreme Court long ago said that no one has the right to endanger his or her fellow citizens by, for instance, falsely yelling "fire" in a crowded theater. Such acts of speech are said to pose "a clear and present danger." James Hansen, perhaps the most respected climate scientist on the planet, thinks that the fossil fuel lobby and its disinformation campaign about global warming may pose a similar threat.

Hansen, speaking before the U. S. Congress last week, said that the CEOs of fossil fuel companies should be tried for "high crimes against humanity and nature." He said they deserve this fate because they know full well that continued burning of fossil fuels threatens the stability of the climate and with it civilization. Yet, they purposely confuse the public to forestall the day when limits will be placed on carbon emissions from such fuels.

(A later decision by the U. S. Supreme Court narrowed the test for prohibited speech to that which incites or is likely to incite "imminent lawless action," and so there is absolutely no danger that fossil fuel industry executives will ever be prosecuted for what is now legally regarded as protected political speech.)

Why does Hansen speak in such seemingly hyperbolic language? He does so because his own research suggests that the highest advisable level of carbon dioxide in the atmosphere is 350 ppm. The current level is already 383 ppm and growing by 2 ppm each year. We have passed a critical point in the global warming saga, and we must now retrace our steps. Hansen therefore believes we must actually find ways to reduce not the growth of emissions, but to reduce emissions altogether to a point that will allow greenhouse gas levels in the atmosphere to fall.

This he says must happen quickly, and the reductions must be drastic or we will face catastrophic consequences, ones that will become unstoppable long before they actually occur because of the delayed effects of carbon emissions. These consequences include worsening floods and droughts, much higher shorelines, massive extinction of species, possible rapid climate shifts in parts of the world, and other problems that will threaten the food, water and general well-being of all humanity.

But public discourse on global warming is being muddied. Here in the United States it is a matter of faith that the cure for faulty free speech is more free speech of the factually correct kind. It is the only response truly anticipated by the U. S. Constitution. There is unfortunately the slight problem that the fossil fuel industry has huge sums of money with which to pursue its freedom of speech in the media. There is another problem in the case of global warming, namely urgency.

For comparison let me offer a brief recap of an historically important issue in American history. It is a great injustice and disappointment that women did not obtain the right to vote after the Civil War along with freed male slaves. It was a disappointment because so many women had worked so hard for abolition. It took another half century of advocacy before they were finally granted that right. While no one should minimize the struggle for woman's suffrage in the United States, it was a struggle--however painful and filled with injustice--that could wait for the principles of free speech to be vindicated without endangering all of humanity. But the amplified free speech of the fossil fuel industry's disinformation campaign does indeed threaten all of humanity. And, the outcome of the struggle between the forces of change and reaction cannot wait 50 years to be resolved on the side of right. By then all the worst damage will be inevitable.

There are so many other issues which fit into this category as well: the depletion of fisheries; the destruction of soil; the peaking of oil; the catastrophic loss of biodiversity due to logging, modern industrial agriculture and urban development; the poisoning of the water, air and food supply with toxic chemicals; and the depletion of precious fresh water. Most of these issues are interlinked with global warming and with each other to one degree or another.

As the clock ticks down to tipping points for each of these problems, will the cherished principles of an open society be challenged? Will those principles continue to be used to delay or water down action and thereby threaten the lives and livelihoods of billions? Or will those principles be modified in some way that allows free speech, but limits the amplified kind that huge sums of money can buy in the modern media?

If we had 50 years to debate all these problems, I am certain that the side espousing sustainability would win. Given the urgency with which I believe we must address these issues, is it an acceptable outcome to be able to say "I told you so" at some future date as modern society crumbles in the face of these challenges?

I don't claim that the issue of free speech and the enemies of sustainability is an easy one for those of us who embrace the notion of an open society, that is, a society where no one is presumed to have a monopoly on truth and where we work together sometimes even through the violent clash of opinions to advance the search for truth. What the ecological and resource challenges we face now call into question is whether an open society is capable of making the kind of change we need to make as quickly as we need to make it.

