mandarine

The forest is burning. All the animals are staring blankly at the blazing fire, paralyzed with stupor, watching their world come to an end. Alone, the little hummingbird is flying relentlessly back and forth, each time sipping one drop of water from the river and spitting it over the flames. One of the animals finally says: “your efforts are useless; you are much too small to make any difference.” The hummingbird replies: “I know, but I am doing my share.”

Maybe not everybody is conscious about it, but our world is coming to an end. Runaway global warming in a few decades; peak energy in a few years; economic collapse in a few months. Nobody can deny that most things we’ve grown used to will stop. If this is true, why hold on to our little habits and carry on our little routines pretending, and then watch the world fall apart, aghast and helpless?

I will be putting all my efforts in my community, starting a Local Exchange Trading System, so that we have a local, social and economic safety net, as all I am seeing from our governments is bailout plans and unconditional support to the very system which brought us here. I hope they succeed in slowing down the fall. Meanwhile, the clock is ticking, and I believe I should devote every minute of my free time to this project (while I am gradually stepping back from my wildly funny, unjustly well-paying, and insanely useless job of inventing space machines which will never fly).

Maybe I’ll be back in a couple of months/years, when my project is up and running and I see the end of the world is not as near as I had thought. In the meantime, it is au revoir everyone.

Amicalement,

Mandarine

This mosaic is on the wall next to my bathtub. This time of the year, while floating idly in warm water, I can contemplate the rising sun bringing extra orangeness to the hues. And I am proud. Because I know we made that mosaic. We made it with leftovers from the terracotta tiles once the bathroom floor and bathtub wall had been tiled. It took us two days to complete, deciding on the design, cutting the little dice, sticking them on a fiberglass netting with tile cement, fitting the net on the wall while filling the joints with lime mortar.

The net result is that it cost us two days of fun work (the materials were virtually free) for an endless supply of pride (and compliments when visitors happen to spot it on their way to the bathroom). I do not count the capital gain because I cannot imagine that I will ever sell this house.

This mosaic is already three years old, and to me it has become a symbol of my house and of my life : hard work, lazyness, and pride.

Only a few weeks ago I was confident that government take-over on the banking and financial front was going to halt the downward spiral of the financial crisis. Now that I have watched the fabulous documentary Money as Debt [update: I absolutely disagree with the conspiracy theory advocated towards the end, but the beginning is still great at explaiing how money come about], I am convinced that the fall will not stop short of a global monetary (and thus economic, and thus social) collapse. Here’s why.

I already mentioned that one’s money was someone else’s debt, and that when the someone else becomes insolvent, money loses its value. What I (and probably you) did not know is that today’s money is highly leveraged debt. Which means that the banking system essentially turns one thousand dollar of debt into roughly ten thousand dollars of money. As soon as there are doubts as to whether the debt will be paid back, the whole pyramid of leverage collapses.

Do you know the famous pyramid-scheme ? This century-old con consists in talking several people into giving you one dollar each, and then send them forth to do likewise with any number of fresh recruits they can trick into the scheme. In an infinite world, this scheme is great and endlessly concentrates money up the pyramid. In a finite world, however, the scheme always ends up collapsing when the bottom levels of the pyramid realise they will never get their dollar back from nonexisting lower level recruits, and understand they have been tricked by the upper levels in the pyramid.

This is exactly what is happening to the financial world (and economic world too, because let’s face it: there is no such thing as a financial vs real economy separation). People have been selling leveraged debt, and the scheme was holding only because the sky was the limit. As long as there was the promise of always more, as long as we could count on sustained exponential growth, paying back a debt with a new debt was nothing to be worried about. The runaway race of leveraged debt was sustainable as long as there was somewhere to runaway to.

I believe that the bursting of the housing bubble is just the first symptom of something far more ominous: the planet is becoming insovent. For centuries or even millennia, the world had relied on the fact that there was always going to be more tomorrow than today. More production, more commodities, more people, more money. The housing bubble burst when the commodity markets had given very clear signs that we were running out of planet to rape. The fact that oil production was peaking sent oil prices skyrocketing. For the first time in a long while (who remembers peak whale oil or peak seal fur?) the planet was sending a signal of exhaustion down the economic pipes. Where everything in the economic world was based on the bet that things were going to be ever cheaper, ever more abundant, now came the news that there was not going to be more oil. This is called a shock, and something had to break somewhere. The economic fabric had to give and it gave where it was weaker: hence the bursting of the housing bubble.

