BBC in Bad News Shock

The job of the media is to avoid giving people any information that might keep them out of the shops.

That means that actual bad news stories – the kind that might wake people up (or, as  nutters economists say,  ‘hurt consumer confidence) – are a complete no-no unless a National Emergency, like nuclear missiles heading for Surrey or all the cashpoints shutting down, is truly imminent.

So when someone like Alessio Rastani  pops up on BBC News and “tells it like it is,” no-one knows what to think. Gobsmacked viewers jammed up the Twittersphere wanting to know whether he was some kind of hoaxer.

Calm down dears. He was just saying what everyone with more than six brain cells and access to the Internet has known since 2006. Moreover, political and business leaders talk in those terms among themselves all the time – only you’d never it know from the BBC because no-one ever says it on air.

Don’t frighten the horses

So how do the BBC and the rest of the mainstream media make sure that no-one (well, almost no-one) says anything that might frighten the horses?

Well, it’s a variation on Churchill’s assertion that you can never get someone to believe something if his job depends on him not believing it. Virtually the only people who get interviewed about Europe’s epochal slide into the worst depression for 80 years are big-bank economists and other finance-o-crats whose jobs depend on their belief that they can fix the problem if only they can postpone the crisis indefinitely .

Unfortunately for them, the debt-bomb that is energy-starved Italy won’t stay afloat for much longer. And when the merda colpisce il ventilatore, torrents of thoroughly bad news will crash down upon newsrooms like collapsing skyscrapers, with dire tidings pouring in so fast that there won’t be time time to wheel in Europe’s leaders to tell everyone to go out and hit the malls with every piece of plastic they’ve got.

The thing is, most journalists and editors aren’t evil or irresponsible but many of those on the nationals or at the BBC seen to have succumbed to a kind of cognitive capture whereby they believe that their job is to de-claw the truth in order to shield the public from reality.

So for instance we get cries of outrage from the Independent over soldiers being shown what it calls ‘war snuff movies’ when the reality is that anyone can easily find hours of such material from Iraq and Afghanistan on YouTube – not to mention every WWII documentary that includes aerial attack footage.

Sanitised

So if everything in the mainstream media has to be sanitised and played down for public consumption, how do they handle a situation which is very bad and getting worse but has yet to spill over into the next Lehman Brothers Moment? Because if the media leave it till the last moment, millions of people will make carry on making decisions, based on the over-optimistic ‘recovery is just round the corner’ meme. And those decisions will hurt people badly in the coming recession.

I guess one strategy would be to ‘accidently on purpose’ give the likes of Alessio Rastani a bit of airplay every now and then. It’s the opposite of a giving the patient a spoonful of sugar to help the medicine go down: letting a drop of bitter truth fall into the  mainstream political and economic pabulum in the hope that few patients will get the point and discharge themselves from the asylum while there’s still time.

The great thing about Rastani is that he works for himself. No-one’s going to threaten to fire him for being too candid on the telly – unlike the Government’s energy advisor David MacKay, who was slapped down by Ed Miliband two years ago for telling the truth about Britain’s looming power gap. By the way, how’s that going, Ed? Looks like you might get into Number 10 just in time for the lights to go out.

Energy writer David Strahan has the latest on the Coalition’s stumbling attempts to get to grip with Peak Oil on his blog. He writes

“DECC has recently invited external consultants to bid to provide further analysis on the impact of oil, gas and coal price spikes, and whether climate change related policies make the country more resilient to fossil fuel shocks. This smacks of wishful thinking; the answer is likely to be yes, but nothing like enough.

“It is of course important to understand how much peak oil is going to hurt, but that in itself will do nothing to help when the crisis breaks. It is long past time for the government to develop policies to radically reduce our oil dependency within 20 years.”

The last word goes to ‘Spec’ who comments on Strahan’s article:

“They may understand the problem . . . they just have no solutions. And if you have no solutions, why bother talking about it?  . . .  So the government plan in the UK (and in most of the world) is to wait until oil prices cause a crisis and then start trying to implement mitigation strategies.

“Voters don’t give credit to people that prevent problems. They only give credit to people that solve problems. So the public has to be smacked down hard by peak oil before they will push the government to do something.”

Expect to feel the smack before you see,  hear or read about it in the media.

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To fly. To survive. Maybe.

