James Howard Kunstler writes: A lot of readers are twanging on me for refraining to castigate
President-elect Obama for deeds yet undone. They’re discouraged by the
advisors and cabinet sectetaries he’s picked, ostensibly because the
crew coming in are Washington “insiders,” meaning they can’t possibly
see or do things differently.

My own starting point for this
is the belief that in the years just ahead any sociopolitical entity
organized at the giant scale will flounder — this includes everything
from the federal government to global corporations to factory farms to
centralized high schools to national retail chains. So even expecting
Mr. Obama’s government to act effectively may be asking too much in a
situation that will require mostly local action.

The meta-situation will be the overall decline of energy
resources and the necessary downscaling of our activities. We are
obviously in a transitional period between the old profligate energy
economy and the new economy of relative scarcity. We have no idea how
disorderly this transition will be, but there is certainly potential
for tremendous instability in daily life.

For a while, perhaps, the federal government may retain some
ability to affect the way things go, or give the appearance of doing
so. This raises the issue of what Mr. Obama and his team really know
about our energy predicament. The president-elect has made some noises
– recently on the 60 Minutes
show — that he understands something about the current price
dislocations in the oil markets resulting from the larger financial
turmoil. He alluded to the public’s erroneous notion that current
low-ish oil prices mean the oil problem is over. But does the incoming
president know some of the following details?

For instance, does Mr. O know that global oil production appears
to have peaked at around 85 million barrels a day, with poor prospects
of ever getting beyond that? This single naked fact has broad
ramifications, above all whether we can continue to think in terms of
industrial “growth” as the benchmark for economic health. (12/05/08)
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Ilargi writes:  The one and only institution whose official job it is to gauge US recessions and depressions, the NBER , National Bureau of Economic Research, reported yesterday that the US has been in a recession since December 2007. And yes, I do wonder why it took them a year to reach that conclusion, but many other things are more important. For one thing, this report speaks volumes, once more, about the extent to which the US government, which still denied a recession existed as late as last month, cooks its numbers, but it says something else as well. This will be the longest recession in more than 40 years. You’re not going to find a single sound soul to predict it will be over by March or April. But many will still maintain that it’s just another recession, and we’ve been through many of those and came out stronger and all that blubber talk. This one will be counted in years, not months. …

My 4-year old prediction of civil war in China by 2015 may have to be moved up yet again. If China’s economic growth goes down to 5%, the economy and the political system are going going gone and out of here. These newly built export economies are just too vulnerable, no resilience. Put Russia down as a close second, and reserve a space right behind for many developing countries. Other, more established, export powers to meet the hammer are for instance Germany, Holland, Brazil, Austria, Belgium and Australia. Job losses will be staggering, and I don’t see any of these places seriously preparing for it. It’s all blind growth religion. They should all take a good look at the Baltic Dry Shipping Index, which is approaching 600, from 11,600+ a few months ago. That, my friends, spells bleak and empty shelves coming to a place near you. Around January 20.

In the US car industry, including the Big 3, production overcapacity will be about 50% by mid-2009, if sales keep plummeting the way they have. Which they undoubtedly will, if only because no bank will lend you money for a car. Since US carmakers are less efficient in just about every facet of the game than their Japanese and European counterparts, they likely need to cut more than 50% of capacity to get back to a “normal”, balanced, supply and demand picture. While Toyota presently can be profitable with total sales of 12 million vehicles, GM needs 15 million sold, and much of that SUV’s, where profit margins are much higher. But US car sales won’t return to 15 million in many years, if ever, and SUV’s are dead. So what do you think will happen? …

Today in Congress, the non-flying out-of-touchmen will announce closing brands, but that is very costly and takes forever. The decision to shed Oldsmobile in 2000 cost over $1 billion, and wasn’t completed till 2004. So what else is there in store? GM needs to close 5000 dealerships and at least 10.000 franchises in the US alone. If 25 people on average work at each of these, that’s a potential loss of 375.000 jobs. Since Ford and Chrysler will require similar cuts, it’s not too far out there in left field to suggest 600.000 jobs will be gone just from dealers, just the ones that sell American cars. That’s before even one additional job has been cut in the factories. Or before Toyota and Honda start their inevitable rounds of cutting jobs in the face of dwindling sales. Or before the parts makers start pining for the f(j)ords.

Overall new car sales are down an estimated 27%, with US cars dropping an estimated 33%. The mess is so convoluted and so opaque that there is only one solution: let the markets handle it. Whatever the government does will fail. But I’d guess they’ll do something anyway: hand over perhaps $10 billion in order to save the industry till January, without much in the way of a serious rescue plan. If Obama lets that happen, he’s a nut, because he will then have to pull the plug next year or the one after that, and be known for the rest of his life and through history as the president who failed America’s pride and pushed 5+ million Americans out of a job. And don’t get me started on the infrastructure maintenance jobs he’s talking about. Something tells me the wear and tear on US roadways is about to become much less of a problem. Meanwhile, who in Detroit will still have a pension and health benefits? (12/05/08)
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