One could argue that ours is not an open society, but rather one dominated by corporate power and that it is corporate power that must be reined in as part of the process of moving toward a sustainable society. But once again we are faced with the time problem. How long will it take for the normal processes of a nominally open society to bring corporate power to heel? 10, 20, 50 years?

The path for most people interested in creating a sustainable society is to start creating one. But will the powers which are working against such a society make those efforts moot? And, if that is the case, with so much at stake, is there a third way of addressing free speech that preserves the basic principles of an open and democratic society, but still allows for those who have the evidence and the logic on their side to prevail in time to avoid the worst?

So far, I have yet to find such a way that does not destroy the very open society I seek to preserve.

Move people, not metal

My latest column on Scitizen entitled "Move People, Not Metal" has now been posted. Here is the teaser:

Our current transportation system uses enormous amounts of energy primarily to move the weight of vehicles which transport passengers and freight. Bill James thinks we can improve transportation energy efficiency by an order of magnitude if we focus on moving the weight of passengers and freight instead of the weight of the vehicles that carry them....Read more

Summer Solstice Break - No Post This Week, Common Dreams Accepts a Piece

I'm taking a short break from posting here and plan to post again Sunday, June 29. I expect my column on Scitizen to appear shortly and will provide a synopsis and link as I usually do. Also, yesterday Common Dreams accepted a slightly condensed and retitled version of what I posted here last week.

Clever and deceptive: API's new ads

The high price of oil has given birth to a thousand solutions. They include such fantasies such as running cars on water and perpetual motion machines. And, they include sensible ideas for quickly cutting the consumption of oil and moving to electricity to power most of our transportation fleet. The American Petroleum Institute (API), the oil and gas industry's lobbying arm, has its own proposals, of course, and not surprisingly they include opening up protected public lands and U. S. coastal areas to drilling.

That API's ideas might be more appropriately grouped with fantasy solutions is illustrated by the organization's own recent television advertising campaign. The campaign includes four separate ads. Two of the ads offer a defense of oil industry profits. One touts the broad ownership of oil company shares by pension funds and implies that viewers' pensions might very well be benefitting from the superb financial performance of the energy industry. The other ad suggests that oil companies really don't make that much money when compared to other industries in America. This would presumably make oil companies poor investments for one's pension fund. But no matter, to avoid confusion the two commercials are probably never scheduled to run back to back.

The remaining two spots deal with the energy crisis. In one a professionally-dressed woman tells us that "we have substantial oil and natural gas resources right here," as she walks across a map of the lower 48 states. "Enough to power 60 million cars and heat 160 million households for 60 years," she continues. The reason for her optimism is that "with advanced technology and smart policies, together we can secure America's energy future."

It's hard to put footnotes into a 30-second spot though API had no trouble footnoting the U. S. Energy Information Agency and the International Energy Agency when it wanted to make the point that 45 percent more oil and gas will be needed by 2030. Let me propose some of my own footnotes. Here is the full text of the ad with my footnotes added below:

Oil and natural gas powered the past. But the future? Fact is a growing world will require more, 45 percent more by 2030 along with greatly expanding alternatives. We have substantial oil and natural gas resources¹ right here [NARRATOR STROLLS OVER MAP OF THE LOWER 48 STATES].² Enough to power 60 million cars³ and heat 160 million households for 60 years.⁴ With advanced technology and smart policies,⁵ together we can secure America's energy future.⁶ Log on to learn more.

(1) Only of fraction of those oil and natural gas resources are ever likely to be recovered for both economic and technical reasons. There is no guarantee that those that we do recover will come out at the rate we want them to.

(2) Includes all offshore areas such as Cape Cod, Hilton Head, Miami Beach, the Gulf of Mexico and the California, Oregon and Washington coasts. Also included are all wilderness areas of Alaska (not pictured).