I believe it is not going to stop there, whatever the government bail-out initiatives. These initiatives are merely an attempt at preventing the middle of the pyramid from melting by transferring more debt to the bottom (government guarantees are taxpayer’s children’s debt). Now that everybody realizes that the planet is bust and that there is far more money (and stocks, and bonds, and such like) around than stuff to buy with it, money that was engineered as a bet on an ever expanding future will just vanish, and we’re in for a complete and global monetary collapse.

The collapse can take many shapes, and a historian of economics will be able to depict at least half a dozen. The smooth option is by way of double-digit inflation over a decade. The hard option is by a complete collapse of corporate, then state credibility worldwide, with the very rich trying to be the first ones to jump ship with anything they can snatch from the people down the third class deck.

There is no liberal take on what should be done. Letting the pyramid fall is not a option. Just think what happens when the guy working for the electricity or the water distribution company stops working because he has not been paid in months (remember the collapse of the Soviet Union?). If I was the king of the world, I’d take the following measures:

• tell the rich the game is over - all savings accounts (i.e. the debt weighing down on the future generations) are reset. After all, if I have been saving money, it means I did not need it all that much. This amounts to telling all those who thought they were investing money that they had in fact been donating their surplus to those who needed it more. This measure will guarantee that the people can keep their homes, the contractors can keep their tools, the bosses can keep their factories. Otherwise, we’d see creditors diving from the sky to liquidate everything and put everybody out on the streets and out of work to get money back that’s not worth anything anymore because the economic system would be completely broken as a result.
• tell everyone that there is going to be less for everyone. There should not be job cuts to protect the wages for the few who stay aboard: everybody should cut their wages, possibly work part-time. Otherwise you you just precipitate the fall. Because the crisis will gnaw at people’s purchasing power, there will be economic niches that we must drop (airplanes, probably automobiles), but then we must reallocate the workforce like Roosevelt did with the Civilian Conservation Corps to mend the planet while we still have time.
• Encourage all local economy initiatives. The world’s financial fabric is giving because it was based on trust and that trust has been abused by financial markets. You cannot rebuilt that kind of trust overnight. However, you can still trust your neighbor. Reinventing the economy from the gift stage and the barter stage takes some time. Everyody had better start right now.
• Rebuild a monetary world that does not send the planet on another runaway race, otherwise we’ll be like a fly bouncing forever against the glass ceiling. Interest lending intrinsically leads to the concentration of wealth and exponential growth. There are many wise alternatives to the kind of money we have grown used to. In the thirties, people have had successful experience with local, evaporating currencies: you had to use your money as quicly as possible if you did not want to see it evaporate. This looks like organized inflation, but the prices and wages remain constant, leading to more psychological stability. This removes the temptation of hoarding, hence the tendency of money to concentrate. After all, if money is debt, there is no reason why it should not come with a date limit. If my grandfather gave a hand to your grandfather fifty years ago, you’d find it awkward if I came to you and demanded a payback right now.

Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether. (Silvio Gesell)

What’s the good side of the recession? It will probably achieve the CO2 emission cuts that give a chance to our children. After all, it’s only fair to say ‘game over’ to the ones who did not play nice with the planet, and not those who come after them.

If you think I am just nuts and that everything is going to be all right, I am glad. Especially if you can come up with convincing data and arguments against these guys, who were my inspiration.

[update: there is another fabulous slide-show that you want to watch to get to grips with the big economic / environmental / monetary picture.]

Although on the economic front, ’slowdown’ sounds inappropriately shy to describe what is soon becoming a great depression, it is the right word on the blogging front. I have long hesitated to write about it here, probably because I still have not made up my mind about how personal I want this blog to be. But I figure I owe that much to all my blogging friends who seldom fail to mention a word or two about what is happening in their lives, especially when it keeps them away from the keyboard.

