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Tue

11

Sep

2007

The Disinformation Society
Tuesday, 11 September 2007 10:32
by James Howard Kunstler

One question that readers ask me often is why the mainstream media is doing such a poor job of reporting the nexus of the global energy emergency and the turmoil in global finance. I maintain my "allergy" to conspiracy theories. There isn't any clique of top-hatted Wall Street biggies with monocles joining with with gray-suited CIA-types to intimidate editors with tongs and electrodes. American culture has become self-dis-informing.

As my friend Peter Golden (blogger at Boardside) puts it so well:
"When people lie, they know they are doing something wrong. But when they just make things up, there's no consciousness of right or wrong at work. It seems morally okay to live in a fantasy world — and this is much more pernicious to the public discourse than lying."
My friends, who are mostly ex-hippie, yuppie progressives, have been locked in prayer to exorcise the evil spirit of George W. Bush for six years, but they fail to recognize a more comprehensive failure of leadership in every sector of American life, and especially in the ones where a lot ex-hippies-now-yuppies run things. Our political leadership may be deplorable, but so is our leadership in business, education, the arts, and especially the media.

The poster child for this is The New York Times. In their reporting on the world oil situation, they have consistently and uncritically swallowed the public relations handouts of Daniel Yergin's Cambridge Energy Research Group (CERA), a wholly-owned PR shop serving the oil industry. Laziness doesn't even explain this. It's bad editorial leadership. It's a failure to ask the important questions.

On Friday, the oil futures markets closed a dollar-and-change away from the all-time record high price (the same day the Dow Jones Industrial Index fell 250 points.) Today's (Monday's) lead headline in the NY Times Business Section is "Disney to Test Character Toys for Lead Paint." Well, I hope we get that situation straightened out so that civilization can continue with a full supply of Disney action figures under the Christmas trees — and forget for a minute whether Grandma will be able to drive to the WalMart in December, or whether WalMart will be able to keep the diesel tanks filled for their "warehouse-on-wheels, or whether both Grandma and the Assistant Manager of her local WalMart are three months in arrears on their re-set mortgage payments, and maxed out on their Discover cards...

To me, there seems to be an obvious correlation between the current failures in the financial markets — in particular the credit sector — and the gross failure of leadership across the board in American life. Ultimately, credit depends on legitimacy, and so does authority. They are tied together. For years, both have been immersed in fantasy rather than reality.

How does one otherwise account for the remarkable disappearance of standards in lending among the human beings who lead banking institutions? All the banking executives didn't wake up one morning missing sixty IQ points. And yet neither can one say that they all woke up one morning with evil intentions to work wickedness in the world. They simply became subsumed in a fantasy that there was no material difference between borrowers with a proven ability to pay back loans and borrowers with no record of credit-worthiness. And they got rid of the problems that might have ensued by selling off wholesale bundles of good-and-bad loans to willing buyers (other banking executives) further down the line, who in turn sold certificates representing these bundles to willing executives in pension groups and money markets. It became normal. It was justified at the tip-top of American leadership by the Explainer-in-Chief saying that it was a good thing for as many Americans as possible to own their own house.

Did the American media report on this chain of dangerous fantasy? Not in the least. They were simply mesmerized by the amazing, supernatural rise of nominal house prices, and the fantastic flow of paychecks from the production home-builder's payroll offices, and the fabulous cash-out re-fi's that sent streams of revenue to the Crate-and-Barrel furniture outlets, and the Williams-Sonoma catalog headquarters, and the plastic surgery parlors.

All this occurred against the background of what has come to be called Peak Oil, the turnaround point in global oil production, and indeed the all-time high-point of world oil consumption, which can be dated precisely now (in the rearview mirror) as having topped absolutely in July of 2006 — the exact moment, incidentally, that a gigantic pin first pierced the outermost molecules of the soapy film that held the housing bubble together.

Oil production (all liquids, including natural gas byproducts, tar sands, what-have-you) are down now by more than a million barrels a day. We've only experienced it so far in the juddering rise of oil futures prices. Over this brief period of time since the absolute peak, the losses of supply have been yielded in the world's poorest societies, who simply drop out of bidding for oil supplies.

What the mainstream media is missing now is the prospect of a really swift worsening of the problem as exports from the major oil producing nations fall off at a sharper rate than their production declines. This idea has been articulated best by Dallas geologist Jeffrey Brown over at The Oil Drum.com (and for one particular discussion of it go to this blog at Jeff Vail's Energy Intelligence site).

The mainstream media is also failing to get the connection between the supreme commodity that allows the world's industrial economies to operate, and the credibility of a financial sector whose chief mission is to finance the operations of industrial economies. In the absence of any real prospect for growth in America's industrial economy, the financial sector dreamed up a system in which we could invest in the manufacture of investment instruments instead of productive activity per se. And so all the expertise and time of those working in the financial sector has gone into the production of tradable debt vehicles based on abstruse formulas that almost nobody could understand (especially the people buying and selling them).

All this dangerous fantasy gained legitimacy because for a while it seemed to pay off. Ordinary citizens could acquire houses much bigger and better-equipped than their incomes justified. And mortgage originators and bankers made whopping fees in enabling the action. And higher-up bankers in the chain derived un-heard-of bonuses from leveraging the securitized debt from all that, and politicians basked in the glow of a seeming hyper-prosperity, and professor Bob Bruegmann at the University of Illinois declared suburban sprawl a good thing, and even The New York Times, while staggering in news-gathering effectiveness against the Internet, was able to rake in enough advertising to build an unnecessary new headquarters skyscraper in Manhattan.

