State of Empire, mid-May
Roundup and overview (actual newsletter #1)
Since this service was originally intended as some sort of newsletter distro, I thought it might be appropriate to actually post something akin to that type of content. “Blog”, I’ve always really hated that concept, echoing of MySpace vanity self-promotion and the marketing of “one’s brand”, as if you and I could share in the agency of Capital.
Newsletters were once the original papers, though, from which grew the sort of popular appropriation of the means of knowledge production that I think we sorely need at this moment in history. Since this is the first iteration of the newsletter proper, I’ve been overly ambitious in terms of the general background of things, so just skip that if you like. Anyway, here goes.
Energy and resources
Energy is king. The amount of available net energy to society is the foundation of everything we do, be it in the form of fossil fuels or firewood. The availability of resources as such are always predicated upon available net energy, but sometimes entail bottlenecks of their own (if energy can’t be readily converted into the desired resource).
Peak oil happened in October 2019, at the latest (see British Petroleum’s Statistical Review of World Energy, 2021). Net petroleum production declined by 6.9% in 2020 from the preceding year, and will almost certainly never again reach the 2019 levels, which not only relates to depletion, but also to the radical shortfall of oil discoveries, as well as the economics of ramping up shuttered production sufficiently fast. The significance of this fact is almost impossible to overstate, and has been discussed extensively elsewhere. Here’s a good overview by Alice Friedemann.
(graph from https://www.resilience.org/stories/2020-05-24/a-stealth-peak-in-world-oil-production/)
Peak conventional oil production took place around 2005, meaning that the easily accessible conventional crude oil production then began to drop from historical max levels. This is to say that the output of the petroleum resources yielding high net energy in return for the energy and resources that go into their production then began to drop.
What then remained was low net-energy yielding sub-par stuff like shale and bitumen-soaked tar sands. Tar sands, for instance, is just what it sounds like. A mixture of clay, water, sand, and a syrupy petroleum goo. Takes a whole lot more processing to get anything useful out of it than the light, sweet crude of classical reservoirs where you could basically just stick a straw into the ground and watch the pure product flow.
In some cases, the low-yielding stuff takes such intense processing that you don’t really get much of a net energy in return, no matter how much money you throw at it. What you can do for a while then, is re-route a lot of the energy and resources in the economy to get as much viable petroleum out of the ground as possible, because even if the yield is low, everything grinds to a halt without diesel.
Nonetheless, total petroleum production of all classes and categories finally peaked in October 2019, at the latest.
This forms a most momentous backdrop to the current situation in general. Since energy in a fundamental sense really is the economy, and money, cash, bonds, stock, securities, and all forms of abstracted capital in one way or another are claims on energy, i.e. useful work or work distilled into finished goods, a reduction of net energy inevitably means economic contraction.
Renewables? Or nuclear? Many, many problems, chief of which is the much lower net energy yield and the lack of versatility of petroleum. A topic for another day.
You can paper all of this over for a while, however. You can move the chess pieces around, try to even things out with one of the thousands of creative mechanisms for balancing nominal capital, preserving ostensible growth while extracting the last pockets of value to keep the system afloat as long as possible.
One of these ways is to lower the cost of debt for key institutional actors. After the US peak and the oil shocks of the 70s, interest rates went down, increasing the availability of nominal capital that could make claims on global energy resources.
Something like this will help balance the economy’s access to net energy, rendering it indirectly available throughout world markets rather than mainly at the local level. Putting the accessible oil to work everywhere (almost). It will also accelerate consumption through economic growth mechanisms.
However, when depletion finally approaches, and enough easily accessible pockets of value are extracted, you will then have rapid inflation pushed by the low cost of debt.
An example of this was the housing bubble and its subsequent crash of 2008, triggered by a steep rise in oil prices, maxed out at around $150. The response then was “quantitative easing”, in other words, just a lot more low-cost debt pumped into the system, ushering in the weird see-saw dynamics of the oil price range in the 2010s. This incidentally also helped unlock the North American shale oil industry, giving us a few more years of petroleum energy yields.
As of 2019, however, there’s not really much left to squeeze out of the ground via the same old financial mechanisms, so we’re up against a hard wall of irrevocable inflation and almost unfathomable levels of debt, strangling even nominal growth.
