Tag Archives: Economy

Lexington 2030 – A Vision

What will we be like in 20 years?  20 years ago this summer, the first Bush war for oil began its intial stages.  Tim Berners-Lee was formulating his idea for the world-wide web – yeah the web as we know it hadn’t been born.  The world’s population was 5.2 billion humans.  (Today, it’s 6.8 billion. When I was born in 1964, it was 3.2 billion)

This vision acknowledges the imminent threats of energy descent, and climate change, and the end of globalization.  It accepts the fact that “local” is the path to independence.

This is based on Portland’s climate action plan primarily, as well as other peak oil plans such as Bloomington’s.

I’ve been thinking about what Lexington should be doing to prepare for its next comprehensive plan.  I’m betting on business as usual – denial is very strong here – but I’m also beginning now to sound the alarm:  business as usual will not improve or even maintain our quality of life.  And that’s really all we have, isn’t it?

This is not about my values.  This isn’t a choice between values.  The world is changing rapidly to the negative. We must act now to protect ourselves and our place.

Here’s the goal:  An 80% reduction in carbon usage by 2030.   

An 80 percent reduction of carbon emissions by 2030 will entail re-imagining the entire community— transitioning away from fossil fuels and strengthening the local economy while shifting fundamental patterns of urban form, transportation, buildings and consumption.

A vision:

■ In 2030, Lexington and Fayette County are at the heart of a vibrant region with a thriving economy, rich cultural community and diverse, ecologically sustainable neighborhoods.

■ Personal mobility and access to services has never been better. Every resident lives in a walkable and bikeable neighborhood that includes retail businesses, schools, parks and jobs. Most people rely on walking, bicycling and transit rather than driving. Pedestrians and bicyclists are prominent in the region’s commercial centers, corridors and neighborhoods.

Public transportation, bikeways, sidewalks and greenways connect neighborhoods. When people do need to drive, vehicles are highly efficient and run on low-carbon electricity and renewable fuels.

■ Green jobs are a key component of the regional economy. Products and services related to clean energy, green building, sustainable food, green infrastructure, and waste reuse and recovery providing living-wage jobs throughout the community, and Lexington is one of North America’s  hubs for sustainable industry and clean technology.

■ Homes, offices and other buildings deliver superb performance. They are durable and highly efficient, healthy, comfortable and powered primarily by solar, wind and other renewable resources.

■ The urban forest and green roofs cover the community, reducing the urban heat island effect, sequestering carbon, providing habitat, and cleaning the air and water.

■ Food and agriculture are central to the economic and cultural vitality of the community, with backyard gardens, farmers’ markets and community gardens productive and thriving. A large share of food comes from farms within the region, and residents eat a healthy diet, consuming more locally grown grains, vegetables and fruits.

■ The benefits of green infrastructure, walkable and bikeable neighborhoods, quality housing, and convenient, affordable transportation options and public health services are shared equitably throughout the community.

■ Residents and businesses use resources extremely efficiently, minimizing and reusing solid waste, water, stormwater and energy.

■ The Bluegrass region has prepared for a changed climate, making infrastructure more resilient, developing reliable supplies of water, food and energy and improving public health services. Policies, investments and programs are in place to protect the residents most vulnerable to climate change and rising energy prices.

What do you think?

If you care about these issues at all, the City of Portland and Multnomah County Climate Action Plan is a must read:  http://www.portlandonline.com/bps/index.cfm?c=49989&a=268612

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Collapse: 32 Months Away? YOU MUST READ THIS

I am keeping this as the top article for a while – folks, this is happening – read about it right now – This is from Guy McPherson at Nature Bats Last – very interesting and deep – very much worth your time – is it really happening this fast?


It’s all the rage to talk about a double-dip in the industrial economy. That would be an economic trend in the shape of a W. I think an M is far more likely. The assumption of never-ending growth underlies all neoclassical economic assessments, but I think that assumption is about to break up on the shore of resource limitations.

How does one know what to believe, and who to trust? We’re surrounded by lies. During our finest moments, we don’t believe the media, the politicians we elect (from the very small slate of candidates selected for us), or the CEOs and NGOs to whom we give our money. Awash in misinformation yet surrounded by culture’s unrepentant, never-ending message, we vacillate between cynicism and swimming in the powerful current of culture.

Although the happy-talk Obama administration — and its proxy and partner in crime, the mainstream media — would have you believe the industrial economy has recovered, many signs indicate the impacts of the last oil price spike haven’t been fully worked out. The U.S. national debt rises every day, and it already exceeds the value of all currency ever produced and all gold ever mined. It cannot be paid off. Ever. If the notion of a Soviet-style default doesn’t give you pause, consider still-rising foreclosure rates, still-falling home prices, massive unemployment, financial bankruptcy at all levels of government, ballooning entitlement programs, and collapsing pension programs. This is merely the short list of economic issues we face. Needless to say, every single one of them is a profound surprise to the vast majority of neoclassical economists, few of whom saw this economic recession coming (as if passing the world oil peak didn’t provide sufficient warning, well in advance).

Knowing culture will lead us astray, we nonetheless invite scorn when we seek the truth beneath the cultural current of the main stream. Culture does not have answers to meaningful questions. But skepticism for the sake of skepticism is no virtue, either.

Applying reason as a path to knowledge (as I’ve suggested here and here, for example) is easy enough in theory. But in practice, it’s difficult to extract the facts and then synthesize them into a coherent message that guides the way. Much less the Way. And yet, we muddle along, individually and societally, relying on some inexplicable combination of faith and rational thought. For me, the guides include data (recognizing they are undoubtedly massaged before general release), historical anecdotes (ditto), my own dubious moral compass (shaped, necessarily, by culture), and an informed set of predictions from a variety of scholars. As with any gestalt, mine is formed from parts that don’t quite add up to the whole.

So how do we go from this list of economic issues to the notion of economic collapse? Continue reading

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8 Reasons the US has Become a Nation of Slaves

This isnt extreme at all – it just captures what’s really happening.

By Damien Hoffman

Posted on April 05 2010. // ShareThis

These days, the idea of retirement seems like either a bad joke or a utopian fantasy. I’ve already covered some main reasons the US economy is screwed, but here are 8 reasons why the US has become a nation of indentured servants:

1) Stagnant wages

Are you partying like it’s 1999? That’s because you’re earning money like it’s 1999. Over the past 11 years, the median household income has been flat as a corpse’s pulse.

If everything gets more expensive over time but no one gets a raise, workers will afford less goods and services. This means people will either work the same amount for less stuff, or work harder for the same stuff. Either way, it’s a shitty deal.

2) Dual-income Nation

We’re a country of family values, right? Wrong. We’ve built an economy that requires two incomes to attain middle class status. It has even become a luxury for one spouse to stay home to raise children! (But that’s more of an existential issue …)

The graph above illustrates one of the most basic tenets of economics: if there is twice as much cash floating around the economy, the cost of things simply rises in direct proportion. In this case, adding an extra worker per household has increased household income. As a result, sellers of houses, child care, health insurance, cars, etc. have upped their prices to take more of our dollars.

3) Energy and Food Inflation

Remember $4 gas? Well, we’re back to $3 (double last year’s low). Every time a car ride costs more, that’s less money left over for things other than getting from point A to point B. As oil prices continue to rise with global demand (and diminishing supply), we will spend more hours working just to get to and fro.

Food is the ultimate necessity. So, when prices rise, there’s not much to do if you don’t care for the taste of cat food. It’s harder to notice 20-30% food inflation when a $2 item jumps to $2.40. But when your average bill moves from $100 to $120, those $20 bills are no longer available for things beyond basic sustenance.

4) Skyrocketing costs for Health Care and Education

One of the biggest thieves of retirement has been the unconscionable rise of health care and education costs. With health insurance costs jumping 10-25% per year, a worker with stagnant paychecks is on the long road to bankruptcy. (See Health Insurance Companies Price Gouging the US Economy)

Got a child or two? Do you want them to go to college? Well you better get rich, fast. The College Board’s study of college pricing trends shows costs have exploded 300% since 1980. That’s especially interesting since median household wages are up only 10-15% over the same time period. Maybe home schooling is better than the poor house.

5) Mauled Retirement Accounts

Have you seen those new John Hancock commercials where the boomer couples are instant messaging each other about either moving in with their children or fearing the longevity of their retirement account? Well, that’s a good reflection of how bad retirement accounts were hit after a decade of bubbles bursting. And without money for retirement, we work until we drop dead.

6) No Savings

The Employee Benefit Research Institute’s annual Retirement Confidence Survey shows that 43% of Workers have less than $10,000 saved for retirement. Really? Then the word retirement does not apply to these people because $10,000 is surely not enough to live off when even a generous 6% annuity would be paying only $600 a year before taxes.