(3) 60 million cars sounds like a lot, but that represents only a fraction of the more than 250 million highway vehicles currently registered in the United States.

(4) The "60 years" claim is theoretical (and perhaps mere fantasy). See footnote 1. Also, powering cars and heating homes assumes that the highest and best use of oil and natural gas is to burn them notwithstanding their high value as feedstocks for thousands of chemicals and others products that are critical to the modern world.

(5) "Smart policies" is shorthand for opening up all public lands and offshore areas in the United States to drilling.

(6) This doesn't mean energy independence. The U. S. will still be importing more than half its oil by 2030 according to the U. S. Energy Information Administration. We won't really be secure.

In fact, by suggesting that domestic oil resources could power 60 million cars, API is admitting that energy independence is a false hope even as they confuse viewers with the notion that we Americans will be more secure.

Of course, if all my footnotes were required, say, in the manner of warning messages included in prescription drug ads, viewers might be just as queasy about API's plan for America's energy future as they ought to be about some of the drugs they see advertised on television.

What might make viewers even more queasy is a second API ad which claims that we get two-thirds of our oil and natural gas from North America. This is a rough but reasonable estimate of the heat value of the oil and natural gas combined. But, once again we find ourselves watching API's spokeswoman walking across a map of the lower 48 states as she delivers her message. Perhaps Canada and Mexico from whom we import significant quantities natural gas and oil are too large to represent on the map. Or perhaps it would be a little impolitic to treat Canadian and Mexican oil and natural gas as if it belonged to the United States. Better to leave both countries off the map and hope that nobody notices. People might begin to think inconvenient thoughts such as, "Why should the Canadians and the Mexicans simply sell us all the oil and natural gas we want? Maybe they'll need it for themselves. Oh, and by the way, didn't I hear that Mexico's oil production is declining and Canada's natural gas production is flat?"

Those who ignore the borders between Canada and the United States and the United States and Mexico must not like the inconvenient facts of sovereignty. Jerome a Paris, writing on The Oil Drum: Europe put it this way in a recent article:

One is to think that political obstacles are minor, i.e., that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even U.S. politicians) to open their door or the spigot. This perpetuates the narrative that other countries [on] the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary.

Two years ago some readers balked at my idea that the United States and Canada could enter a period of bitter tension (although probably not open conflict) as energy resources, especially natural gas, become scarce in North America. But can such an idea be far from the mark when API is telling us that we can get whatever energy resources we want from Canada and Mexico?

One of the most important facts which API omits from its television ads, but does mention obliquely in a policy piece on its website is that the vast majority of the resources to which they refer are "undiscovered." The group isn't even talking about known deposits waiting to be assessed for their potential. API states that "federal lands hold an estimated 656 trillion cubic feet of recoverable natural gas" and "an estimated 112 billion barrels of recoverable oil." This probably refers to what the government calls technically recoverable. Rocks from the Moon are technically recoverable, but they are very expensive and difficult to get. And so, none of this tells us whether this undiscovered, technically recoverable oil and gas will ever be found and tapped.

There is likely to be some economically recoverable oil and natural gas on federal lands. But is it wise to make public policy on such an important issue as energy based on estimates of oil and natural gas that have yet to be discovered? The Bakken Formation in North Dakota, Montana and Saskatchewan has been touted as having 3 to 4 billion barrels of technically recoverable oil reserves. But it seems doubtful that we will ever get that much oil out of it. And, even if we did, it is worth remembering that at the current rate of consumption, these barrels would last the world somewhere between 36 and 48 days (12 days for each billion barrels).

In this environment of high oil and natural gas prices, those who have a vested interest in drilling will naturally lobby for the right to do so. This really shouldn't strike anyone as strange. What we should not do is base our energy policy on the outlandish pronouncements of industry players about the success they expect.