In the fall of 2019 there was no war in Ukraine, there was no pandemic. But for still undisclosed reasons, the Fed decided to funnel trillions of dollars in cumulative repo loans to the trading units of U.S. megabanks and their foreign counterparties. The Fed’s repo loans stretched from September 17, 2019 through July 2, 2020. The Fed has begun releasing the names of the banks and the amounts they had borrowed on a quarterly basis, following a two-year lag. There has been an unprecedented mainstream media news blackout of this information (wallstreetonparade.com).
So right now we have a situation where food and fuel are becoming too expensive for consumers, and where this enormous mountain of debt isn’t getting serviced and the lender’s “investments” are rapidly losing value. Vicious cycle. When lenders pull back, or locally raise interest rates due to risk perception, prices rise further.
The above graph is utterly catastrophic. It coincides with the Ukraine war, the sanctions against Russia, and is a tail-end effect of the global covid lockdowns, yet takes places against a background of real energy scarcity and mounting levels of debt.
Iran, yesterday: https://www.algemeiner.com/2022/05/23/demonstrations-erupt-across-iran-amid-a-sharp-rise-in-food-prices/
Nigeria, yesterday: https://nairametrics.com/2022/05/23/price-of-yam-rice-tomatoes-increase-significantly-across-markets-in-may/
Sri Lanka, May 20: https://www.aljazeera.com/news/2022/5/20/we-are-going-to-die-food-crisis-worsens-misery-of-sri-lankans
Egypt, two days ago: https://www.middleeasteye.net/news/russia-ukraine-war-million-could-die-globally-wheat-shortage-egypt-warns
Afghanistan, two weeks ago: https://www.ndtv.com/world-news/over-97-of-afghans-affected-by-food-shortages-says-un-2951639
Sudan, yesterday: https://english.news.cn/20220523/a2d1730e8b96486e893ea85d580fe9d9/c.html (“Sudan faces deteriorating food shortage or even crisis in 2022: experts”)
And what do you do in this sort of situation? Well, since we don’t really have a rational global economic order geared towards needs, but rather one inherently designed for profit and growth, the response is now to raise interest rates:
The idea is that higher interest rates will curb inflation and dampen energy demand, which in theory also indirectly would offset the rise in commodity prices such as food.
Thing is, without freely available energy, this approach is not going to be able to stabilize economic activity and continued growth, which at the end of the day fundamentally depend on material resources.
The situation we are facing today is much more severe than in 2008. The debt bubble is much larger. The shortage of energy products has spread beyond oil to coal and natural gas, as well. The idea of raising interest rates today is very much like going into the Great Depression and deciding to raise interest rates because bankers don’t feel like they are getting an adequate share of the goods and services produced by the economy. If there really aren’t enough goods and services for everyone, giving lenders a larger share of the total supply cannot work out well (Gail Tverberg, 2022).
The ECBs turn towards suppressing crypto currencies can be interpreted in the same light. They need to get liquidity off the markets, so less money will chase increasingly scarce goods. Pushing out crypto is a rather easy target with a decent payoff:
China’s repeated attacks on crypto can likewise be related to inflation risk and the state’s truly epic housing bubble, but must also be connected to the general push towards centralized digital currencies.
After 30 years, the equation in China has changed: debt in the official banking sector and in the informal shadow-banking sector has soared along with purely speculative excesses while "good growth" has stagnated. That's the problem with incentivizing moral hazard: the profits from speculation, corruption and fraud far outweigh the puny profits earned by legitimate enterprises. So where do you put the borrowed billions? In Evergrande and other conglomerates of speculation.
(Charles Hugh Smith, 2021)
It’s in light of all of these background factors that developments on subordinate levels of society must be interpreted, not, perhaps, as inevitable effects of the former, but insofar as they’re triggered and shaped by the background factors. In other words, a fundamentally insoluble emergency of capitalist industrial society, and its manifestations within the economy, is the central driving cause behind current societal developments.