But the scariest stat from the survey is 54% of workers are “clueless” about saving for retirement. This stat is a direct indictment on how crappy our school systems have become — and I’m talking about colleges too.

7) Trillions in Debt

Can we dig ourselves out of a $12.7 Trillion hole? If we can, it’s going to take a backbreaking amount of labor … and that’s just to fill the hole.

This debt is directly reflective of slavery. For every dollar of our debt, we owe a creditor who lent us the money. So, before we can use all our tax dollars to add value to our domestic economy and society, we have to skim a lot off the top to pay our masters their due.

8) Jobs Exported Overseas

If we are going to deal with all the costs above, we need to earn money. However, while we were drunk on credit card debt over the past 30 years, our Congressman and once domestic corporations shipped millions of middle class jobs to whichever country would do the job cheapest.

Think only the middle market has been affected? Now some of the brightest and most ambitious minds are accepting jobs in hot markets like China and Singapore. These people aren’t dumb: if the jobs move, they realize they must too.

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Still think that we can trust the “powers that be” on peak oil? Look how well they did on the whole finance thing

April 4, 2010
Op-Ed Contributor

I Saw the Crisis Coming. Why Didn’t the Fed?


Cupertino, Calif.

ALAN GREENSPAN, the former chairman of the Federal Reserve, proclaimed last month that no one could have predicted the housing bubble. “Everybody missed it,” he said, “academia, the Federal Reserve, all regulators.”

But that is not how I remember it. Back in 2005 and 2006, I argued as forcefully as I could, in letters to clients of my investment firm, Scion Capital, that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy. My prediction was based on my research into the residential mortgage market and mortgage-backed securities. After studying the regulatory filings related to those securities, I waited for the lenders to offer the most risky mortgages conceivable to the least qualified buyers. I knew that would mark the beginning of the end of the housing bubble; it would mean that prices had risen — with the expansion of easy mortgage lending — as high as they could go.

I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers — those with the weakest credit. The lenders generally then sold these risky loans to Wall Street to be packaged into mortgage-backed securities, thus passing along most of the risk. Increasingly, lenders concerned themselves more with the quantity of mortgages they sold than with their quality.

Meanwhile, home buyers, convinced by recent history that real estate prices would always rise, readily signed onto Continue reading

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Lexington homebuilders, realtors, and affordability: which is it?

Dont ya just love the Lexington Homebuilders  Association and Realtors? These guys simply change the message to suit whatever load of crap they are trying to push at the moment:

Right now it’s HOUSING IS AFFORDABLE! From a Realtors press release last week:  “The Lexington area is affordable compared to most markets and the local affordability has improved and is below the national average.”  Here’s Homebuilders XVP Todd Johnson: “This is great news for the community. In addition to housing affordability, the real estate industry groups employ thousands of people and provide over twenty percent of Lexington’s economy.” I wont even go into the fallacy about the real estate industry making up 20% of the local economy – see this post for that: http://steveaustinlex.wordpress.com/2010/03/07/wall-street-journal-to-homebuilders-it%E2%80%99s-time-for-america-to-find-itself-a-new-economy/

But in 2006 it was HOUSING ISN’T AFFORDABLE! From the Homebuilders in 2006:   “Looking into the future, the housing market is predicted to remain solid for the next several years. Because access to developable land is defined by the urban service boundary, an artificial inventory of land establishes supply while demand for housing remains constant or actually increases. As a result, costs go up. As those land prices go up, it greatly affects the affordability of housing in Lexington.”

I also won’t even go into the laugher that those guys thought the housing industry was going to remain “solid for the next several years…” HA!  It was already tanking.  Either they were just ignorant, or it could be something more sinister…..   Anyway, back then they used the “affordability” issue to push for more land to be added to the Urban Service Boundary.  They didn’t get what they wanted – no land was added – but guess what:  HOUSING IS NOW AFFORDABLE!

So, let’s recap:  No new land was added to the Urban Service Boundary in 2006.  Cries of “unaffordability!”  Now, in 2010 – with NO NEW LAND HAVING BEEN ADDED IN THE LAST 4 YEARS, cries of “We’re affordable!” And “affordability has even improved!”

This is a credibility killer. Especially to the providers of “20% of Lexington’s economy.”

We are in the peak oil time.  Peak oil leads to both peak credit and a permanent state of recession – these spell the doom of the 1950s model of housing provision.  What will take its place?

Read the full details here: Continue reading

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Planners and Landscape Architects Don’t Get It

I am a member of both the American Planning Association and the American Society of Landscape Architects.  As such, I get to read the publications of both organizations.  With each new one I see, my astonishment at the lack of understanding of the new reality grows.   The new reality is simply this:  peak oil has changed our economy.  We will endure what I call a perma-recession, as complexities are wrung from the current economic system.  The new level, whenever we reach it, will be one of much less economic activity.   Simply put:  economic growth is no longer possible due to this reality, and trying to maintain it somehow will put our survival as a society, perhaps even as a species, at risk.

This isn’t my wish, nor is it a personal “value”.  This is simply my reaction to the understanding that has been created by some very smart people:  nature has limits and we have crossed them.

Planners and landscape architects should be the leaders in helping us adapt to the new reality.  Instead nearly everything I read mentions “recovery” in some fashion.  There seems to be a collective intellectual paralysis among these groups.  They tout plans that have “economic growth” and “environmental sustainability” as twin goals, yet no one has the courage, or perhaps the intelligence, to say that those two things are mutually exclusive.  They quote practitioners – people that are trying to shape our futures – as having faith in return to the status quo:  “We’re more poised for recovery than the last recession, with diverse, strategic plans,” says the director of San Diego’s planning department.  What a crock of shit. 

 We are in deep trouble as a society when the people who should be leading us forward instead are looking backward.  The next 20 years will not be like the last 60.  We are in a time of great transition. We don’t need people fine tuning “smart growth.”  We need smart people to help us figure out how a steady state economy can work in our city.  We need smart people to help us create a distributed energy grid.  We need smart people to help us plan for rainwater harvesting and treatment. We need smart people to create a local food economy.  We need smart people to help us create energy descent action plans.  We need smart people to help us retrofit our buildings.  We need smart people to help us adapt to a changing climate. We need smart people to devise alternation transportation plans.

 The one thing we absolutely don’t need is anyone planning for recovery.


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Breaking the Growth Habit: A Q&A with Bill McKibben

Continuing today’s theme of the new economy, read this and see what you think:

If humankind is to survive, it must change society’s economic model from relentless, unbridled growth to maintenance of wealth and resources

By Mark Fischetti   (Scientific American)


BILL MCKIBBEN: The environmentalist author argues that growth as an economic principle must be abandoned to save Earth.

The April issue of Scientific American includes an exclusive excerpt from Bill McKibben’s new book, Eaarth: Making a Life on a Tough New Planet, plus an interview that challenges his assumptions. Expanded answers to key interview questions, and additional queries and replies, appear here.

McKibben is a scholar in residence at Middlebury College in Vermont and is a co-founder of the climate action group, 350.org. He argues that humankind, because of its actions, now lives on a fundamentally different world, which he calls Eaarth. This celestial body can no longer support the economic growth model that has driven society for the past 200 years. To avoid its own collapse, humankind must instead seek to maintain wealth and resources, in large part by shifting to more durable, localized economies—especially in food and energy production.

[A Scientific American interview with McKibben follows.]

You entitled your book Eaarth, because you claim that we have permanently altered the planet. How so? And why should we change our ways now?
Well, gravity still applies. But fundamental characteristics have changed, like the way the seasons progress, how much rain falls, the meteorological tropics—which have expanded about two degrees north and south, making Australia one big fire zone. This is a different world. We underestimated how finely balanced the planet’s physical systems are. Few people have come to grips with this. The perception, still, is that this is a future issue. It’s not—it’s here now.

Is zero growth necessary, or would “very slight” growth be sustainable?
A specific number is not part of the analysis. I’m more interested in trajectories: What happens if we move away from growth as the answer to everything and head in a different direction? We’ve tried very little else. We can measure society by other means, and when we do, the world can become much more robust and secure. You start having a food supply you can count on, and an energy supply you can count on, and know they aren’t undermining the rest of the world. You start building communities that are strong enough to count on, so individual accumulation of wealth becomes less important.

If “growth” should no longer be our mantra, then what should it be?
We need stability. We need systems that don’t rip apart. Durability needs to be our mantra. The term “sustainability” means essentially nothing to most people. “Maintenance” is not very flashy. “Maturity” would be the word we really want, but it’s been stolen by the AARP. So durability is good; durability is a virtue.