Tinkering our way to sustainability

When we think about the scope of the ecological challenges we face--peak oil, climate change, soil degradation, water depletion and species loss--we often think of responses big enough to match them. We might ponder large, national or international crash programs for the deployment of alternative energy; for the conservation of energy, water and habitat; and for the spread of organic agriculture and gardening. We might also think of a global agreement to slash greenhouse gas emissions deeply and quickly. But, the larger the responses one imagines, the more improbable their implementation seems. Governments are moving only slowly or sometimes not at all in the direction of sustainability though some corporate efforts are moving much faster.

In an age of gigantic government and corporate research projects, it is easy to lose sight of the fact that the majority of human technical and even social progress has been made through trial and error, in other words, through tinkering. Unfortunately, tinkering has been given a bad name by the dictionary. "To tinker" is variously defined as 1) "to busy oneself with a thing without useful results," 2) "to work unskillfully or clumsily at anything," and 3) "to repair in an unskillful, clumsy, or makeshift way." But there is a more neutral definition as well: "To make unskilled or experimental efforts at repair."

It is tinkering of the last sort, some of it highly skilled actually, that was much on display at the International Conference on Peak Oil and Climate Change held recently in Grand Rapids, Michigan. A few examples will serve to illustrate:

• An Internet-based system called Bright Neighbor designed by Portland, Oregon resident Randy White allows people living in a neighborhood, village or town to coordinate simple things such as ridesharing or tool lending and more complex tasks such as planting a community or individual garden.


• A system of public transportation referred to as JPods seems to take its inspiration from both the gondola and the monorail and could create a cheap alternative to building light rail lines. In addition, JPods can be designed to run on solar power generated by panels mounted above the overhead track. JPods founder Bill James says he is close to lining up the financing for the first JPod system at the Mall of America in Bloomington, Minnesota.


• Permaculture and urban gardening are already well-established practices. But the idea of turning every large suburban lawn into a permaculture garden and many of the empty spaces and backyards in cities into urban gardens is a task that has barely begun. It has the potential, however, to provide a huge increase in the world's food supply in ways that are healthy for people and soil and also easy on the climate since transportation needs are minimized.


• Community currencies, which only circulate locally, offer an opportunity to keep money flowing within the community where it is earned. That benefits all who live there. Such a currency also offers a method of exchange the value of which is not determined by international currency traders, but by the hard work and ingenuity of community residents.

None of these ideas by themselves will create a sustainable society. But each can be tested and adapted to the locale where the testing takes place. Allowing everyone who wants to to become an experiment station speeds greatly the adoption of new practices and technologies. In this way, such tinkering may work better and faster than any grand government plan to spread sustainable practices and technology. The secret weapon, of course, is modern communications, especially the Internet. The success or failure of promising sustainability projects can be transmitted almost instantly across the world, and the details for implementing new practices can move just as fast.

It's likely the scale for most successful sustainability ideas will be no larger than that of the town or region. This explains why tinkering could be a more successful sustainability strategy than any centralized research. If thousands of minds toiling under a variety of conditions in many places are working on a problem, it just might get solved faster and more satisfactorily than if several hundred or thousand are working on it at a research institute or corporate research department away from where it will be implemented.

Still, it is hard to see how a problem such as global warming might be tackled without broad international efforts and regulation. The tinkerer might be able to come up with ways for making deep reductions in carbon emissions affordably. But, he or she won't have any market for those methods without government regulations forcing the curtailment of greenhouse gas emissions. Who is going to put up wind generators and solar panels at the rate necessary to displace fossil fuel plants unless the government makes it profitable and perhaps even mandatory to do so?

While we struggle to create a political climate more friendly to sustainability practices in the face of lethargic and often unresponsive political systems, it is the tinkerers who have stolen the march and are rapidly creating the needed platforms for social, economic, technical and even political progress. Let a thousand flowers bloom. One second thought, why not millions.

The end of money?

It is a commonplace among hard money advocates that the U. S. dollar and all other fiat currencies are doomed to become worthless. History seems to be on their side. There is a long list of currencies based on nothing other than the say-so of a government that have indeed become worthless or near worthless. Perhaps the most often cited example is that of the mark during the great German hyperinflation. From the beginning of 1922 until the currency was replaced in November 1923 inflation was nearly 2 trillion percent.