It’s not blog burnout, it’s not boredom or weariness. I simply have been busy.

• Busy at work because I have been working on two tenders, three patents, and a spacecraft dynamics course for internal training which is turning into a testament



• Busy in the garden and the kitchen because you may have a no-work garden for pretty much of the growing season, the tomatoes still won’t pick themselves (you can read about the garden there)



• Busy at home because I am stepping in to replace my terminally pregnant wife with her computer home help business (logo by yours truly below) in my spare time and days off



• Busy in the house because we still have to build a bedroom for kid #1 so that he can leave his bedroom staircase landing to kid #2 when kid #2 leaves our bedroom (that would be before next summer)
• And busy mentally because there maybe new opportunities job-wise (but shhush..)

This slowdown will probably last another fortnight, but after the birth I will be on leave for at least a month, leaving enough time to resume the weekly posting rhythm.

Because I am jealous of HealingMagicHands’s giant tomatoes, I wish to show off my version.

Those were eaten 20m from where they grew. The taste was fabulous (all the more so as I knew I had sown and planted them myself).

How many times do we hear conservation projects dismissed casually as a step back towards stone age?

Imagine stone age with ten thousand times more books than there ever were in the Alexandria library; with physics, chemistry, molecular biology, zoology, mathematics, evolution theory; with seed varieties from all parts of the world; with Aristotle, Marx, Maupassant and Led Zeppelin; with techniques to build positive energy straw-bale, mud and wood-frame homes; with democracy; with freedom of speech; with antibiotics and vaccines, or at least hygiene, composting toilets and nutrition; with the wheel, the siphon, the pedal, the bicycle, the pump, the wind-turbine, solar hot-water, enclosed stoves; with mulching, companion planting, ramial wood chips, drip irrigation; with majestic clippers, trains, airships, and even a few airplanes; with thousands of varieties of tomatoes, hundreds of varieties of wheat, dozens of varieties of pears; with micro-credit and thousands of miles of paved roads; with recyclable iron all around us; with millions of engineers, whose job is primarily to invent under constraint. Imagine stone age with the internet, linux, project gutenberg, and two billion interconnected computers acting like synapses between these neurons of collective intelligence we call humans.

It would not be stone age. Nor would it be the XIVth century either; nor the XVIIIth, nor the XIXth.

The post-oil era is not even a 50-year step back in time. Believe it or not, the post-oil era is the XXIst century, building up on all the knowledge we have inherited from past centuries, including this mad fossil-fuel junkie to we which gave the number XX. That one will leave the sour-sweet memory of a bad dream of gigantism.

The post-oil era starts today.

When you google 'Airbus Boeing Peak Oil', the top result is this article that I wrote in the summer of 2006. Being a Cassandra proved right gives one all sorts of uneasy feelings, but I will carry on in that direction and offer a revised version of my prophecy, adorned with new details.

In a nutshell: people are talking a lot about the difficulties for airlines with $150-a-barrel oil. But we also have to understand that it is going to be much worse for aircraft manufacturers. They probably know it; but they cannot believe what they know, and they cannot say it either. This is not just another crisis for air transportation and aerospace construction: this is the last crisis until the end of the fossil fuel era.

Hard times for airlines

First an important premise: there are no serious alternatives to jet fuel for airliners. And even if there were, they could never be cheap in a world of expensive energy. The problem is not that oil is scarce: the production has never been this high — that's why we call it Peak Oil. The problem is that energy supply is not meeting global demand: until demand abates, any type of energy will end up costing the same, be it classical kerosene, gas-to-liquid synthetic jet fuel, or biodiesel. Regardless of the environmental footprint. Just know that if it was technologically feasible, filling an A380 tank with biofuel would use up 150 hectares of yearly yield,considering an optimistic figure of 2000 litres per hectare for Jatropha biodiesel. You'd need 150×2x365×150 = 16 million hectares — the arable land in France — to power the currently ordered A380 fleet.