In part, you’re advocating a return to local reliance. How small is “local”? And can local reliance work only in certain places?
We’ll figure out the sensible size. It could be a town, a region, a state. But to find the answer, we have to get the incredibly distorting subsidies out of our current systems. They send all kinds of bad signals about what we should be doing. In energy we’ve underwritten fossil fuel for a long time; unbelievable gifts to the “clean coal” industry, and on and on. It’s even more egregious in agriculture. Most of the United States’s cropland is devoted to growing corn and soybeans–not because there’s an unbelievable demand to eat corn and soybeans, but because there are federal subsidies to grow them—written into the law by huge agricultural companies who control certain senators. Once subsidies wither, we can figure out what scale of industry makes sense. It will make sense to grow a lot of things closer to home.

It’s plausible to “go local” in, say, your home state of Vermont, where residents have money and are forward-looking—and their basic needs are met. But what about people in poor places; don’t they need outside help?
Absolutely. The rich nations have screwed up the climate. It’s our absolute responsibility to figure out how to allow poor people to have something approaching a decent life. What happens to the poorest and most vulnerable people in the world? They get dengue fever. The fields they depend on are ruined by drought or flood. The glaciers that feed the Ganges will be gone, yet 400 million people depend on that water. We are not helping the poor by destabilizing the planet’s systems. Meantime, what works best for them? Local, labor-intensive, low-input agriculture: It provides jobs, security, stability and food, and helps make local ecological systems robust enough to withstand the damage that’s coming.

U.S. debt is rising to insane levels because the country has lived beyond its means, which supports your call to switch from growth to maintenance. But how do countries like the U.S. get out of debt without growing? Do we need a transition period where growth eliminates debt, and then we embrace durability?
My sense is that all of this will flow logically from the physics and chemistry of the world we’re moving into, just like the centralized industrial model flowed logically from the physics and chemistry of the fossil-fueled world. The primary political question is: Can we make change happen fast enough to avoid all-out collapses that are plausible, even likely, under the patterns we’re operating in now? How do we force global changes that move these transitions more quickly than they want to move? We have an incredibly small amount of time; we have already passed the threshold points in some respects. We best get to work.

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What Is a “Green Economy?”

This is a great little explanation of where nature is forcing us to go….this is not a value choice, but rather the reality of life on a planet with finite resources…and Mr. Daly, the author of this piece, is a living legend…he’ll be remembered as one of the first and most important thinkers on the new world we will build…. read the post below this one for some basic ideas…

by Herman Daly

A green economy is an economy that imitates green plants as far as possible. Plants use scarce terrestrial materials to capture abundant solar energy, and are careful to recycle the materials for reuse. Although humans are not able to photosynthesize, we can imitate the strategy of maximizing use of the sun while economizing on terrestrial minerals, fossil fuels, and ecological services. Ever since the industrial revolution our strategy has been the opposite. Fortunately, as economist Nicholas Georgescu-Roegen noted, we have not yet learned how to mine the sun and use up tomorrow’s solar energy for today’s growth. But we can mine the earth and use up tomorrow’s fossil fuels, minerals, and waste absorption capacities today. We have eagerly done this to grow the economy, but have neglected the fact that the costs of doing so have surpassed the benefits – that is to say, growth has actually become uneconomic.

In spite of the fact that green plants have no brains, they have managed to avoid the error of becoming dependent on the less abundant source of available energy. A green economy must do likewise – seek to maximize use of the abundant flow of solar low entropy and economize on the scarce stock of terrestrial low entropy. Specifically, a green economy would invest scarce terrestrial minerals in things like windmills, photovoltaic cells, and plows (or seed drills) – not squander them on armaments, Cadillacs, and manned space stunts. A green economy can be sufficient, sustainable, and even wealthy, but it cannot be a growth-based economy. A green economy must seek to develop qualitatively without growing quantitatively – to get better without getting bigger.

There is another kind of green economy that seeks to be green after the manner of greenback dollars, rather than green plants. Green dollars, unlike green plants, cannot photosynthesize. But dollars can miraculously be created out of nothing and grow exponentially at compound interest in banks. However, Aristotle noted that this kind of growth is very suspect, because money has no reproductive organs. Unlike green plants, green money seeks to grow forever in the realm of abstract exchange value, even as we encounter limits to growth in the realm of the concrete use values for which money is supposed to be an honest token and symbol.

Recently we have grown, or rather “swollen”, by expanding the symbolic realm of finance. Debt is a mere number (like negative pigs) and can easily grow faster than the real wealth (positive pigs), by which it is expected to be redeemed. Wall Street has bought and sold an astronomical number of negative pigs-in-a-poke – they have “sold bets on debts and called them assets”, as Wendell Berry succinctly put it. We have recently experienced the failure of this fraudulent attempt to force expansion. Yet we have so far been unable to imagine any policy other than restarting the old growth economy for another round. After the next crisis we should try to avoid the Ponzi scheme of growth and build a steady state economy – a green economy that is sustainable, just, and sufficient for a good life.

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Ideas for A Green Economy

This post goes along with the one above it…..basic ideas, but that’s what we need – check out the greenamerica website: http://www.greenamericatoday.org/

From GreenAmerica – January 15, 2008

Green economyEveryone now understands that the economy is broken.

While many name the mortgage and credit-default-swap crises as culprits, they are only the most recent indicators of an economy with fatal design flaws. Our economy has long been based on what economist Herman Daly calls “uneconomic growth” where increases in the GDP come at an expense in resources and well-being that is worth more than the goods and services provided.  When GNP growth exacerbates social and environmental problems—from sweatshop labor to manufacturing toxic chemicals—every dollar of GNP growth reduces well-being for people and the planet, and we’re all worse off.

Our fatally flawed economy creates economic injustice, poverty, and environmental crises. It doesn’t have to be that way. We can create a green economy: one that serves people and the planet and offers antidotes to the current breakdown.
Here are six green-economy solutions to today’s economic mess.

1. Green Energy—Green Jobs
A crucial starting place to rejuvenate our economy is to focus on energy. It’s time to call in the superheroes of the green energy revolution—energy efficiency, solar and wind power, and plug-in hybrids—and put their synergies to work with rapid, large-scale deployment. This is a powerful way to jumpstart the economy, spur job creation (with jobs that can’t be outsourced), declare energy independence, and claim victory over the climate crisis.

2. Clean Energy Victory Bonds
How are we going to pay for this green energy revolution? We at Green America propose Clean Energy Victory Bonds. Modeled after victory bonds in World War II, Americans would buy these bonds from the federal government to invest in large-scale deployment of green energy projects, with particular emphasis in low-income communities hardest hit by the broken economy. These would be long-term bonds, paying an annual interest rate, based in part on the energy and energy savings that the bonds generate. During WWII, 85 million Americans bought over $185 billion in bonds—that would be almost $2 trillion in today’s dollars.

3. Reduce, Reuse, Rethink
Living lightly on the Earth, saving resources and money, and sharing (jobs, property, ideas, and opportunities) are crucial principles for restructuring our economy. This economic breakdown is, in part, due to living beyond our means—as a nation and as individuals. With the enormous national and consumer debt weighing us down, we won’t be able to spend our way out of this economic problem. Ultimately, we need an economy that’s not dependent on unsustainable growth and consumerism. So it’s time to rethink our over-consumptive lifestyles, and turn to the principles of elegant simplicity, such as planting gardens, conserving energy, and working cooperatively with our neighbors to share resources and build resilient communities.

4. Go Green and Local
When we do buy, it is essential that those purchases benefit the green and local economy—so that every dollar helps solve social and environmental problems, not create them. Our spending choices matter. We can support our local communities by moving dollars away from conventional agribusiness and big-box stores and toward supporting local workers, businesses, and organic farmers.

5. Community Investing
All over the country, community investing banks, credit unions, and loan funds that serve hard-hit communities are strong, while the biggest banks required bailouts. The basic principles of community investing keep such institutions strong: Lenders and borrowers know each other. Lenders invest in the success of their borrowers—with training and technical assistance along with loans. And the people who provide the capital to the lenders expect reasonable, not speculative, returns. If all banks followed these principles, the economy wouldn’t be in the mess it’s in today.

6. Shareowner Activism
When you own stock, you have the right and responsibility to advise management to clean up its act. Had GM listened to shareholders warning that relying on SUVs would be its downfall, it would have invested in greener technologies, and would not have needed a bailout. Had CitiGroup listened to its shareowners, it would have avoided the faulty mortgage practices that brought it to its knees. Engaged shareholders are key to reforming conventional companies for the transition to this new economy – the green economy that we are building together.

It’s time to move from greed to green.

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7 Stressors Sapping the Middle Class

This article does a very good job laying out the challenges faced by the “middle class” in the peak oil time. Same things those in the “below middle class” have been facing for years….And the final sentiment of this piece:  it may be this way for years.  We WILL adjust to the new new reality of peak oil time.  We will get to a place where we will wistfully say “remember what it was like when….?”
By Rick Newman, U.S, News and World Report

We all know about keeping up with the Joneses. Now, the Great Recession and the jobless recovery have introduced a new socioeconomic phenomenon: slip-sliding with the Smiths.