Many Latin American currencies suffered similar fates during the latter half of 20th century. Bolivia's inflation rate peaked at 11,750 percent in 1985. Peru's topped out in 1990 at almost 7,500 percent. Brazil's hyperinflation reached nearly 3,000 percent in the same year.

Today's poster child for hyperinflation is Zimbabwe where the inflation rate is a moving target last calculated by independent analysts to be running at 1 million percent annually. Oddly, Zimbabwe's stock market was the best performing stock market in the world in 2007 on a percentage basis. And, therein lies an important story, one that tells us what people do when they begin to lose faith in the currency of their country.

In this case, one of the few options beyond bank deposits available to Zimbabweans with savings is the stock market. Controls on exchanging the local currency for foreign currency have made it exceedingly difficult for most people to move much of their savings or current paychecks into more stable currencies. With the stock market practically the only outlet for those with savings, Zimbabweans pushed up stocks by more than 300,000 percent in 2007, handily beating inflation of 24,000 percent. The point is that it didn't pay to keep cash in the bank or anywhere else for that matter. The stock market at least offered the opportunity to invest in businesses with tangible assets that appreciate with inflation.

On the North American continent another currency is thought by some to be threatened by a similar kind of spiral. The woes of the U. S. dollar are well-known: persistent high trade deficits, high government deficits, and expansive monetary policy amidst a crash in housing prices. Add to this the possibility of a derivatives-driven financial crisis that might engulf the entire world economy. One economist believes the situation is so bad that a hyperinflation could visit the United States as early as 2010.

The first signs of worry at the political level have come in an indirect way. Congressional leaders have been pointing the finger at speculators for rising commodity prices, especially oil. Sen. Joe Lieberman has proposed legislation that would limit what large institutional investors can put into the commodities markets.

Before we go any further, it is worth examining why those investors are moving so heavily into the commodities markets. First, there is the ongoing robust demand for commodities of all types, but especially metals, grain and oil and the apparent strain on supply. Fundamental factors are driving up prices, and rising prices attract speculation. Second, there is the pleasant fact that there is no president of copper or wheat or pork bellies. This stands in stark contrast to publicly traded companies whose top managers have all too often in recent years deceived and defrauded their investors. Those holding commodity investments are in most cases only taking the risk that the price of those commodities will go down (or up, if they invest on the short side). Outright fraud in the heavily regulated commodities futures markets is exceedingly rare and difficult to bring off. Third--and this is the most salient point for this discussion--most commodities are denominated in U. S. dollars. When the dollar declines in value against other currencies, commodities generally move up.

At the margin, institutional investors are voting with their money against the U. S. dollar and perhaps against currencies in general. Here it is worth noting the presumed purposes of a currency. First, as everyone knows, currency is a medium of exchange. It's easier and more convenient to use currency for exchange purposes than to try to barter for everything. Second, currency often serves as a store of value. While we wait to decide what to buy with our money, we usually put it in the bank where it earns interest. Sometimes we put it in for a long time in the form of a retirement account or a college savings plan. It is this second function of currency which is being called into question, not just in the United States, but worldwide, for the so-called speculation in commodities is now a worldwide phenomenon.

Governments naturally fear any loss of faith in their currencies. But rather than address the reasons behind that loss of faith, they typically focus on making it more difficult to move money out of one's home currency. That's because it is the easier of the two tasks. Hence, Mr. Lieberman's proposal. The proposal would make it more difficult for large institutional investors to move out of their home currency, in this case, the U. S. dollar, and into commodities.

While the U. S. imposes few restrictions now on the movement of money in and out of the country, the restrictions that are in place are usually defended as necessary for tracing money related to illegal drug and money laundering schemes or to terrorism. That's how Canadian officials are portraying their investigation into websites that allow individuals and companies to turn cash into "electronic" gold that can be used to pay those accepting payments in gold. There are legitimate reasons why governments want to know who transfers money where. But it seems all too likely that those legitimate reasons will be used as cover to extend restrictions on financial transfers out of one's home currency as more and more people attempt to protect their savings.

