I am Joe Blog’s Left Ventricle

What the hell is going on?

One minute, we’re in a resource boom and enjoying growth. The stock market is rising, house prices are going up again, unemployment is nice and low and everything is shiny. 12 months later we’re staring down the barrel of the second great depression and everyone’s too shit-scared to come out and say it.

What happened?

Apparently, some US banks were invested in some homeloans which weren’t viable. They’d lent money to people who couldn’t afford a loan to buy a house.

So what? They’ve been doing that for years. What’s was so special about late 2007?

Let me show you a graph.

(source wikipedia)

That’s the price of crude oil. The only economic fundamental that changed significantly in the last three years.

But why did that happen?

(source www.theoildrum.com)

World oil production was still growing in 2002-2005 but from 2005-2007 it was sortof flat and kinda went down a bit in 2007. Meanwhile, up until that point global economies were growing. The western world was growing. China was growing. India was growing. Mexico was growing.

Everybody was buying cars and using them.

When you get rising demand and flat production of a resource, the price goes up. If you compare the production to price graphs, you see what I mean.

You see, the real story here isn’t that some banks in the US made some loans to some people who couldn’t afford them. Those people could afford them just fine thanks.

The real story is that those people had a really marginal financial state, and the took out loans to buy houses in outer suburbia. Those people commute up to 50 miles each way to work in low paying jobs.

In late 2007 the cost of a 50 mile commute in your standard gas-guzzling american car went through the roof. But that isn’t all. Oil based fuels are behind most transport, so transport costs for everything those people consumed went up, driving up prices. Worse yet, petroleum is used to make fertilisers and pesticides too, so agriculture got suddenly much more expensive, and the price of food went up too.

Worse again in the US they’ve reached peak production on natural gas which heats homes and produces most of the electricity.

So people with expensive loans they can barely afford, in the same year saw large rises in the price of fuel, goods, food, heating and electricity. Pretty much every part of their home budget went up, except their income.

So some of those guys couldn’t afford their loans anymore.

When you can’t afford the repayments on your home loan, what happens is the bank kicks you out of your home and sells the house to recover the money they loaned you. So they started doing that.

Except when you need to sell a large number of houses suddenly to recover a loan in a climate where every major household cost is skyrocketing, you have to offer it at a bargain price. And who the hell wants to buy a house 50 miles from the city when “gas” is the most expensive it’s ever been and still going up?

So they had to sell them off at firesale prices.

Which drives the value of ALL houses down - “hey I can get one for 10% less from the bank why would I pay full price for yours?”.

But it kept going on. More and more loans were defaulted, and more and more houses were dumped onto the market, driving house prices down further.

It quickly got to the point where the banks couldn’t recover all the money they loaned in the first place. Homeowners literally owed more than their homes were worth. No matter what they do after that point, the banks simply can not get their money back.

Here’s where it hit the news. The home-loan-lending banks tended to sell the loans on to investment banks who would buy huge numbers of them, presumably on the theory that “If we do this big enough, we’ll be immune to the risks of lending money”. Let’s call that the Titanic theory for now.

These huge investment banks… went bust. Pretty much all of them either went under or were bought out or saved by federal government money.

And this led to the all banks everywhere panicking. Basically, now none of them will lend each other or anybody else any money.

And that’s contributing to a global recession.

I say contributing because the underlying reason is oil, and that’s still driving it, but if you accept the impression the media is giving it’s all about banks getting all paranoid because of some broken american homeloans.

The awful truth is that the high cost of oil began to kill everything, everywhere. Airlines started going backwards - throwing a gigantic lump of aluminium through the air at 900km/h burns a lot of petroleum. “Consumers” bought less stuff because the stuff was expensive and their other costs were going up. With consumers buying less stuff, retailers start to see their profits evaporate and eventually turn to losses. Manufacturers stop making so much stuff, and in doing so they stop buying so much raw materials. So soon enough the miners will stop mining so much. If this carries on what happens is that retailers, manufacturers and eventually miners start laying off staff.

So why don’t the oil producers just produce more oil? I mean the price hit $140/barrel you would think if you had an oil well you’d crank it up to the max right about then, right?

Here’s the kicker. They can’t.