Working harder for less is the new normal–for those lucky enough to have a job. Millions of families are giving up comforts they long took for granted, such as restaurant meals, new clothes, vacations, spacious cars, home improvements, and cable television. College funds and retirement savings have taken a hit, and some families have been forced to downsize their homes or, worse, submit to foreclosure. Little wonder that record numbers of Americans tell pollsters it’s getting harder to get ahead and that they worry their kids’ standard of living may fall rather than rise.

The obvious culprit is a terrible job market that has left 15 million Americans out of work and millions more working less than they would like. But several economic trends have been stressing the American middle class for a decade or more, and the recession intensified those pressures as well. Healthcare and college costs, for example, have been rising unabated. Seniors who are living longer require more late-in-life care, with the costs often borne by their middle-aged kids. A turbulent economy, meanwhile, has hammered away at incomes, job security, and net worth–and even led the White House to create a “middle-class task force” that gives the problem an official hue: “It is harder to attain a middle-class lifestyle now than it was in the recent past,” declared a recent task-force report.

Politicians want to help, with dozens of proposals in Washington and state capitals to create jobs, subsidize living costs, and prove that elected officials care. But most governments are running out of money, and many of the political proposals are hollow, vote-seeking gestures. Americans, meanwhile, are relying more on themselves by cutting spending, saving more, changing their lifestyles, and re-evaluating their careers. As a halting economic recovery evolves, here are seven stressors that middle-class Americans need to address in order to maintain their standard of living:

Falling income. The pinch that many families feel comes from incomes that have fallen while other unavoidable costs have continued to go up. From 2000 to 2008, median household income after inflation was basically unchanged, the weakest performance since at least the end of World War II. And that was mostly before the recession. Economists estimate that once additional data are tallied, they will show that median real income fell by 5 to 7 percent during the recession. That’s a huge drop that seems unlikely to reverse itself anytime soon, since a weak job market means that even those who have jobs are far less likely to get raises. And many people have absorbed pay cuts or taken new jobs that pay a lot less than they used to earn.

A sudden loss of income can be devastating for those with a lot of debt and little savings, which unfortunately includes far too many Americans. Even so, people are adjusting. There’s been a stutter-step increase in the savings rate, which, if it lasts, will help pad rainy-day funds. Shoppers are buying fewer extravagances and more discount merchandise. And after a 20-year borrowing binge, Americans are paying off (or defaulting on) record amounts of debt. If those trends continue, the typical household may eventually lower costs enough to live comfortably on less income–and enjoy a few new perks if incomes begin to rise again.

Reduced savings/net worth. When incomes fall faster than expenses, the first impulse is often to make up the difference by borrowing. But banks and credit-card issuers have clamped down on lending, leaving many Americans no choice but to raid their savings to pay the bills. This has happened at the same time that home values have plunged. Many homeowners now have little or no home equity, and a topsy-turvy stock market has stabilized more than 25 percent below its peak values from 2007. The result is a net loss of about $12 trillion in Americans’ net worth over the past three years, according to the Federal Reserve–about $102,000 per U.S. household.

A sharp housing rebound or a fresh stock market rally would help recover those losses, but neither seems especially likely. And stock-market gains tend to benefit the wealthy much more than the middle class anyway. So the majority of Americans will have to rebuild their net worth the old-fashioned way: by saving more, spending less, and living more frugally. The savings rate has in fact ticked up over the past year, but not by as much as some economists had expected. That’s one sign that it may take a long time for consumers to adjust their behavior and get used to a new financial reality.

High healthcare costs. The sob stories trotted out by advocates of healthcare reform ring true. Healthcare costs rose by 155 percent between 1990 and 2008, according to the White House’s middle-class task force, while median household income rose by just 20 percent. That means medical costs take an increasing share of take-home pay for virtually every family. A separate study from 2009 found that 62 percent of all personal bankruptcies stemmed from medical problems that overwhelmed family finances. Even if Washington passes healthcare reform, rising medical costs seem likely to pressure the family budget for years, forcing many to simply spend less on other things.

Child-care/elder-care expenses. Many families have maintained their standard of living because both parents work. Between 1990 and 2008, for example, hours worked by both parents in a typical middle-income family increased 5 percent; in a middle-income single-parent family, hours worked spiked by 13.4 percent. That leaves less time for taking care of kids, aging parents, and anything else that needs attention–and the added costs of paying somebody else to do it. Data from the recession may show that child- and elder-care costs have eased as more people find themselves involuntarily stuck at home. And as Americans simplify their lives, some moms and dads may decide that it makes sense for one parent to spend more time at home instead of working to pay for a bunch of stuff the family doesn’t really need.

College costs. A typical family with two kids should sock away about $4,200 per year to pay for college. That’s a tall order. College costs have risen about 43 percent since 1990, nearly twice the rise in median income. And with state and federal education funds being axed, public universities are hiking tuition and fees. A budget crisis in California, for instance, has led to a 32 percent increase in tuition at marquee state schools like UCLA and Berkeley, with more increases likely. Private schools, meanwhile, are struggling with steep drops in their endowments thanks to the financial crisis and the housing bust, which trashed mortgage-based investments. The bottom line for many families is that they’ll have to take out bigger college loans, with students working more to pay for their own education.

Housing costs. The cost of financing and maintaining a home soared by 56 percent between 1990 and 2008, thanks to the housing bubble that’s now deflating. Many families that bought a home near the peak of the market–say, between 2005 and 2007–are stuck with property that’s declining in value and in some cases worth less than the mortgage. That will continue to fuel foreclosures and the stress of making huge housing payments that the family income can barely cover. But the housing bust is helping bring prices back down to manageable levels for many families, one break for those who escape the recession with their household finances more or less intact.

False expectations. For the past 40 or 50 years, Americans have lived by a series of unofficial tenets: A good education guarantees a good job, hard work will bring prosperity, and 40 years of 40-hour-a-week work earns a comfortable retirement. Then, maybe; now, not so much. Workers who believe that somebody owes them a comfortable life just because they try hard are risking bitter disappointment in a Darwinian economy, where there are likely to be more losers and fewer winners than we’re used to. The winners will be those who learn how to adapt, expect nobody to give them anything, and are prepared to work harder in the future than they did in the past. That’s how it was in America before anybody ever heard of the middle class, and it may be that way for a while again.


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Random Thoughts

From Bloomberg Businessweek:

• THEM: Commodity prices are rising – “raw materials were up 9.6% in January” – while at the same time “wages remain under wraps, constrained by sky high unemployment.”

o ME: When exactly is this going to get better? It’s not. We are going to get poorer across the board.

• THEM: Janet Yellen – President of the San Francisco Federal Reserve – says it will take until at least 2013 for the economy to “recover.”

o ME: Can our cities and states take another three years of this? Taxes are going to have to go up, while at the same time services will have to come down. This at a time when more of our constrained income is going for commodities.

• THEM: College tuition has increased 92% in nine years. Twice as much as health care, three times more than food, and 100% more than the price of cars. At the same time, the income of college graduates has decreased 1% during those years! The only consolation is that college graduates have lower unemployment right now.

o ME: Is getting a traditional college degree worth it for most people? So much time and debt to gain what exactly? Certainly not the kinds of skills needed in a low energy, local world. And what about colleges? Lower enrollments will result from the growing awareness that it just isn’t worth it. THEN how much will tuition have to increase to keep the bloated colleges running? Either that, or there soon may be a whole lot of highly educated administrators and professors who will be out on the street. This can’t go on forever. The bubble is going to burst. Whoa be to cities that have put a lot of stock in being “recession proof” because of the presence of a college in their midst.

• THEM: “Business is powering the recovery” – Manufacturing added 21,000 new jobs in the last two months.

o ME: So this is the sign that a) the economy is picking right up, and b) it is businesses that will grow us out of the hole we are in, not consumer spending. There is so much wrong with this that I wont even try. Enough to say that the spinmeisters are just pulling stuff out of their asses in the hope to get confidence back into us.

From the Wall Street Journal:

• THEM: Front page March 12 – “Massive” Personal Bankruptcies will “Clear the Ground for Growth.”

o ME: I shit you not. This is how bad things really are: we are counting on people going bankrupt – stiffing their creditors – so that they will have more money to spend on consumer goods rather than paying back their debt. Who reads this shit and believes things are in anyway shape of form about to get better?

• THEM: Exxon’s existing oil fields are declining by a rate of 5% per year.

o ME: Exponentially, by the rule of 70, that means that within 14 years the company will be out of oil. But they are drilling like crazy to find new sources….but that is expected to only bring 1-2% per year on line. Now I’m not great at math, but it sure seems like they are not covering their depletion rates. So while they are adding, what they add will continue to get more and more expensive since it will become ever more valuable to them.

• THEM: “The economy is expected to grow steadily in 2010.”

o ME: Don’t you feel better?

