The lid/wheels have come off the Great Moderation. The old order of serfs working gratefully in sweatshops for the benefit of a handful has failed utterly. The neoliberal tactic of robbing from the poor to give to the rich has run aground on the twin shoals of peak petroleum and the world- wide penetration of US- style marketing. Riots in Egypt are a reflection on the success of lifestyle- ism as seen on TV. Everyone in the entire world now wants to live like Americans do. They’ve heard the rationalizations for belt- tightening and economic freedom. They’ve had the tight belt now they want the goodies. They ‘Want It Now’ and if they don’t get it the world’s economies will be fed into the meat grinder, first with the dictators, then with anyone else they can get their hands on.

The easiest way to look @ current events is to think of them as forms of labor action. It is the outcome of the structural failure … of economies- of- scale energy consuming industrialization to provide all with something useful and remunerative to do.

It is the failure of, ‘No robot left behind!’

This cannot be a surprise. Now that the system has ground to a halt due to every mismatch anyone can think of, it’s ‘bailouts for all’. Everyone demands the chance to be the Middle Eastern or Madison, Wisconsin version of Hank Paulson. The public holds society hostage: “Make Me A Millionaire or else!” This public is as serious as a heart attack! How many do you know are ready to stand in the street and get shot at with a machine gun? This willingness is not founded upon pop- art abstractions. Along with ‘Freedom’ and ‘Democracy’ these folks feel entitled to easy jobs, luxury cars, air conditioners, iPads, electricity, gadgets and finance economies like Singapore, Dubai and London have. The people want their cake and they want to eat it too.

They want it because television has promised this to them.

On the heels of peak oil comes the arrival of ‘Peak Marketing’, which is the point where adding that single, additional marginal customer causes economic activity to contract. This is because ‘Marginal Man’ is the first in a very long line of unsatisfiable customers. All these bright young people racing around like madmen in Cairo, Benghazi, Tehran, Algiers and Tunis among other places are responding to marketing. They want goods that either cannot exist or have long since run out, like cheap oil.

The question is how this new post- marketing peak is going to express itself? Will the four or five new Chinas materializing on our doorsteps take the time to invent zero- throughput economics or ‘Steady State’ and seek places in John Michael Greer’s ‘Salvage Society’ or will they become increasingly frustrated by false promises and churn the world’s economies into mush?

I vote for mush. Marketing and modernity have promised far more than these can possibly deliver. It’s not just the economies that are broke, the world itself is broken. Like it or not, healing time has begun.

Look to China to become engulfed in the expanding conflagration. China’s reforms are skin deep, it is a totalitarian state with no rule of law. Libyans’ complaints are little different from those of Chinese citizens. The other populous states such as India, Pakistan even Brazil have experienced unrest. What cannot be articulated can be instinctively understood: there isn’t enough to go around whether it is cheap food, wives or Swiss bank accounts.

Lurking @ the edges of consciousness is the vulnerability of crude supply. If the vital organs of the Great Moderation shut down there will be an oil price spike (from already outrageous levels) and the next deleveraging leg will take place. There is a lot of anxiety in the markets because of this vulnerability. The suppliers are all on edge, particularly repressive Saudi, Iranian, Iraqi and Kuwaiti producers. It would take little to remove a million barrels per day of OPEC production and burst the myth of ‘Spare Capacity’. Then what?

The central issue is credibility and relevance, not finance or business mechanics. Institutional credibility is bleeding out of the Establishment by the minute. There has been too much invested in the status quo with no ‘Plan B’. Right now the events have taken place within a channel of political activities. Mistakes are easy to make and the outcomes can quickly spiral out of control. A labor action in Saudia or Iran could cut oil exports. You can figure out the rest all by yourselves.

Meanwhile the discussion of the WTI/Brent ‘spread’ or difference in price goes on unabated. Everyone who has an interest in oil trading has an opinion. Here’s one from the Estimable Gail Tverberg:

Why are WTI and Brent Prices so Different?