You’ve been hearing it all your life. Oil is a non-renewable resource. Our way of life, given that it depends entirely on oil, is a non ’sustainable’ way of life. The urban sprawl, the ‘great american dream’, the ‘great Australian dream’, of the quarter acre block in the middle of nowhere and driving your car to do anything of use, is unsustainable.

Time for more graphs!

This above graph was made in 2004 by the US government and it shows all the non-OPEC countries in the world that produce oil, except Russia, and when their production peaked. Oil is a finite resource - at some point in the future we will completely run out, globally. This is a universally accepted fact. But oil in the ground doesn’t ‘run out’ the way your car runs out of fuel. What happens is that production increases from the first finds - you stick a hole in the ground and oil gushes out, through to when you’re exploiting a given oilfield to the max. That’s called “peak” production because beyond that point, there is less and less oil in the ground and you have to pump other crap down there to force it out - water, gas whatever.

It gets more and more expensive and you get less and less oil out.

This pattern is the case with a single oil field, with an oil-producing region, with an oil-producing country and eventually with the entire world. You get a “peak” and after that no matter what you do, you can’t pump out oil any faster anymore. In fact, you get less and less.

This is beginning to happen right now, globally.

Here’s this global graph again. Right at the beginning of 2008 when oil prices hit $140US/barrel it was worth doing all kinds of crazy crap to produce it, but production rose only a little nudge. You can see that between 2005 to 2008 production is basically flat. It declines very slightly between 74 and 72 million barrels per day, and then starting in 2007 when prices went from $60/barrel to $140/barrel they moved up a WHOPPING 2million barrels a day to a very unimpressive not-quite-75million barrels per day.

When the price of something more than doubles and global production goes up a mere 4%, something is horribly wrong with production.

The hilarious part here is that governments and the media have chosen to blame “speculators” for driving the price of oil up.

Let’s see here, the global daily oil market, at $140 a barrel and 74 million barrels per day is over $10billion PER DAY in sales. The kind of money you need to throw around to manipulate a market that size is just huge. You could see the pile of cash required from space. We should be sceptical of the speculator explanation for that reason - it is far more likely that a fundamental interaction of supply and demand caused the oil price hike.

Here is the real recorded production figure for all non-OPEC countries. Note - it includes Russia and other former USSR countries, and Iraq.

Here’s Russia, apparently peaking last year.

And here’s what happened in India and China to demand when the prices skyrocketed like that. The dip at the end of 2007 there right when the price of oil went bananas, that’s what economists call “demand destruction”. When the price of something is too high, only the rich can buy it. The poor, or the newly emerging almost-not-poor-anymore in this case can’t afford it. So their “Demand” is destroyed. They don’t stop wanting it, they just can’t afford to buy what the market decides the price is.

The price of oil only came back down once this ‘demand destruction’ had happened. If it was just “speculation” why did it take a massive shift in demand for the prices to begin to fall again?

And here’s what we fat westerners did - we just kept buying it and paying the price. We have finite money, so that flat-out means we began buying less of other stuff, and in some cases couldn’t afford our home loan repayments.

We need the global graph one more time.

What is likely to happen in 2009, 2010, 2011? Oil production is likely to remain fairly flat, or drop off. Once it drops off it’s unlikely to ever rise again. We are in a period of Peak Oil, with everything that entails. Whether early 2008 is the high water mark or not, only time will tell. We may get another slight peak before the great decline sets in.

The problem is that the global economy is totally tied to oil consumption and without rising oil production, growth is halted. This is exactly what we are witnessing right now. Growth halted. When production starts going down in a big way, so will the global economy. This is what we are beginning to witness right now.

This is the cold light of day, dawning on the new age. The age where we humankind begin to truly understand the awful meaning of “unsustainable”.

For we have come upon the time when we can no longer sustain our society.

And we are woefully unprepared for the changes required to go on.

Ten years ago I remember standing in the rain for over an hour to hand the postman a sealed A4 envelope with a proposal to start an ISP in it - because the thing wouldn’t fit in the post-box without folding it and I wanted my potential investor to be able to read it without a crease. I held the thing under my jumper and kept it dry while I slowly soaked through. The postie gave me a really odd look when I gave it to him. He was late.