Meanwhile the fuel efficiency improvements do not come anywhere close to compensating the price surge. Boeing claim that their new 787 will burn 20% less fuel than current jets of the same category (namely the 767 or A330). 20% is how much oil prices rose between the beginning of April and mid-May 2008: 30 years of technological improvement in aircraft and engine design will offset six weeks of price increase, and no technological Deus ex Machina will change that deal.

The obvious consequence is that cheap flights are gone for good. We are currently witnessing a fast concentration of the market, because the fierce competition prevents airlines from transferring the whole fuel bill to their passengers. As the weaker players exit the arena, ticket prices will rise until the few remaining airlines can break even financially. We will see a trend of de-democratization of air travel, and people will gradually change their travel habits, starting with the poorer and newer travelers.

There is a second key element that will drive air traffic down: as planemakers' market forecasts point out, air traffic growth is consistently correlated to world GDP growth. No need to be a psychic to imagine that GDP growth will seriously suffer from expensive energy. When people's purchasing power shrinks because of the energy bill, they will think twice before flying. Note that a major economic downturn could very well stop the rise in oil prices or even reduce them for a while. But it will not help air traffic - unemployed people do not fly all that much.

Meanwhile, environmental awareness is growing worldwide: the global warming theme is increasingly popular with the sort of middle class travelers who used to fill economy seats for exotic vacations. There will be less scuba-diving in the Maldives; less horseback-trekking in Mongolia; less leopard-spotting in Tanzania. Flying is losing political correctness points by the day. This is even beginning to reach the corporate world, although sometimes only for mere greenwashing concerns: more firms are asking their employees to fly less, to favor teleconferencing or to merge meetings. Business travel, the spine of airline profitability, is probably weaker than most hope.

I also see a final, more tricky contributor to airline misfortunes: many airlines have based their financial model upon the resell value of their aircraft. Planes are a huge investment, with a long lifetime — a bit like homes. Maybe you see what I am hinting at. Just as the housing crisis brought many people to bankruptcy, many airlines will lose their financial footing when the industry's obvious overcapacity and gloomy outlook pulls the market value of second-hand aircraft down. All this will contribute to reduce air traffic over the next decades, to the levels of the 1990s, then the 1980s, then the 1970s …

Harder still for aircraft manufacturers

The average natural decay of a fleet because of ageing is around 6% a year. When yearly traffic is constant from one year to the next, 6 planes for every 100 go into retirement, and are replaced by newer planes. This means that if airlines cut the world's capacity by a mere 6% each year, old retiring planes will not need to be replaced, and no new aircraft will be sold at all. A 6% capacity reduction is equivalent to just changing the Tuesday flight of the daily San Francisco to Tokyo service from a 747-400 to a 777-300ER. A reduction the economic press or the general public would hardly notice can make Airbus and Boeing assembly lines grind to a halt. US carriers will reduce capacity by 10% to 15% this third quarter of 2008 alone.

All told, the industry will cut capacity by 9% in 2008, according to James Higgins, analyst for Soleil-Solebury Research. (quote from CNNmoney.com)

In short: airlines make money in proportion to air traffic; aircraft manufacturers make money in proportion to air traffic growth. In a world with negative air traffic growth, the former float, the latter drown. Therefore, although we will probably not see the end of air traffic any time soon, this extremely nasty leverage effect will make aircraft manufacturers suffer considerably.

One might argue that in a world of expensive oil, airlines should scrap all old, gas-guzzling planes and buy new, soberer ones instead. That would be easy if they were making a lot of profit or could promise a bright future. But when the industry is consistently in the red zone, and getting redder, bankers do not follow. Few airlines have sufficient cash to sign billion-dollar contracts without external investment. Therefore airlines will be like people in poor countries: they will be running old vehicles which use up tons of gas because they cannot afford the newer models which make twice the miles per gallon.