The dream is over now. Reality-based moral hazard is returning (literally) with a vengeance. Right and wrong are going to matter again and a lot of people who put these things aside for a while are going to suffer.
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a guest said:

0
...
Jim,

I am playing the devil's advocate here, but haven't oil companies been finding new fields over the past few years which will help offset the onset of peak oil significantly? How sure are you that world oil production peaked? How sure are we that there are no really big oil fields left? Could it be that refining capacity is responsible for the inability to raise production levels?

On the other hand, the much-lauded discovery of an oil field off the coast of Brazil is estimated to contain approximately 700 million barrels, but world demand is at 25 gigabarrels/yr and growing so this is discovery and others like it seem like drops in the bucket. The fact that some people get so enthused by discoveries of this magnitude is not a good sign.
 
September 11, 2007
Votes: +0

a guest said:

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Although I do agree in general that "American culture has become self-dis-informing," it is naive to think that the brightest minds in the tallest of Ivory towers within the increasingly fascist US government couldn't see the current colamity coming. It is called predatory capitalism. They are the predators and this time we are the prey. Does Mr. Kunstler beleive that it is a coicidence that the clearly phony Global War On Terrorism is occuring at the same time as global economic collapse due to peak oil? If so, he should take something for that "allergy". Then he will be able to recognize that the term "conspiracy theorist" has lost all meaning in the modern world when it used to describe people who question the 9/11 Omission Report (does not even mention that 7WTC collapsed AT ALL!).
 
September 11, 2007
Votes: +0

Jimmy Montague said:

Jimmy Montague
Both are right.
Jim K. is clearly right: America has in large measure disinformed itself and works increasingly hard at becoming totally ignorant as fast as possible. I think it all started with Vietnam, where we were told it was necessary to destroy the village in order to save it. But the Reagan administration, so far as I know, gets credit for the idea of self-administered lobotomization. It was the Reaganites, remember, who quit counting the unemployed as soon as the unemployed used up their unemployment benefits. It was the Reaganites who dropped rational tax policy in favor of a gizmo called "The Laffer Curve". The Reaganites, in sum, made great strides toward perfect, self-inflicted ignorance, and subsequent administrations have worked very hard not to be outdone in that (dis)regard.

"A Guest" (2) is also right: Conspiracies are surely to blame for many of our current problems -- even if some of them were conspiracies of one. If or when someone starts digging into the financial disaster that's now shrieking down upon us, that someone will probably find that the person who profited most from the disaster was Alan Greenspan -- the very same man who people (experts, I presume) are lining up to blame for the ongoing disaster. Did Cheney and his pals conspire to create the energy policy that makes Cheney and his pals richer moment by moment? Did Cheney and his pals conspire to start the Iraq War on false pretenses? Did they not conspire to fight the war in a way that would make them all richer moment by moment?

All in all, I think that the multitudinous messes in which America now stews provide an ample number of things for any contrarian to gloat over: We saw these messes coming; we told the country what would happen; and damn their eyes they didn't listen. Ain't we smart? Now if we could only figure a way out of having to suffer along with the rest of us yahoos --

Wait a minute! Did I say that right? Damn, I didn't mean. . . . Yes I did. So maybe we contrarians should quit calling ourselves yahoos and start calling ourselves googles. The liberals, remember, have started calling themselves progressives. That seems to work for them. So all I ask is that we just think about it, OK? Wouldn't it be a wise thing -- when the mob comes to your door looking for yahoos -- if you could say reflexively, "I'm not a yahoo! I'm a google!" Live long and prosper.
 
September 11, 2007 | url
Votes: +0

a guest said:

0
The Disinformation Society
Kunstler is very insightful, but his "allergy" is also his blind spot.

He doesn't see the connection between Wall Street and the CIA but the execs and high ranking officials from those two powerhouses appear to be playing a constant game of musical chairs. The corporate, government, and the media ties are deep - at this point verging on the original definition of fascism. These closely knit groups have collaborated for their mutual benefit and selective advantage, it is the logical outgrowth of our society's fundamental organization.

What about the important analyses and research done by Chomsky on the process of "manufacturing consent"? It may be comforting to discount Chomsky and others as paranoics but they have verifiable evidence including an extensive paper trail.

If the basic media problem of limited transparency is not widely understood, then we will never have the type of open discourse that leads to an informed citizenry.

Yes, it is true that Americans are often too lazy look into the details surrounding important topics and they struggle to make sense of a constant feed of seemingly unconnected information. However, we don't need to set up a false dichotomy to explain why the mainstream media refuses to adequately or accurately cover the important issues, focusing instead on inflammatory issues like stem cell research or gay marriage.

Ultimately, the media conglomerates continue to herd and corral public opinion, the task made all the more easier given that a large segment of the public tends to be easily sated with overly simplistic explanations and pointless distractions.
 
September 12, 2007 | url
Votes: +0

a guest said:

0
Yergin's Cera is not a shill for the oil industry
I am a retired Exploration Director. I once had a discussion with our marketing VP about CERA's notoriously bad predictions. He agreed and had argued that they not be renewed because their predictions were worthless. So, not all in the oil industry think Yergin and Co. are doing a good job

Glenn Morton
 
September 21, 2007 | url
Votes: +0

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