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Why the Economy Can't Recover

Mark A. Goldman                                                                 Dated: 11/3/2011

 

If you want to understand why the government and the oligarchs do what they do, sometimes you have to look beneath the surface of what is called common knowledge. 

The reason itís difficult for most people to understand what Iím about to say is that it flies in the face of almost anything they hear or see in the popular culture or in the main stream media.  The problem is that the main stream media is corporate media and it is not media from which one might expect the truth, the whole truth, and nothing but the truth.  Iím not sure if the media was ever expected to live up to that standard, and yet on the other hand, why shouldnít we expect professional journalists to try? 

Instead, popular media outlets appear to do the bidding of the government and oligarchs embarked on what Noam Chomsky and Edward S. Herman refer to as the manufacturing of consent Ė i.e., the managing of public opinion and the molding of popular culture to meet the illegitimate objectives (or, more accurately, to hide the illegitimate objectives) of an elite few.  But we now live in a culture that has been and is seen by this observer, at least, to be constantly manipulated by the government and private interests unbeknownst to a generally unconscious public.  

In any event, Iím going to tell you what I believe is now happening to our culture and our economy:

Itís my belief that peak oil has been achieved and its arrival explains what is happening to markets and to our society.  To understand more fully what peak oil is and what its consequences are I suggest you review this set of videos and also this one.  Essentially peak oil is that point in time when enough oil has been extracted from the earthís crust, such that the amount of oil that can be extracted in any given year has reached its maximum output and from that point forward will be in continual decline.  It doesnít mean we are running out of oil anytime soon, but only that the amount we can extract in any given year will continue to decline over time, even as the cost of extraction continues to increase, until it eventually will no longer be economical to extract what remains. 

The reason this is important is that as economies and populations grow, the demand for oil increases. While in the past oil production has always been able to meet demand at reasonable cost, it now no longer will.  Now when economies try to grow, the production of oil will not be able to meet demand at historical prices.  Instead, the relative scarcity of oil in the face of increasing demand will tend to force the price up which in turn will force economic activity to contract. 

So what we will see from now on is an economy (ours and everyone elseís) that is highly volatile and also consistently unable to break through to the upside over any significant time period.  As economic activity shrinks, the relative scarcity of oil will abate; the price of oil will temporarily decline and prospects for growth will begin to look good again.  But when the economy begins to pick up, demand for oil will again increase, shortness of supply will again inflate the price, and economic activity will again be constrained.  The overall trend will look like a roller coaster but one that has an overall downward trajectory as the maximum production of oil in any given year will tend to decline as world reserves continue to be depleted. This process could go on for quite a few decades.

If you research this further you will find that attempts to increase supply by finding new sources of oil or by improving extraction technologies, will only produce temporary spikes in production but it will not solve the problem.  Right now we have nothing in the pipeline that can replace oil.  And yet those who make money from oil continue to do everything in their power to make more money from oil, including petitioning congress to divert national resources into finding more of it, and selling as much oil as they possibly can while they can, particularly as the price spikes when shortages occur.  All this while the US is without any long term energy policy that addresses the future needs of ordinary people.

Under these conditions the economy cannot recover.  Oil is the lifeblood of the economy.  And less oil means diminishing life and increasing lethargy for most, if not all, economies.

Complicating the problem, is that if we try to use other fossil fuels, such as gas and/or coal to replace oil, the impact on global warming will only get worse, bringing us closer to ecological disaster, even if, or because those resources can remain plentiful over a protracted time period.  In my understanding, almost none of the suggestions that you hear day in and day out from most economists or politicians, for expanding the economy or growing jobs, will make any difference at all no matter how good or hopeful they sound.

Government officials and oil moguls know this.  Oil companies are trying to maximize profits and extract as much wealth as possible from the public while they can, while our government is engaged in making war in order to confiscate whatever oil resources are left in the world regardless of where they are located. The attempts they make at offering legitimate reasons for engaging in war are becoming more and more ridiculous as their strategy unfolds, and this is likely to result in what the CIA refers to as ďblowback,Ē i.e., repercussions from people who decide to fight back, the reason for which our generally uninformed population will not likely comprehend. 

Unfortunately, theirs is not a strategy designed to help any society or any people who are not in the oil, war, security, or finance industries.  War uses up so much of our resources and destroys so much of the assets and infrastructure of other countries that the net result is the accelerated destruction of economies, ours and theirs, even though it is still profitable for those who are on the payroll of those industries or otherwise own or control oil or have a vested interest in its protection, extraction, production, financing, or sales. 

As long as our elected officials are bought and paid for, we will continue on this path, apparently until the oligarchs canít extract any more wealth from us or from oil producing countries; or until the economy collapses altogether; or until people wake up in time to embark on a more enlightened strategy for economic sustainability.  With respect to this last option, it is doubtful that our current crop of leaders and oligarchs are either inclined to create, or intellectually and emotionally capable of creating, such a strategy.  

The current state of consciousness is as follows:  Oil runs the economic engine.  When oil is in short supply, those members of society who are not critical to keeping that engine turning should be ignored, discarded, and/or impoverished, thereby freeing up additional non-productive resources that can instead be used to keep that hungry economic engine turning. Of course the destruction of other economies helps too for the same reason.   

So in my view, this is what protestors are protesting about even though most of them probably donít know it.  This is why social safety nets are under attack; this is why Obama and others arenít trying to grow the economy; this is why we're at war and this is why government is tooling up and training to handle a general citizens' insurrection.  Itís only a matter of time.  The more time they have, the more prepared they will be. I donít rule out the possibility of some black swan event that could save us from the scenario I describe, but then again, black swan events are events that arenít predictable.

This is my theory, which, if you investigate the links I provided, you will see I extrapolated from other sources.  I have no hard proof that this explains current events and behaviors as I experience them, only a lot of circumstantial evidence.  (No Middle Eastern country accurately reports their reserves and certainly none will admit publicly that they have reached peak oil until they have no choice).

If you think this wonít affect you, you probably have a lot of financial resources which you believe will carry you through, and/or a lot of faith...  or you may simply possess what one politician once calledÖ the audacity of hope.

 


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