I remember trying to start small businesses because I wanted to DO something and get somewhere, learn how the world worked and be able to help somehow - and I couldn’t stomach working for a capitalist pigdog corporation. So I tried to work for myself. With mixed success… for several years.

I remember the night when and old friend of my father’s and four other guys I didn’t know put up ten grand each and we started my little ISP. I look back now and think I had no idea, but no… so many things I said we should do, I still look back and say we should’ve done and everything that was left up to me was done reasonably well - or wonderfully well. The thing broke even, I’ll never forget that, but then it got squished out of the market. I remember sticking with it and getting as much of my investors’ money back as I could. I worked so hard for that - I can’t see it as a defeat. Another year or two earlier (I’d been trying to get it going for four years) and we all could’ve been millionaires. We had better, leaner technology than others who did.

But I’m glad things happened this way - I learned a lot and I know the path I’ve walked since has taught me more than an easy success back then could’ve done.

We went on with new ideas and new businesses, I wrote software that could’ve changed the world, but we could never sell it - none of us knew how to sell - and two businesses in a row lagged and went stale. I stuck it out until the end - at the limit of my credit card, sleeping in my mother’s garage, empty bank account, car in pieces, owing my little sister money, isolated from friends and mostly sick to death of waiting for somebody else to get it right. Four years on from that, my software still runs that business, but it’s still growing at a glacial rate. I’d have died in there if I’d stuck around. Besides, my work was for the most part done.

I remember the clear and cold night my father died. I remember being a suspect in a murder investigation for a few hours before they ruled it out. I remember beginning to feel it then; the crushing weight of loss, that savage hole that wont ever fill again. I remember taking it the right way. I remember talking to all of my friends and telling them how I felt. I talked, I cried, I screamed, I destroyed the world a thousand times over with armies of undead in computer games and eventually I spiralled back under control. But I’ll never forget.

I remember how he saw me on that night. Virtually a bum, who’d never got anywhere or done anything worthwhile. But I know it with calm; that without him to say ‘hey, proud of you!’ that NOTHING will ever be good enough, no matter how far I get or high I climb, I will never be able to stop. Nothing anybody can say can make that change.

I remember falling for a girl and getting cut off pretty savagely. Led on, then cut off when I told her how I felt. That was pain, unbelievable pain too, and I went away and met other people and other girls and learned a thing or two about people and what they value, what they see and how to change what they see - even if you’re the same inside all along. But my feeling never changed - my feelings never change. I still love my first girlfriend, my second, the third, them all. I am polyamourous and to me  that means love never, ever ends. So when that first girl saw me in a new light; one I’d constructed with a pure heart and clean intentions but an artificial light nevertheless - for I hadn’t changed - we came together and the pain of losing her at the start faded.

I remember when life and business had broken me down and I was living in that garage with Nothing, I took it as an opportunity to just start again. I moved to another city - a big city - and moved in with my girlfriend to give life another go. Within weeks I was a contractor earning $50 an hour to do what I’d been doing for years - only now instead of a near-bankrupt small business loser whose own fellow directors didn’t listen to, I was an experienced and EXPENSIVE contractor/consultant whose every word they hung off. And they were right to; I was everything they needed. In my first six months in my new home I made more money than in the entire previous five years of failed business dealings.

I hadn’t changed a bit - just my surroundings.

But I was learning new tricks; new scales, new systems and ideas, applying old ones in new settings and surprising myself every day with how much the capitalist pigdog world needed me - a guy who knew the things they’d need but CARED. Customer service I’d learned in a tiny business that desperately needed every sale held me in good stead in giant unfeeling organisations where our own people were desperate for us to help them.

But I never once crossed my ethical lines. Everywhere I’ve gotten, I’ve done it honestly and fairly. I’ve backstabbed no-one, used no-one and hurt no-one. I’ve stolen nothing, always done it the nice-guy way no matter what people would say. Oh I saw the cheats and the liars and users and the evil pricks who’d stop at nothing - and I watched them LOSE. You can’t get anywhere in business if all you make is enemies - that old line about them making you stronger is crap; friends and allies are strength when you most need it, enemies will wait until then to strike. The beautiful fact is that doing the right thing will get you everywhere you need to be, and being a prick will fuck you - hard. You don’t have to fellate everybody - don’t extend yourself - but if you listen and do the right thing by them they’ll remember you.