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The Economic Effects of Peak Oil

Very nice piece below explaining clearly the economic impact that peak oil will have on us:a permanent state of increasing depression.Without cheap energy to fuel the growth that is hoped to pay off the accumulated debt, austerity will become an everyday reality, not a short-term fix. A reality that slowly sinks in for the rest of our lives, as net (oil) importers become progressively poorer.

This is an investment adviser, not some enviro nut with an axe to grind.  In the article there is a link to investments he recommends – he sees money to be made in the transition times we are in.

That said, this is just one more alarm sounding that we must begin relocalizing.  We must disconnect from the global economy, we must begin a serious local food system, we must use our “creative class” to help us with how best to relocalize our economy, and we must be making energy descent plans.  And this is a very large reason why I am so pleased with the Legacy Projects and the way the community has engaged around them – these are ways that we can improve our quality of life – which is vital.

(but ok, I think the mass of our leaders and population will simply go around with smiles on their faces and their positive attitudes waiting passively for “recovery.”)

And as you may remember, I’ve written about “peak demand” a lot over the last month or so.  This article makes the point that we will indeed reach peak demand, but it will be rationing by price. We will not use any more oil simply because we can’t afford to, not because we don’t want to:

‘Peak Demand,’ Yes, But Not the Nice Kind

by Chris Nelder

“For Energy and Capital last week, I explained why the “peak demand” argument is a good one–but not for the nice reasons.

Why there will be no recovery

When oil crossed $120 a barrel for the first time in May 2008, oil cornucopians knew they were in trouble. Prices had quadrupled in just five years, yet had failed to bring new production online. Regular crude had flatlined around 74 million barrels per day (mbpd). The case for peak oil was looking stronger with every new uptick in crude futures.

The following month, prominent peak oil critic and cornucopian Daniel Yergin of IHS-CERA changed his stance: The peak oil threat would be neutralized by peak demand. Gasoline consumption had peaked in the U.S. and Europe, he argued, due to the combined effects of increasing efficiency, biofuels, and the recession.

In 2009 the peak demand story seemed confirmed, as prices stabilized around $70 in June, and U.S. consumption remained well off its previous high. Most people thought the nearly 2 mbpd decline in U.S. petroleum demand from 2007 through 2009 owed to efficiency and people driving less.

In reality, only about 15% owed to reduced gasoline demand. The other 85% was lost in the commercial and industrial sector: jet fuel, distillates (including diesel), kerosene, petrochemical feedstocks, lubricants, waxes, petroleum coke, asphalt and road oil, and other miscellaneous products.

Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world’s most developed economies to shrink. At $147, it wreaked serious damage.

As I explained in “Investment Themes for the Next Decade,” the new normal will be cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing, only to bump our heads against the ceiling once more.

Scooters Will Kill SUVs

Two interesting news stories crossed the wire this week, which portend badly for the world’s #1 net importer, the U.S. Continue reading

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“Growth” v. “Development”

This is a GREAT explanation of the situation we find ourselves in.  Lexingtonians should watch this.

Dr. Dennis Meadows is one of the authors of Limits to Growth. Dr. Meadows made this video in Davos, Switzerland in September 2009, when he was there to participate in the World Resources Forum.

In the video, Dr. Meadows talks about economic growth, peak oil, and the possibility of collapse.


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Peak Oil TidBits

The Wall Street Journal had an interesting article about the price of oil on March 4th.   The point of the article was that the oil futures market, which gauges the price of oil for delivery in 12 months, is showing that 12 months from now traders expect a tight market.  The discount for contracting now to buy oil a year from now is dwindling.  The trend shows that the discount is nearing $0, essentially meaning that it doesn’t save you any money to buy it now.  If it passes $0, then the effect would be that you will pay more NOW for oil in 12 months than you would today.

The writer is puzzled as to how this could be.  The article states that there are 60 million barrels of surplus in the world.  The implication is that these 60 million barrels should be enough to tide us over, thus there isn’t any real reason that anyone should be expecting a tight market.

Yet the world uses approximately 85 million barrels of oil per day; 60 million isn’t even a day’s supply.  And, it appears conveniently, the author chooses to confuse what’s happening now with what is expected to happen 12 months from now.

There should be no confusion:  the market understands that supplies are tightening even at a time when demand is dropping in the U.S., by far the world’s largest petroleum consumer.   If there is  any chance of an economic “recovery’ in this country, oil demand will have to pick up.  Increased demand and constrained supplies will equal rapidly increasing prices.  That’s what is driving the futures market.  http://times.busytrade.com/6089/2/The_Oil_Market_Is_Throwing_a_Curve.html

Our friend Jeff Rubin (Your World is About to Get A Whole Lot Smaller) has a great commentary out this week:  “We’re all PIGS now.”  Simply put, it’s not just European governments that are in a serious debt situation.  Here in the U.S., and even Canada, we’ve been borrowing WAY too much and that government spending by necessity will come crashing down.   “…actually paring those deficits down is a whole other matter. For the economy, it is tantamount to taking one’s foot off a floored accelerator, suddenly slamming on the brakes, and then keeping them on at full force for years to come.” The dreams of life as we knew it will end with that.

We borrowed too much to bail out financial institutions.  But this was the wrong cure:  in his words, “we mistook an energy shock for a financial crisis.  Today’s bailouts are tomorrow’s spending cuts.”


All this sounds like peak fucking oil to me.

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Peak Oil and the Economy

This is a very good article that explains simply the relationship between oil consumption and our economic health. Basically, the more we use, the stronger the economy. The less we use, the weaker.

It’s interesting to note that our oil use is the same as it was in 1998, despite 20 million more people. This corresponds perfectly with the fact that our economy hasn’t grown during that time either.

Folks, we are in the peak oil time. The economy as we knew is over. No amount of stimulus, or wishful thinking, will get it back.

By Dr. Stephen Leeb:

“The two most important developments that came to light this past weekend both occurred within the energy sector, a sector which is also a key indicator of economic health.

On the global level, we had a report that oil consumption in the U.S. fell in January to its lowest level since 1998. We can interpret this drop in several ways.

Most of the recent decline came in the demand for distillates, including diesel fuel. Diesel fuel, which is used in trucking, railways, and other forms of mass transit, is particularly sensitive to economic activity. The more goods we produce, the more transportation fuel gets consumed and vice versa. In fact, UCLA has recently created a Pulse of Commerce Index based on real-time diesel consumption by the American trucking industry.

Diesel consumption has a very good record as an indicator of industrial production. Unfortunately, this means the drop in January’s consumption figures suggests that industrial output is slowing as well.

To be fair, the 3-month moving average for this index is considered more reliable than the monthly data, and the 3-month MA is up. December saw a big increase in consumption, so perhaps January’s dip is really just a brief correction. Nonetheless, another drop in February would call the U.S. economic recovery into question.

Looking at the longer-term data, the flat-lining of energy demand confirms that the U.S. economy has not grown much over the past decade. Even allowing for conservation, a 12-year period of no growth is unprecedented. Indeed, there is even the possibility that growth in America, however measly, has been overstated.

However, despite this lack of U.S. growth, oil has been on a tear. In 1998, oil sold for around $14 a barrel. Since then, oil prices have risen fivefold. Why such a huge move if demand hasn’t been growing?

(Incidentally, we recognize that oil is well below the high it set in 2008. It’s also well above its low for that year. Commodity prices can sometimes get ahead of themselves and be subject to oversized corrections. But the long-term trend has been undeniably up.)

The rise in oil prices from $14 to $80 price, despite weak U.S. consumption, sends us an important message: U.S. demand is no longer the key driver of oil prices. Instead, oil prices are being driven by demand elsewhere in the world.

It is not surprising, therefore, that the U.S. seems to be losing some of its clout with the biggest oil producers. For example, we are no longer Saudi Arabia’s most important trading partner. That place of honor has gone to China, which now imports more Saudi oil than the U.S. and is therefore more important to the Saudi economy. This change could have profound implications for the U.S. Dollar.”


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Another of My 2010 Predictions Coming True

Emerging Trends in Real Estate 2010

This report was recently issued by the Urban Land Institute and PriceWaterhouse.  This is an OPTIMISTIC organization saying this….see what peak oil is doing?

This also goes to my predictions for 2010 – that there would be no new downtown construction this year.