The day after Airbus launched a new game called Fantasy Plane Orders, IATA announced that airline profits will fall by 29% next year because high oil costs make their already-inadequate margins so thin that they could rose-tint them and give them to plane makers to use as spectacle lenses.

As someone from ASPO Australia commented on Economist.com, it’s not just a question of the cost of fuel now; it’s a question of its availability. Airlines must compete with a billion drivers and hundreds of millions of portable and fixed generators for a no-longer-growing supply of liquid fossil energy. Guess we’ll soon find out how ‘essential’ flying will remain to ordinary people whose first priority for fuel is to use it to get to work, have jobs and feed themselves.

These huge uncertainties seem to have got to British Airways, despite last year’s return to profitability. Their much-hyped new TV ad looks wistfully back to a golden age of air travel (mostly the ones when, BA artfully omit to mention, only the relatively wealthy could afford to fly).

The film’s lavish production values can’t disguise the hollowness at its heart. It begins well enough in deep, solid shadows – all leather coats, gloves, goggles and waxed moustaches – but climaxes with an unintentionally hilarious piece of CGI which looks as if someone’s pasted planes on to the whizzing quidditch players in a Harry Potter movie.

 

File under whistling past the graveyard.

How many barrels of oil buy a UK house?

What’s a house worth in real money? Not in electronic numbers or bits of paper but in something extremely useful and globally sought after, such as oil.

It’s a question worth asking because in the end money is only as valuable as the physical work it can buy (‘do’). This chart shows how many barrels of oil it took to buy the average UK house over the last 15 years:

UK House Prices in Barrels of Oil EquivalentSources: Nationwide Building Society and Indexmundi
(Brent Crude GBP Price in December)

You could say that things are OK as long as the amount of oil you could trade your house for keeps pace with its price in pounds. That suggests that the rising value of your house is backed by a similar increase in the equivalent amount of energy that could be put to work growing the economy.

Of course, for that to happen (i.e. for house prices to rise sustainably), the oil needs to remain level or, better still, keep getting cheaper. And for that to happen, under conventional olde worlde economics, more oil needs to be produced so that supply doesn’t fall below demand because if it did the price would go up.

Indeed, oil and house prices kept more or less in sync between 1995 and 2003, apart from a blip in 1998 caused by a short-lived plunge in oil prices that made house prices momentarily look very good indeed.

But the trends started to diverge after 2003 – coincidentally just around the time that conventional oil production hit its peak. Oil began to get a lot more expensive, which made houses worth less in real (energy-backed) money.

If those were the only fundamentals behind house prices, the market should have corrected in 2004. But of course they’re not. Cheap debt allowed prices to rise for another three years. And since then the UK Government has done everything in its power to prevent home values dropping back to the long term average in relation to incomes (or barrels of oil).

Crushed

QE1, QE2, and other forms of make-believe money have helped to hold house prices up despite a massive slump in sales.  But who is that helping?

Remember, the shorter the vertical bars on the chart, the more expensive oil is and so the more that people have to pay for road fuel and other necessities (like food) whose cost is affected by the price of oil. The increasing struggle to pay for higher-priced energy is exacerbated by the cost of mortgage payments on high-priced homes. Ordinary people are being slowly crushed by the consequences of the rush for growth fuelled by debt instead of real resources.

In the meantime, it’s a bonanza for those with access to oil wealth. To them, the price of UK houses is less half what it was in 2003: hence the relative immunity of high-end properties in and around London from price-falls.

It makes you wonder why Governments are so terrified of deflation. Yes, millions of unrealistic expectations would be brought tumbling down along with prices and levels of debt. Yes, consumer demand would crater. But such a slump would also bring down the price of oil and narrow the gap between ‘real’ energy-backed values and the prevailing phoney, debt-backed, put-it-on-the-grandchildren’s-tab values.

Right now that’s too much to ask. UK Business Secretary Vince Cable was burbling about renewed stimulus yesterday- i.e. more thin-air money; more synthetic demand and therefore higher prices for scarce energy. All that will do is make the crash, when it comes, that much harder.

Off to war with Vince Cable

Did British Business Secretary Vince cable feel the hand of history on his shoulders yesterday when he declared the economic equivalent of war?