All of this would be of little import were the world about to return to an environment of low commodity prices, fiscal probity by governments and households, and noninflationary economic growth. Under such circumstances people would have little reason to flee their own currencies. But the trajectory of the world seems decidedly in the opposite direction. And, the focus on oil as a store of value by investment managers may only be the beginning.

The tremendous demand for basic materials needed by growing Asian countries continues to levitate prices of metals such as copper and zinc; foodstuffs such as soybeans and corn; and oil, of course. Oil prices may subside from their recent highs, but it seems unlikely that they will fall to levels even remotely close to those experienced at the beginning of this decade. Moreover, governments and their central banks seem determined to keep their economies growing with expansionist monetary and fiscal policies. More debt-funded spending and more money printing are the order of the day.

What frightens policymakers more than institutional investment managers moving money into commodities is the possibility that average citizens may attempt to flee their own currency. The avenues open to them, however, are considerably more narrow. Certainly, those who have brokerage accounts can call their brokers and ask that their money be shifted into commodity investments. But that is a small subset of the world. The rest of the population is left with turning their ready cash or small savings accounts into real things: jewelry, coins, precious metals, even sides of beef for storage in the deep freezer. But this part of the population usually doesn't realize what is happening to them until the cost-of-living has been rising for some time, and so they are the most vulnerable segment of society. When they do realize what is happening, their collective rush to the exits is so large that it can create a very high rate of inflation and even hyperinflation as real things are bid up and money is spent as quickly as it is earned.

By themselves high prices for energy, food and other essentials do not wreck a currency. But they do lower the standard of living for everyone except those whose incomes are directly tied to profits in the relevant sectors of the economy. What could wreck the world's currencies is a desire to offset the effects of the ever-tightening noose of resource scarcity caused by the approach of peak oil, the march of climate change, and the rapid industrialization of the Far East. The desire to offset these effects is already expressing itself through easy money policies and the financing of government expenditures through borrowing rather than taxation. As scarcities build, the temptation will be ever greater for governments to go down the path of high inflation. None of them will intend, of course, to cause hyperinflation. But it will be an ever-present danger.

Some say that if the U. S. dollar crashes and brings with it a hyperinflation, this will be the end of money as we know it. A few predict that the phenomenon will eventually be worldwide and result from the economic effects of peak oil and climate change. Even if these scenarios do occur, I doubt that it will be the end of money as we know it. The convenience of electronic payments and paper money are too great for people to give up. Even the poor Germans of the 1920s didn't want to give up that convenience. When the German government announced the introduction of a new currency to replace the worthless mark, people accepted it and used it right away.

Perhaps what will be different this time is that while most people will want the convenience that paper money and electronic payments provide, fewer of them will trust money as a store of value. What that means for individual commodities is anybody's guess. But, unless 1) we are miraculously delivered into a time of plenty by huge, unexpected discoveries of the basic building blocks of civilization or 2) people suddenly en masse embrace an abstemious lifestyle (or are forced to embrace it by a depression), it seems possible that one time-honored role of money, that is, as a store of value, will disappear for an extended period as the world comes to grips with resource limits that are only now beginning to convulse our societies.

Will the rate-of-conversion problem derail alternative energy?

My latest column on Scitizen entitled "Will the rate-of-conversion problem derail alternative energy?" has now been posted. Here is the teaser:

Many alternative energy advocates claim that it is possible to replace our fossil fuel economy with one that runs on a combination of nuclear power and renewable energy from the wind, the sun and the farm. Credible scientific estimates suggest that they are right. However, those advocates often fail to consider one critical issue that could derail their plans, the rate-of-conversion problem. How long will it take to make such a transition? And, more importantly, how long do we have?....Read more