  • “After more than a year spent in suspended animation lagging already shattered housing markets, the commercial real estate industry hits bottom in 2010, suffering a surge of painful writedowns, defaults, and workouts.”
  • “A lackluster economic recovery characterized by problematic job growth will hamper the pace of any real estate market resurgence, which probably cannot gain much traction until late 2011 or 2012.”
  • “Massive government infusions finally build up loss reserves in financial institutions to levels allowing them to foreclose or strike deals with many overleveraged borrowers. In turn, banks will start to dispose of real estate owned, and government regulators will package and sell more bad loans and real estate assets acquired in takeovers of increasing numbers of failed community and regional banks. Transaction markets will begin to thaw and value declines ultimately will average more than 40 percent off mid-2007 pricing peaks. These property market reversals likely will be the worst registered since the Great Depression, eclipsing the industry debacle of the early 1990s.”
  • “Debt markets will remain severely compromised—resuscitated banks will increase lending slowly, employing strict underwriting standards and requiring significant equity stakes from borrowers.”
  • “Mexico’s fortunes decline in lockstep with its U.S.-centric economy. ” (me – peak oil is hitting Mexico really hard)

read the whole thing here:  http://www.uli.org/~/media/Documents/ResearchAndPublications/EmergingTrends/Americas/2010/2010EmergTrends.ashx

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What Really is Our Most Important Issue?

Last night, Lexington mayoral candidates assembled for a debate. All the  candidates agreed that economic development – creating jobs – is the most important thing facing Lexington in the next four years.

Since Lexington’s city government is payroll tax dependent that makes sense – as increase in jobs should theoretically increase the tax base (unless they are low wage service jobs, in which case people are likely to demand more in services than they pay in taxes – we’ve got lots of those) .  Anyway, the theory is that increasing jobs will allow us to keep acceptable levels of government service.   Of course, it doesn’t hurt elected officials at election time to be pro jobs either.

But what if?

What if the biggest issue facing Lexington is not jobs? What if the biggest issue facing Lexington was energy descent? What if the price of oil, and consequently, the price of everything that surrounds us, was to increase rapidly and enormously? Jobs wouldn’t be the number one issue then, would it?

(And don’t call me doom and gloom! I’m just reporting what Toyota, Great Britain, the major oil companies, the American military, Warren Buffet and others are saying or doing – this isn’t me sitting in my basement – well I am doing that – but I’m not making this shit up)

If that we’re true, you know what would be the number one issue? Take your pick: Food security. Alternative transportation. Energy efficiency in buildings and homes. Free falling government revenues. Commercial collapse. Sharp population losses, or gains. Safety.  Feel free to add yours.

Debating jobs is a luxury at this point in time. Lexington is in no way prepared to have some sort of “jobs revival.” Global forces will conspire to keep that from happening. Until we decouple from the global economy, we will have no power over jobs in a conventional sense. For our candidates, all smart, sincere people, to be arguing over being the “jobs candidate” is silly. It ain’t happening. It’s just empty. (For example,the bureau of Labor statistics data shows that in December 2009 there were 2,500 LESS jobs in the metro compared with December 1999!    This is despite adding over 20,000 new people to the regional labor force.  A truly lost decade. See the numbers here:  http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LAUMT21304605&data_tool=XGtable)

Preparation is the biggest issue facing Lexington. We know what’s coming. We shouldn’t be wasting our time debating “jobs.” We need to be creating resilience. And the great thing is that jobs will come with the purpose of resilience.

Creating resilience means relocalizing our economy, from food to fiber to finance. Creating resilience means ending the hostage situation we are in with oil. Creating resilience means adapting to a new climate.

This is not a social, environmental, or personal “values” debate. Reality isn’t political. What is happening is happening. It isn’t Democrat or Republican or liberal or conservative. We can use those frames of reference when we debate about creating resilience – oh what debates those will be! What we can’t waste time on is debating reality.

We will be the least vulnerable to the shit that’s coming down when we are the most self-reliant. This strategy is at once the most deeply conservative – the preservation of our place – as well as the most populist – we’re all in this together. And the great thing is, resilience is something that can be accomplished during the intervals between election cycles and as well it will offer true hope and optimism to our community.

The politician that gets this will be the one rewarded with a landslide. He or she better be ready to move once they get it.  We deserve the best.  Let’s get it.

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Local Economy: The Path to Resilience

Bloomberg Businessweek has a story this week about the growing “buy local” movement. The article states that there are now 130 cities or regions that have “buy local” groups, up from 41 just 3 years ago. A lot of this is feel good stuff about supporting our friends and neighbors, as well as backlash against crap made in China and a growing resentment against the devastation that chain stores have wrought in our communities.


But to me the key point of the article is that buying local is actually the strongest economic development tool that we have these days. I know you all know this but it bears repeating:

  • locally owned stores spend proportionately more on payroll than chains – better for humans
  • for every $100 spent at a locally owned store, $45 remains in the local economy, compared with about $13 per $100 spent at a big box – that’s 3.5 TIMES more – I’m not a business person, but isn’t this better for us as a city? That money will get recirculated again and again rather than disappearing to Bentoville or whever…

The article offers a case study example: 

“…in 2007 booksellers in San Francisco asked Civic Economics to calculate what would happen if Bay Area consumers shifted 10% of their spending from chains. The forecast: $192 million in increased economic activity for the region and almost 1,300 new jobs. ‘If any single business promised that, the governor would be downtown handing out checks,’ says Dan Houston, co-founder of Civic Economics.” 

In Lexington our city government – the thing that provides all the services we enjoy – is enormously dependent on local income taxes. Wouldn’t it make sense to promote local as a way to grow jobs? Wouldn’t it make sense to make local the central element of every single thing we do? Yet what are our nominal “leaders” doing to truly build a local economy here? Not much. Like members of a cargo cult, they are looking to the skies for the plane loaded with goodies to arrive from heaven, or somewhere. 

Meanwhile, the real leaders in our community are just doing it. Thankfully, the folks who created and support LocalFirstLexington are leading the way.http://www.localfirstlexington.com/ – visit their site and support our local businesses!  

I’m sure you’ve heard of these local economy ideas: 

You may not have heard of these:  

  •  Utah Local First, with 2,500 members, gets funding from both Salt Lake City and the county.
  • Grand Rapids Local First helped persuade its town to give a 1% bid preference to local businesses

Again, does our government do this here? 

Building a local economy is a huge part to adaptation and resilience in the face of what is coming (see post below, for example). “If there had been no oil crisis and no financial crisis,” says Michael Shuman, director of research and economic development for the nonprofit Business Alliance for Local Living Economies, “we’d be whistling in the wind.” I take this to mean that building a local economy is the ONLY way for communities to face realities. 


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Economic (un)Certainty

Which way is the economy going? This is important for us here in Lexington as we look to somehow improve our city budget, as well as our overall standard of living. But we are living in very uncertain times, though. Just today we have two very different opinions on where things are going.

My take on it is that oil prices will rise with any “recovery” and will thus act as a lid on any “expansion.” We are in the peak oil time, which looks like everything going on around us today: recession, joblessness, stagnant wages, foreclosures, uncertainty…. but that doesnt stop the:

MAINSTREAM MEDIA: “Economists expect the recovery to remain “firmly on track” over the next two years though job growth is likely to remain slow, according to a new survey.The latest outlook from The National Association for Business Economics, set to be released Monday, sees regular job gains resuming this quarter but no drop in unemployment below 9 percent for another year.  

“We see a healthy expansion under way, although it will take time to reduce economic slack and repair damaged balance sheets,” said Lynn Reaser, the group’s president and chief economist at Point Loma Nazarene University.

The NABE forecast is largely consistent with its last quarterly forecast in November and reflects an economy in slow-but-steady recovery mode.

Participants in the survey consider the housing market rebound sustainable. Home prices are predicted to rise 1.6 percent in 2010 and an additional 2.6 percent in 2011. Those may not be huge increases but they would still represent an important watershed for the economy, the NABE noted, after the declines of the recent past.

The stock market is expected to climb significantly in 2010 and 2011. On average, the economists predict the Standard & Poor’s 500 index, a widely used barometer of the stock market, will rise 23 percent over the next two years. The S&P 500 jumped 3.1 percent last week, though it’s still down 29.1 percent from its high.”


MISH:“The European recovery is on its last legs. The global recovery will soon follow. Prepare for an economic relapse. One is highly likely. ….it is a mistake to assume the US ‘recovery’ is about to pick up steam. If the economy stagnates (which I think is the best case scenario), that would add to housing pressures. An economic relapse is more likely….” 


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Did Peak Oil Cause the Financial Crisis?

Absolutely not says Ilargi (who completely understand peak oil) at the Automatic Earth:

“Where did the financial losses originate? In the energy field? Not even close. They stem instead from low post tech bubble interest rates which led to low mortgage costs which led to everyone wanting to buy a home which led to no-questions asked loans which led to high volumes of mortgage based securities which led to a zillion other forms and sorts of derivatives which led to untold trillions in lost wagers which led to a collapsing financial economic system, a process we find ourselves in the early stages of. We can argue about the sequence in which these things happened, but not about whether they did happen, or about the role of peak oil in their occurrence.”