Twice now I’ve been within 24 hours of having to resign because I refused to do something I found unethical. An order I wouldn’t carry out - a falsified report, or using our systems to spy on our employees. There’s a fine line in there but I won’t cross it. I’ve had access to a table with a quarter-million valid and up-to-date credit card numbers in it for over a year at a time, and seen millions of dollars run under my fingers day after day, and never once been tempted. The flipside is that sometimes when I’m asked to do something, I say ‘Sorry, but no.’ on ethical grounds. So far - employers have been willing to deal with that. One day, one wont, and I’ll be out of a job. It might hurt my career. I don’t care - I’ll take looking myself in the eye in the mirror over a dirty job any day.

I’ve done a lot of things I’ve been afraid of. It’s not at all that I don’t have fear - although I do lie and say that I don’t - it’s that I feel the fear and I do it anyway. Sometimes my balls fail me, but usually not. I’ve told people who held power over me that I thought they were wrong, and I’ve done it alone and in private - and it won me their respect.

I remember when I was 12 my dad told me I had to get braces - my two front teeth grew almost horizontally frontwards out of my mouth; it sure wasn’t attractive. But I told him I liked myself just the way I was - and god knows I’d endured enough teasing that it HAD to mean something. He overruled me and I’m glad now, but I remember being that young man who said no and wanted to be who he was no matter what anyone said or thought. He’s still in here, at the centre.

I remember deciding, aged 16, that the world was fucked up. We were screwing over the planet, screwing over each other and there was a million ways we could improve - HAD to improve - and that I was going to set out to teach people to do them, or failing that to do them all myself. Fifteen years later I still feel the same way, and the goals are the same. The changes are that the plan’s become increasingly firmer and more achievable with each passing year - no matter how unbelievably ludicrous it started out or still is - and that I’ve gained a lot of knowledge and resources. One day, I will finish Preparing and be ready to Act directly on the path. I’ve never once given up on that goal. The How and the When can move, but the What and the Why have never changed.

I don’t remember but I’ve been told that even as a tiny infant I would lie awake at night and stare at my tiny flapping hands, staring into the middle space. I do know and remember that by the time I was two this had become a form of meditation that allowed me to picture anything and everything with my mind’s eye in complete clarity. It’s a skill I spent a quarter-century honing and now I need no props at all for my mind to shift gears and see what it needs to. This is what makes my mind so different to others’ and it’s why I see things others miss - but miss things others see. I’ve learned over the years to rely on the people around me without them even noticing at times, to see the obvious for me, and I’ve even learned to do it a little myself. Despite living for possibly a quarter of my waking life in an alternate reality, I learned to motivate myself in the real world where everything is hard to come by - instead of instantly in your grasp - and learned to ‘interface’ with people and things in this world, and bring my visions to life. I’m not done yet, by damn.

I remember leaving a job in which I was quite content and enjoyed the challenges of every day, taking a huge risk and moving to a new job where I’d have just a small chance of making the second great leap of my career - from systems administrator to Manager. Despite things going straight to hell and staying there for months, I stuck it out, made things work, made key alliances all over the new business and got the damn promotion. Now I’m switching around like a madman chasing my tail and seeing every tiny mistake I make. I’ve changed my career - and most managers feel like a fraud their first few months. I don’t feel like a fraud, but I know damn well that despite reading all those excellent books in preparation, I’ve got a lot of learning to do and years of experience to build before I can truly say “I’m good at this”. But I woke last night and found myself smiling with the realisation that I’m the only one casting the critical eye - by everyone else’s standards I’m doing great.

This is my chosen path; learn to get things done with more than just myself doing the work. To achieve greater aims, larger and larger groups of people and resources will be required - I am now learning how to Manage these. I feel as on The Path now as I ever have.

These are the key things of which I’m proud. There are many, many other things in my life that weren’t so difficult or costly to gain, or make a good telling in a pithy paragraph. But these are the main things.

And here is the last; if I had my time again, despite how much it hurt at times, wouldn’t change a thing. These lessons have cost too much to be discarded.

It’s funny how it all turns out.