Admittedly, a handful of airlines will be in a position to buy the new planes. When all the world's money ends up in oil exporters' hands, they have to buy things from us to avoid drowning under the heap of green bills. Aircraft are a great choice, as they are both hard-currency-intensive and fossil-fuel intensive, which oil producers have a lot of, as per design. Consequently, aircraft sales may in fact undergo an increase because of high oil prices. This I call the "Aboulafia effect". I conjecture that such an increase is inherently short-lived. Middle-East carriers will probably become prominent players, and gradually snatch the bulk of the market from the traditional airlines. But air traffic will shrink nonetheless, and all they will need to do is buy back the recent planes from their victims, scrap the old ones, and make the most of a declining market — something they are becoming good at.

As if matters could be any worse, there will finally be a mean backlash effect: thanks to cheap liquidity seeking asylum, the years 2003-2007 were absolutely euphoric in terms of aircraft orders. Manufacturers had to invest massively in infrastructures and people in order to ramp up production and honor those orders. But these planes will not materialize into deliveries before a couple of years. There is plenty of time for many airlines to go bankrupt or otherwise hit financial turbulence. This will mean massive delivery deferrals, then cancellations, so that assembly lines cannot even hold onto their current backlog. Who knows, we may witness the very curious artefact of a negative net yearly order-book. In the real world, that's called jumping off a cliff with a lot of momentum.

The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, so large-scale cancellations and deferrals could easily amount to tens of billions of dollars and affect suppliers of engines and other parts in addition to the jet makers. (from the Wall Street Journal)

What next?

When that happens, it will be catastrophic for all the people, organisations, or communities, which now contribute to the aircraft manufacturing adventure. This could send Seattle or Toulouse the way British textile, or French foundries went not so long ago. And do not get influenced by prejudice. Aerospace does not have an intrinsically higher value than those industries we have come to regard as lowly. Today's ghost slums were full of very busy and extremely proud people at the peak of their flourishing trade.

I do not know what the smartest move for aircraft manufacturers is, and I am glad I am not in Tom Enders' or Scott Carson's shoes. Publicly acknowledging that the air travel industry is on the brink of inevitable decline would discourage investors and hasten the fall. And yet, the earlier they can start downshifting, the smoother the forced landing. They should be cancelling the B787 (a little too late for that one) or A350 developments, and simply offer to fit new generation engines on good old 767s and A330s. That would already be at least half the fuel economy, for a much smaller cost, while not forcing new capacity on the market place. Or silently work on a totally new kind of bird, absolutely optimized for fuel efficiency, even if it changes the rules of the game: a Mach 0.62, 20,000ft, turboprop, middle-range, high-capacity, DC-4-comfort machine that would be the soberest flying camel to get people where trains can't go for the next half century.

Or maybe steer away from this dwindling trade altogether and find a new frontier. How about giant wind turbines? If those do not sell, nothing will anyway, so that may be worth a try.

Notes

Many thanks to Richard Heinberg and Julian Darley of the Post Carbon Institute for accepting publication at Global Public Media.

Requests for reproduction or translation should be sent to the Post Carbon Institute.

Remember that I recently recommended reading George Monbiot? Well, he’s just agreed to my translating his recent article Small is Bountiful, in defense of smallholdings, on my garden blog. Not that you need a French translation anyway, but I thought I’d let you know.

Mowing is more fun when it allows for some creativity.

Remember how I said people should read much more than they write? Well, I am doing just that at the moment. That and write post upon post for my gardening blog. This leaves me no huge motivation to post here, all the more so that I am under the impression I would be boring people with the same themes all over again.

For those dear readers who would protest they would not be bored, I offer two solutions:

1. I will be recycling old posts - I know I like to read them again. Maybe you will.
2. I strongly recommend you to read George Monbiot’s articles. He writes the things I would like to write. Only he does it much better. And he knows what he is writing about.

[…] why are we still prospecting for fossil fuels when we already have more than we can safely [global warming] burn? The reason is that governments are pursuing two completely different policies. One is to encourage the production of fossil fuels; the other is to discourage their consumption. Until this conflict has resolved our carbon cutting programs will fail. No company extracts fossil fuels as a hobby. Once removed from the ground, they will be burnt whatever demand side policies say. May I propose a new kind of carbon capture and storage, which is geologically stable and guaranteed to work? Leave the damn stuff in the ground.

George Monbiot, as podium speaker in the Nature podcast