Absolutely says Gail the Actuary at The Oil Drum:

“What happens is that many of the consumer’s most necessary purchases tend to be closely tied to the price of oil—things like food and gasoline, and home heating oil. If the price of these necessities goes up, the consumer is likely to cut back on something else. One possibility is to cut back on non-essential purchases—not go out to a restaurant, or not buy a new car or higher priced home. Another possibility, if the consumer is really pressed, is to default on some of the consumer’s promised debt repayments. What effect would cutbacks in discretionary spending and loan defaults have? It seems to me that they would look a whole lot like the recession and debt defaults that we have been seeing recently.”

Partially Absolutely says the International Energy Agency (who have denied peak oil until late last year):

The IEA warned in 2006 that the effect of high oil prices from the preceding four years had not yet worked their way through the world economy, and that further increases in prices would “pose a significant threat to the world economy, by causing a worsening of current account imbalances and by triggering abrupt exchange rate realignments, a rise in interest rates and a slump in house and other asset prices”.

Partially AND It Will Happen Again Says Dr. James Hamilton: ” Some degree of significant oil price appreciation during 2007-08 was an inevitable consequence of booming demand and stagnant production. It is worth emphasizing that this is fundamentally a long-run problem, which has been resolved rather spectacularly for the time being by a collapse in the world economy… If growth in the newly industrialized countries resumes at its former pace, it would not be too many more years before we find ourselves back in the kind of calculus that was the driving factor behind the problem in the first place. Policy-makers would be wise to focus on real options for addressing those long-run challenges, rather than blame what happened last year entirely on a market aberration.”

Absolutely says Jeff Rubin: “By any benchmark the economic cost of the recent rise in oil prices is nothing short of staggering. A lot more staggering than the impact of plunging housing prices on housing starts and construction jobs, which has been the most obvious brake on economic growth from the housing market crash. And those energy costs, unlike the massive asset writedowns associated with the housing market crash, were borne largely by Main Street, not Wall Street, in both America and throughout the world.”

Absolutely, But it was China’s Fault says Steven R. Kopits: “Ultimately, the inability of the oil supply to keep pace with global demand proved to be a key contributing factor to the current recession. I would note, however, that the proximate cause of the recession is China, not peak oil. China ultimately provided both the financial liquidity and the commodities demand which brought down the global economy. Were China not so large and not at its current stage of development, peak oil might have come and gone without anyone noticing for some time. As it was, China hit its stride just as the oil supply was stumbling. The issue was not, therefore, peak oil in and of itself, but rather the supply/demand imbalance caused by the inability of the global oil supply to adjust to China’s incremental demand.”

Here’s my take: The price of oil and the financial crisis sure seem to have weird parallels. Was it just a coincidence that both things happened essentially at once?

To me, the gigantic price spike in 2008, and all the spikelettes leading up to it, prove that energy abundance is over. We had too many people wanting too small of a resource – oil. And if oil is limited that means it will get very expensive, then that means that economic growth as we knew it is over. So to me, peak oil caused the recession indirectly. The recognition that growth was over caused the greedy sluts on Wall Street (and everywhere else) to chase “growth” in ways that were criminal, because there was no none criminal way to find rewarding returns. Most of those folks have made out like, well, criminals, in this new era. The crash didn’t cost them. They got fantastically rich. It’s the rest of us living in the peak oil time that will suffer – a time of non-existent real national or personal income growth, high unemployment, and devastated savings. It was going to happen anyway, I guess. I just wish that we hadn’t spent so much bailing the fuckers out. 

WHAT DO YOU THINK? Love to hear from you.


Filed under Economy, Peak Oil

HOLY SHIT: Don’t Read This

Dont read this.  I’m serious.  You are not ready for reality.  But if you do, ask yourself how this happened to our country.  I don’t know what to say right now.  After reading this I am speechless.  And it’s nothing but facts, not politics.  Unless your politics are in some disagreement with facts…uh…you know who you are….hey FOX is on!

The Economic Elite Have Engineered an Extraordinary Coup, Threatening the Very Existence of the Middle Class

By David DeGraw, Amped Status
Posted on February 15, 2010, Printed on February 18, 2010

“The American oligarchy spares no pains in promoting the belief that it does not exist, but the success of its disappearing act depends on equally strenuous efforts on the part of an American public anxious to believe in egalitarian fictions and unwilling to see what is hidden in plain sight.” – Michael Lind, To Have and to Have Not

We all have very strong differences of opinion on many issues. However, like our founding fathers before us, we must put aside our differences and unite to fight a common enemy.

It has now become evident to a critical mass that the Republican and Democratic parties, along with all three branches of our government, have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99 percent of the U.S. population no longer has political representation. The U.S. economy, government and tax system is now blatantly rigged against us.

Current statistical societal indicators clearly demonstrate that a strategic attack has been launched and an analysis of current governmental policies prove that conditions for 99 percent of Americans will continue to deteriorate. The Economic Elite have engineered a financial coup and have brought war to our doorstep…and make no mistake, they have launched a war to eliminate the U.S. middle class.

To those who feel I am using extreme rhetoric, I ask you to please take a few minutes of your time to hear me out and research the evidence put forth. The facts are there for the unprejudiced, rational and reasoned mind to absorb. It is the unfortunate reality of our current crisis.

Unless we all unite and organize on common ground, our very way of life and the ideals that our country was founded upon will continue to unravel.

Before exposing exactly who the Economic Elite are, and discussing common sense ways in which we can defeat them, let’s take a look at how much damage they have already caused. Continue reading

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Morningstar Analyzes Peak Oil for Investors

Morningstar is one of the most repsected finanical services in the world.  Merely having them mention the words “peak oil” show how far we’ve come in just the last few months.

This article purports to be a serious look at peak oil and offers advice on how to invest wisely during the peak oil time.

But. Good. Lord.

I’m glad to have come across this on the mainstream internets, but this shows so clearly how little thought actually goes into the reality that peak oil presents.

First the opening:

“Although there are large implications throughout the economy, I want to say upfront that I do not think this will bring on Armageddon. Oil prices that are significantly higher than earlier in our lifetimes will bring about great change, yet I firmly believe that our economy has the ability to successfully adapt. Despite the strong headwind oil scarcity will create, I am still an optimist.”

Here is the typical American mindset: “Great Change is coming. A strong headwind of scarcity. But I’m still an optimist.” No one in any position of responsibility wants to appear to be worried about anything. We have the cult of “growth.” We also have a twin cult of “optimism.” What is this optimism about, you ask? That things will remain basically the same as they are now. See, despite great changes, and strong headwinds of scarcity, we cannot admit for one minute that anything will be different in our lives. That’s what passes for optimism.

Ok, so on to the investment advice. I’ll bet that there’s lots of talk about coal and electric cars. Let’s see:

Initial Winners and losers in Peak Oil:


  • Oil exploration and production companies: “If oil is becoming more scarce, it makes sense that those who own rights to the resource will benefit.” The article says Exxon could be a winner, for example.


  • Existing Petro Infrastructure: “With lower production of oil, there will be less of a need for the energy infrastructure needed to support the processing and transportation of liquid petroleum.” The article says Exxon could be a loser, for example. Wait, what?
  • Coke and Pepsi – people just wont drink as much bottled water. They’ll opt for the “free and ‘green’ alternative” of tap water and this “is only going to get stronger.” DOES THIS MORON REALLY BELIEVE THAT WHAT COMES OUT OF THE TAP IS FREE? But really, no one has to lose in this world because “Thankfully, Coke and Pepsi still have exceptionally attractive businesses, even without any contribution from water products.” Folks, I shit you not.

Now, lets get on to the meat:


  • Inefficient Transportation: “Unfortunately, our entire economy is currently based upon relatively inexpensive point-to-point transportation of people and goods.” “Trucking companies and airlines are likely to continue suffering. Even traditional newspapers and the postal service–which at the end of the day revolve around moving information via dead trees–should continue their downward spirals.” “…few companies will be totally immune to higher transportation costs.” YEAH, a little reality.


  • Efficient Transportation: “…we will continue to see more and more hybrid and electric cars on the road.” Ok, here’s the problem. Our Morningstar analyst has not taken the time to think through what the total effects of peak oil are. Most people make this mistake. They think that, if gas gets expensive, then I’ll just switch to an electric car. What they don’t think through is the fact of just how thoroughly drenched with oil every single thing in our lives is. If we can’t afford to drive around with regular gas because it’s too expensive, how will we be able to drive around in an electric car that is made from and produced with that same expensive oil? This is just an infantile reaction: I don’t want to give up my car based life, so I’ll keep the fantasy alive. There is no substitution from oil .

“Railroads already have a major cost advantage over trucks in terms of fuel efficiency, and this advantage will only get stronger as fuel prices rise. I have no doubt this is one of the primary reasons Berkshire Hathaway and Warren Buffett was attracted to Burlington Northern Santa Fe.” See what I’ve been saying?