Was he flanked in his mind’s eye by Presidents Nixon, Carter and Bush Jnr as he rallied us to share hardships, stiffen upper lips and – I must assume – risk losing loved-ones for the sake of brighter, safer, fairer tomorrow?

Nixon declared war on drugs in 1969. Carter declared the ‘moral equivalent of war‘ on wasteful living standards in 1977. Bush declared war on terror when he was told to.

Nixon’s and Bush’s wars have chewed through trillions of dollars and wrecked hundreds of thousands, if not millions, of lives for no discernible result. More Americans use drugs than ever before. The US remains mired in Afghanistan, long after declaring victory.

But, for Mr Cable, Carter’s war speech is probably the most poignant. His message was closest in spirit to Cable’s; urging listeners to lower their expectations and dig in for tough times ahead.

Naturally, the listeners didn’t like it. You could say that the speech cost Carter his job – although the Iran hostage crisis was a more proximate cause.

Too early

Worst of all, Carter’s timing was out by 30 years. It really was in the interests of the American people to turn around in 1977 and start becoming less dependent on imported fossil fuel.

But there was another course open to any populist politician who was happy to let the problem grow unseen until it became a huge predicament for a generation not yet born: cut a new deal with the oil producers and party on.

So Ronnie Reagan declared not war but ‘morning in America’. He knew that in 25 years or so the flow of oil would stop increasing, and that when it did the growth party would be over.

But what a party it would be! And in any case, Reagan believed quite sincerely in the Rapture.  So no need to fret about life in a post-fossil-fuel, post-industrial civilisation because all the righteous folk (read: Americans) would be in the arms of Jesus by then.

Timing

So why would Cable want to put his head on the war block unless he felt history was on his side? When Reagan beat Carter, around half of oil the that’s been burned between 1859 and now was still (fairly accessibly) in the ground. That all went in a short, three-decade splurge. Now we’re left with ever-more anaemic flows of difficult, slow, expensive stuff.

President Carter aside, few politicians deliver unpalatable messages unless they know the people are up against the wall. Even Churchill waited until the invasion of France in May 1940 to promise the British people nothing but ‘blood, toil, tears and sweat.’

Looks like Mr Cable recognises a wall when he sees one. He isn’t asking us to fight our expectations on the beaches yet. But he is the Business Secretary and he used the word ‘growth’ a mere seven times in a 2,100 word speech yesterday .

Is that the equivalent of declaring war? Perhaps it’s the equivalent of what Churchill told General Ismay on May 13 1940: “Poor people, poor people. They trust me, and I can give them nothing but disaster for quite a long time.”

(N.B. Doubtless, most people in 1940 would gladly have swapped their kind of disaster for the sort of trouble Mr Cable is preparing us for).

End of Growth

Interesting to see how fast the end-of-growth meme is spreading outwards from the commentariat to the governing class.

George Monbiot has noticed that Ed Miliband’s holiday reading included Tim Jackson’s Prosperity without Growth. The book was a singular choice: Gordon Brown ignored it; Peter Mandelson responded with a witless piece of official sloganeering about growth, and David Cameron torched its publisher, the Sustainable Development Commission, as one of his first acts as PM.

Richard Heinberg’s The End of Growth is just out in print, although I’m still waiting to be able to get hold of a copy in the UK.

Even the BBC, sworn to uphold the idea that everything in the garden is lovely, is broadcasting seditious scuttlebutt on the Today programme, tacitly acknowledging that Permagrowth economics is now pretty much wedged into a cul-de-sac of its own making.

A couple of years ago, the Today presenter Evan Davis predicted that peak oil would be one of the business world’s leading topics of conversation in future. But, like Prosperity without Growth, Davis’s prediction sank without trace. Funny that.

For today’s Today, though, Davis got commodity trader Jim Rogers’ take on what’s going on:

“If the world economy gets better, then commodity prices are going to go through the roof because of the shortages that are developing. If the world economy does not get better, commodity prices will still be firm, (a) because of shortages and (b) because governments will print money

“Throughout history when governments have printed money it’s led to rises in the price of real assets. Whether it’s rice or silver or natural gas or whatever it happens to be, people try to protect themselves when money is being debased.”

That is the peak oil vs. financialisation argument in a nutshell. Growth has been killed by shortages – primarily of energy – while attempts to substitute a kind of ersatz growth based on thin-air money printing for the real thing are self-defeating.