We have all heard at least a partial explanation as to why West Texas Intermediate (WTI) and Brent prices are so far apart. We have been told that the Midwest is oversupplied because of all of the Canadian imports, and the crude oil cannot get down as far as the Gulf Coast, because while there is pipeline capacity to the Midwest, there isn’t adequate pipeline capacity to the Gulf Coast. I have done a little research and tried to add some more context and details. For example, the opening of two pipelines from Canada (one on April 1, 2010 and one on February 8, 2011) seems to be contributing to the problem, as is rising North Dakota oil production.

There are two pipelines (Seaway – 430,000 barrels a day capacity and Capline – 1.2 million barrels a day capacity) bringing oil up from the Gulf to the Midwest. It is really the conflict between the oil coming up from the Gulf and the oil from the North that is leading to excessive crude oil supply for Midwest refineries and the resulting lower price for WTI crude oil at Cushing. Demand for output from the refineries remains high though, so prices for refined products remains high, even as prices for crude oil are low. This mismatch provides an opportunity for refiners to make high profits.

There are various ways of fixing the problem. Bringing less oil up from the Gulf would seem to be part of the solution. Conoco Phillips, one of the owners of the Seaway pipeline (and an owner of Midwest refineries), says it is not interested in reversing it. But lower prices by themselves would seem to result in less oil being shipped through the pipelines up from the Gulf, and may at least partially fix the problem.

Gail puts up a lot of good analysis and the article is worth reading in its entirety. What I’m not sure about is whether there is a ‘problem’ that requires ‘fixing’. Chris Nelder pointed out a few days ago during a Twitter discussion is that that are doing what markets do. Whatever the price is, is. That there is a difference in prices between two markets is unusual but by itself nothing extraordinary particularly in extraordinary times.

If protesters oust Iran and Saudi dictators and these countries’ economies swoon the price of oil will likely rocket into the stratosphere and test the 2008 highs. There isn’t that far to go from where we are now @ Brent to the old high of $147! The outcome of that spike will be a phenomenal crash as price vaporizes demand. Unlike 2008, when unemployment in the US was 5% and everyone had house equity, people now are broke. Banks are insolvent. Nobody has access to the credit that was available during the 2007- 08 runup. The governments are also broke. There is nowhere to hide. A decline in any market will unmask the banks’ balance sheets and the race to the exits will be on. There are bank runs taking place right now.  Once the realization that Uncle Sugar cannot do anything to fix but can only wring his hands the Mother of All Runs out of stocks, bonds, and derivatives will be underway @ lightning speed.

Not one person will recall the WTI/Brent spread.

What all this leaves us with is a short checklist of step to protect oneself. For the moment ignore the ‘inflation/deflation’ arguments. These are all about investment strategies. What is taking place under everyone’s noses is the end of investment, of Financialism or ‘money making money’. Success in the world to come will not be something you can buy in a store but something you have to learn.

 – Decouple from modernity; get rid of the TV and don’t look back. Get rid of the car: if you have two get rid of one, looking to get rid of the last one when you can. The car and the teevee are instruments of your enemies who are out to kill you. It is you or them!

 – Get out of debt by any means necessary. Debt is a way society institutionalizes you. You become a ‘score’ and your humanity escapes into a computer in Delhi or Atlanta. In today’s economic undertow, the outcome of hyperinflation or deflation is depression and collapse. Depressions are class wars and ours has begun.

 – Be yourself. Wishful thinking is a wasting asset. The time to figure out where you stand and what resources you really have access to.

 – Be ready for the long haul. Times will be tough … then, they will get worse. Ours is a generational challenge, then a human existential challenge. Nothing is amenable to five- year plans. Start thinking 500 year plans.

 – Find tools rather than investments. ‘Invest’ in yourself and your loved ones, forget about investing in the Robber Barons who will make you a pitiful amount of money until they don’t anymore. Then what? Remember, this is a class war. You win by leaving the casinos and holding on to what is yours. Without what you surrender to them, they are nothing.

 – Look to live ‘easy’ rather than the alternative. If you aren’t a farmer, don’t try to become one. If you are good with numbers, be an accountant or a teacher. If you are comfortable in the city, don’t move to the country. Try hard to make the city work for you. Be easy on yourself. Avoid anxiety and become your best friend.

 – Read, read, read. The more you learn the better off you will be.

 – As always, avoid self- destructive people like the plague. This is really the secret to success in life, anyway.

 – Cultivate that sense of humor. We will all need it.