  • Electric Utilities: “The primary alternative to oil as a transport fuel is electricity. In a world with declining oil production, electric cars and plug-in hybrids are only going to continue to replace gasoline-fired vehicles.” CAN YOU HEAR ME SCREAMING? Sorry. Remember, if gas is too expensive to burn in a car, then it’s too expensive to make cars with. See the tortured logic of people who cannot imagine giving up what they have now?
  • Electricity Generators: “Not only will the regulated utilities need to be beefed up to handle a shift from oil to electricity in terms of transportation, but a scarcity of oil will cause a rise in electricity prices.” This is a mixed bag. One the one hand, we get the standard economist’s theory of substitution, which says when one thing gets too expensive, then we’ll just switch. But we are NEVER going to make a switch to electric powered transportation and keep the same scale that we have now. Never.

Now, peak oil WILL cause “a rise in electricity prices.” Oil is the       beginning point for all other energy sources. But uh oh, “This will happen directly, as electric vehicles are substituted for gasoline vehicles, increasing overall electricity consumption.” Nope. See above.

  • Alternative Energy: “There will be no shortage of alternative energy technologies and companies vying for a piece of the energy market pie that is being vacated by liquid petroleum. Wind, solar, biofuels, geothermal, tide capturing, and so on, these are all areas that will become increasingly economical…” All the energy generators he lists have oil as a beginning point. You simply can’t make them without oil. So if oil is too expensive to burn in a car, its going to be very expensive to make things with. That means that renewables will never become “increasingly economical.” That doesn’t mean that we should pursue them with everything we’ve got, they’re just not going to provide us with cheap energy. Those days are gone.
  • Labor: “Although higher oil scarcity will act as a drag on the entire economy through raising shipping costs, there is one silver lining.” Ok, we are getting closer to some real truth, but once more we have to wade through the muck first. Peak oil is not just a transportation crisis. This is thrust of the whole article and its wrong. Peak oil is a lifestyle crisis. Oil is at the bottom of everything in our lives. When it gets scare, everything will change.

But this article does offer the glimmer of understanding that peak oil will make our world, to borrow from Jeff Rubin, a whole lot smaller. In the era of cheap energy, labor costs could be cut by off-shoring. No longer – this is where peak oil IS a transportation crisis – it “all boils down to high oil prices taxing transport and causing us to act more locally. This means goods being produced much closer to where they are actually consumed, which would benefit local laborers. ” YEAH. Right for reasons not quite understood.

In conclusion: “As you can see, there are actually quite a few companies that will benefit as oil production peaks and our economy moves from a heavy dependence on liquid petroleum to the alternatives. Overall economic growth will be constrained, and it will not be an easy transition. Yet peak oil will certainly not destroy the investment landscape.”

These statements offer another mixed bag. The old hoax of substitution is trotted out, making us feel like we do indeed have choices. Some reality in there about the facts that growth will be constrained and it won’t be an easy transition. And then smiles and rainbows at the end!

Wow. We have a lot of work to do folks, but even having an article like this in the mainstream says that we are moving forward.


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Is the Sky Falling, Chicken Little? Questions for Lexington’s Leaders

Reasonable people in this country have become numb – to avoid pain, we look for the middle when we hear “extreme” viewpoints.

We say, “Well, it (whatever topic it is) must be between those extremes,” meaning that it isn’t so bad.

And it’s not just the Overlord classes. We have bright people here in Lexington, writers who have audiences, who subscribe to this thinking.

Folks, peak oil isn’t a political talking point. It’s reality.

But because it sounds “extreme,” no one is taking it seriously here.

This is a train wreck happening in slow motion right in front of us (…as I dredge up every cliché in the book).

Our problem is this: we’ve had so many predictions and warnings about the limits to our life that we’ve grown immune to them.

Chicken Littles have been running amok for 40 years, and in people’s minds, the sky isn’t falling because it hasn’t already . The egregious bullshit that many climate science people have perpetuated is just the most recent example. (But know this folks, the earth is warming, greatly. Oh, but that sounds extreme, so let’s find a compromise on how to think about it instead of accepting it… J )

The real problem is that the sky was falling the whole time, and now it’s accelerating. 40 years is nothing in the span of history. Seems like a lot to us, but those prophets who’ve been saying “we can’t go on as we have” – and who caught so much derisive shit because of it, are right.

But ask ANY SINGLE LEADER IN OUR CITY TODAY: “What about peak oil?” And I guaran-fucking-tee you that you get a dumb look first, then a slick rationalization about how we are the greatest and there ain’t nothing going to stop us.

Our leaders are focused on “growth” and “economic development” which is laughable because we haven’t had significant economic development in this region for 25 years, when Toyota came to town. Since then the biggest employment area in the region has been Hamburg. Low wage, low skill, selling environmentally destructive shit, and businesses that won’t survive peak oil have become our model. Yea for us.

Oh, right, we got lots of health care and education jobs. Those aren’t subject to a bubble or anything that would burst…if we got poor, or healthy, or needed a new set of skills…..

We are living in the peak oil time. We are getting used to the new normal of these days: high unemployment, declining wages, broke local governments, global economic insecurity, a changed climate, and higher energy costs.

This sounds extreme. But look around: isn’t it real? Are we going to wait until it gets worse to do something about it?

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The Great Reskilling

The future of work in Lexington is much different than what most people conventionally imagine.  Peak energy simply means that distance will matter a great deal.  When distance matters a great deal, being LOCAL matters a great deal too.  Since we wont be able to rely on food and things made half a world away to keep us going, we are going to have to make do right here.  This is great – our communities are stronger in this future, there is more freedom, more meaning in our lives.  Read this and see what your next “career” might be – if it’s not already!

Posted by Magnus K at Sunday, January 17, 2010 on http://life-after-oil.blogspot.com/
“Rob Hopkins has founded and popularaized the Transition Town movement. One of his ideas is The Great Reskilling. The basic idea is simple – the twin challenges of peak oil and climate change mean that society will change fundamentally, and this will in turn force each one of us to acquire new knowledge and skills. These “new” skills are often old skills; knowledge of how to do things in a world of drastically reduced access to energy, and incidentally leading to a much lower environmental impact. They include old craft skills, resource management and farming — knowledge that was alive and widely distributed in society only two generations ago:

“Re-learning the skills that our grandparents took for granted, such as how to use hand tools, how to build our own structures, how to mend and make clothing, how to make our own medicine, how to forage, grow, preserve and store our food.”

To some extent, The Great Reskilling is about turning the clock back. Not for dogmatic reasons (“technology is evil”) or for romantic reasons (“everything was better in ye olde times”), but because the required direction of action – given coming (energy) resource scarcity and climate change concerns – is so obvious. And it is thus better to start acting now, rather than to wait until we have no other choice than to learn everything all at once. However, we should of course hold on to any and every technology that we can possible manage to maintain. From this perspective, it is clear that cars are not a sustainable transportation technology, and that resources for transporting people (in cities) already today should focus on rail traffic and bicycles, rather than wasting resources on building brand new roads. Continue reading


Filed under Economy, New World Planning, Peak Oil

Shortage of Rare Earth Elements Could Thwart Innovation

In a timely follow up to my post below – “The Cult of Growth” – I came across an article that describes the peaking of the rare earth elements needed to sustain high tech.  The point I made in that earlier post is this:  we cannot continue to exploit nature as we have done in the name of growth because nature itself won’t let us.

Many people will argue that we have reached a higher plane, that we are now in the “knowledge economy” and plundering the earth is not what we need to continue to grow.  My response is:  nonsense.  Everything we do has the earth as it’s beginning in some form or fashion.

The article states: “…rare earth elements with exotic names such as europium and tantalum hold the key to hybrid cars, wind turbines and crystal-clear TV displays – that is, if a looming supply shortage doesn’t stop innovation in its tracks.

Rare earth elements, called ‘rare earths’ by those who use and study them, often prove irreplaceable in green technologies and high-tech consumer products. Yet the world’s production of rare minerals relies mainly upon China, and the Chinese government warned last year that its own rising demand will soon force it to stop exporting the precious elements.

‘Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths,’ said W. David Menzie, chief of the international minerals section at the U.S. Geological Survey (USGS).”

See, even high tech can’t be done without something from the earth as a beginning.  But even assume hypothetically that we aren’t reaching a peak in the rare earths, how would they be transported from China to the world?  On a vessel of some sort that relies on oil.  So disregarding the limits of the materials themselves, they would become much higher priced simply because of peak oil.  Higher prices means less use.  In this case, it means less “high tech.”

As the title of Richard Heinberg’s book says, we’ve reached “Peak Everything.”  Not because we want it to happen, not because of any socialist plot to take down America.  Simply because nature can’t give us any more.

Read it here: http://news.yahoo.com/s/livescience/20100216/sc_livescience/shortageofrareearthelementscouldthwartinnovation


Filed under Economy, Peak Oil