In other words, we do have a crisis. Or rather, a series of interconnected crises. But they’re being sublimated and marketed in a much more politically expedient fashion than would be possible in relation to just the bare truth of the situation. I mean, what do you think would happen if institutions suddenly proclaimed that real growth is inevitably over?
The Ukraine war? It’s about energy security and geostrategic positioning.
Myanmar/Burma? “Burma is estimated to possess 3.2 billion barrels of oil and 18 trillion cubic feet (tcf) of natural gas reserves… Its unproven resources may be vastly greater (www.gov.uk).”
“Myanmar’s fields could be on a par with Britain’s North Sea before it was exploited, or Brazil’s reserves now” (economist.com).
Yemen? Proxy war between Iran and Saudi Arabia. Over oil.
The food price shock will cause further conflict. Inevitably. Sri Lanka has seen widespread violence and is on the verge of a major upheaval, and a 60% increase in cereal prices in Sub-Saharan Africa will likely mean war. &c.
Yet the covid situation of the last two years brings controllers an excellent opportunity to limit energy and resource consumption as a more comprehensive approach towards the aforementioned issues. Covid actually reduced per capita oil consumption to levels not seen since the 1980s. China’s renewed lockdowns are accordingly predicted to dampen current price spikes.
The roll-out of digital IDs and centralized digital currencies also makes perfect sense in this context, since they provide excellent tools for rationing and behavioural control, likely orders of magnitude more effective than anything else. Iran is already implementing biometric ID for this purpose throughout their current food crisis (source statements are independently verified).
The monkeypox scare in surprisingly perfect concert with the WHO summit and its marketed policy coordinations also exemplifies the prolongation of the low-intensity emergency, cf. “Global health talks clouded by conspiracy theories about pandemic treaty”.
The general pattern towards increased authoritarianism in the politics, society and culture of the industrialized nations is a structurally inevitable emergency response to the general situation. According to recent research, it also engenders a self-reinforcing feedback towards authoritarian political attitudes (Rocatto, Cavazza, Colloca. (2020). “A Democratic Emergency After a Health Emergency? Exposure to COVID-19, Perceived Economic Threat and Support for Anti-Democratic Political Systems”. Social Science Quarterly.)
The Italian political theorist Giorgio Agamben points out that, in fact, the “state of exception” has almost become the rule rather than the exception in the Western liberal democracies over the last century. The language of war is invoked to pursue ordinary domestic politics. Over the past 60 years in the United States, we have had the war on poverty, the war on drugs, the war on terror, the war on Covid, the war on disinformation, and the war on domestic extremism.
A variation on this theme is the utility of moral panics — spiritual warfare — for pursuing top-down projects of social transformation, typically by administrative fiat. The principle of equality under the law, which would seem to be indispensable to a liberal society, must make way for a system of privileges for protected classes, corresponding to a moral typology of citizens along the axis of victim and oppressor. Victim dramas serve as a permanent moral emergency, justifying an ever-deeper penetration of society by bureaucratic authority in both the public and private sectors.
Lockdowns kicked our social atomisation to a level we’ve never seen before. Loneliness profoundly damages our ability to orient in the world and distinguish what is real from what is in one’s head, as the work of Ian Marcus Corbin shows. With little shared material existence to provide an intersubjective anchor, we found what solace we could in disembodied interaction on social media. Screen time rose dramatically for all demographics. But such interaction tends toward the feedback loops and brittleness of merely verbally constituted tribes who have no skin in the game because they lack the shared, pragmatic interests of those who inhabit a real world together (Matthew Crawford, 2022).
All of this relates to how the system’s impetus towards maintaining, stability, control and power relations in various ways become manifest in the Western bourgeois subject’s increasingly unreflected agency. See John Steppling’s piece from yesterday for an excellent dissection of this particular issue.
In other, and COMPLETELY UNRELATED news, COVID Drives US Population Growth To Slowest Rate Since Nation's Founding.
Furthermore, “The CDC reports that in 2020 3,605,201 babies were born in the U.S., down four percent from 2019 and the lowest number of babies born since 1979,” and even India’s total fertility rate is now below replacement levels.
Oh, and “monkey pox” spreads through sex. Just so you know.
What’s ahead? Well, to be frank, I think we’re approaching one of our last summers in the city.