free html hit counter Peak Oil Debunked: 293. "BLOOD IN THE STREETS"

Sunday, April 23, 2006

293. "BLOOD IN THE STREETS"

Over time, we've seen a gradual shift in the rhetoric of the peak oil community. The original pessimist position was based on "hard", unavoidable numbers and realities: the human population is dependent on oil for food, and as oil declines, this must lead inevitably to mass die-off of most of the world's population. As we have seen, however, this argument is only superficially plausible, and when we dig deeper into it, we find that it is basically a bunch of B.S.

On the whole, even the doomers themselves have grudgingly accepted the refutation of die off theory, and have shifted their focus to economic cataclysm. Their rhetoric is now based on concepts like fiat money, unmanageable debt, recession, depression, inflation, deflation, stagflation, consumer credit, housing bubbles, financial overextension and imbalances etc. etc. It's kind of ironic really. The original doomer position was that economists are wholesale idiots, "flat earthers" who have no credence whatsoever. They were supposed to stay out of the peak oil debate and leave it to geologists -- because economists don't have the expertise to comment on oil depletion. Yet now, we are seeing the peak oilers crassly invading the turf of their enemies (the economists) in order to salvage their collapse scenario. I guess the bottom line on the turf question is that economists have no valid opinions on peak oil because they have no expertise, but peak oiler amateurs have valid opinions on economics because they're... well... peak oilers.

One thing is for sure, though: economic apocalypse is notoriously hard to predict.

Just to give you an example, I recently got an interesting old book from a friend when he moved and threw out all his old paperbacks. It's called "Blood in the Streets: Investment Profits in a World Gone Mad". It was written by two financial commentators/analysts (James Dale Davidson and Sir William Rees-Mogg) in 1988. Here's a quote:
The coming years will be a bad time to be ill-advised. A time fraught with snares for anyone who is unprepared. We could be on the verge of a financial upheaval when blood will, indeed, "run in the streets".
The authors describe in great detail the coming upheaval due to the Latin American debt default, the imminent real estate crash, the end of American supremacy etc. etc.

It's entertaining reading because the authors were 100% wrong about everything. The U.S. didn't go down the toilet in the 1990s. Rather, the country experienced the greatest surge of technology-driven prosperity in its history.

My point is that people have been predicting the implosion of the global financial system for more than 30 years. Davidson and Rees-Mogg made an extremely convincing case for it 20 years ago. Nevertheless, nothing actually happened. In fact, anyone who actually bought into their imminent collapse theory in 1988 got burned.

The warning sign, I think, is the tone of the analysis. Davidson & Rees-Mogg were so sure of themselves, and it's eerily reminiscent of the tone in the peak oil community. Many of the quotes from their 1988 book could have easily been lifted off The Oil Drum or peakoil.com yesterday. That's the problem. The economic future is highly unpredictable and should be addressed by hedging -- not by being sure of yourself, but by questioning yourself. Seriously and toughly asking yourself: Could I be wrong? And if so how? What am I missing? That's what Davidson & Rees-Mogg didn't do and that's why they were so wrong.
-- by JD

16 Comments:

At Sunday, April 23, 2006 at 10:21:00 PM PDT, Blogger nukeengineer said...

JD, have you ever asked yourself, "What if John Denver is the assh-le"?

NE

 
At Monday, April 24, 2006 at 12:11:00 AM PDT, Blogger JD said...

I don't have to ask myself that question. I know I'm an asshole. In fact, I'm such an asshole that I will be nuking your comments nukeengineer. Thanks for dropping by.

 
At Monday, April 24, 2006 at 1:50:00 AM PDT, Blogger R. C. said...

That was a very well-written thoughtful post. But, I suspect the doomers will just say that this time the sky is falling and we have just gotten lucky these past few years.

I suspect if the Internet had existed in 1988, the ideas of that book would have spread a lot farther and there would be a group of people with their own website panicking and preparing for the apocalypse. Look at the LEAP/EURO2020 prediction for a "systematic crisis." That got a lot of people panicking. People believe everything they read on the Internet too easily these days (myself included). At least this website prompts to at least think critically versus being told exactly what to think at LATOC, etc.

The majority of people are not able to think critically about every issue. When the LEAP guys tell us there is going to be a crisis, a percentage of us panics instead of analyzing why they are (were) wrong.

I really hate how "experts" like investment banker Simmons talks about how Saudi Arabia is peaking. He is an investment banker, not a geologist. He should stick to what he knows best. Campbell, the most respected peak-oil geologist, predicts a Saudi peak in 2014 (with a world peak of 2010). His opinion means more than Simmons since he is a geologist (even though he has been wrong many times, but thats another story). My main point is that peak oilers (peakoil.com folks) should stick to what they know best, whatever that is. I don't know much about economics or geology, but I do know thermodynamics well so I can comment on that subject appropriately. If you are an economist or studied the subject extensively, comment on it, otherwise keep quiet and go work on the ecobunker, you tools.

 
At Monday, April 24, 2006 at 2:46:00 AM PDT, Blogger Alex said...

It may be worth remembering that William Rees-Mogg is known in the UK precisely for putting his name to a whole string of wrong predictions. I think Francis Wheen of The Guardian used to keep an annual list.

 
At Monday, April 24, 2006 at 2:57:00 AM PDT, Blogger R. C. said...

It may be worth remembering that William Rees-Mogg is known in the UK precisely for putting his name to a whole string of wrong predictions. I think Francis Wheen of The Guardian used to keep an annual list.

The same can be said of C.J. Campbell. No one would put any stock in Rees-Mogg after his failed predictions, so why are people ignoring Campbell's failed predictions. Ruppert/Deffeyes and others also have a history of failed predictions as J.D. has pointed out. People like Rees-Mogg and Campbell need to stop predicting the future so they don't look life idiots.

 
At Monday, April 24, 2006 at 4:26:00 AM PDT, Blogger Roland said...

The majority of people are not able to think critically about every issue.

Particularly if you don't have background knowledge in the subject. I used to know nothing about oil or energy, so how could I assess the claims of a website like LATOC properly? That's the problem with sensationalist predictions.

 
At Monday, April 24, 2006 at 6:10:00 AM PDT, Blogger allen said...

JD wrote:

Their rhetoric is now based on concepts like fiat money, unmanageable debt, recession, depression, inflation, deflation, stagflation, consumer credit, housing bubbles, financial overextension and imbalances etc. etc.

Boy, does this bring back memories.

Although they seem to have evaporated post-Y2K (how many people remember what a big boogeyman that was?), these are exactly the imminent disasters predicted by the survivalist movement and you can see how some of that view showed up in movies like "Mad Max" and other post-apocalypse epics.

Based on historical precedent, I predict that the Peak Oil movement will devolve into an echo of the survivalist movement complete with instructions on how to camoflage your bunker in the woods, what firearms to buy and how much ammunition and dried food to stock, etc.

r.c. wrote:

The majority of people are not able to think critically about every issue.

You mean there are people who can think critically about every issue? I find that pretty tough to believe, the legions of people who claim to be able to think critically about every issue notwithstanding.

In fact, I think the opposite is closer to true, that the majority of people are capable of thinking critically about every issue with the single, additional proviso that the majority has to have enough time to sort the issue out. Since that's the underlying assumption of any democracy, an assault on the intelligence of "the masses" is an assault on the idea of democracy.

People like Rees-Mogg and Campbell need to stop predicting the future so they don't look like idiots.

Some of these folks make a fine living off this stuff. Paul Ehrlich, who's been making laughably wrong predictions for forty years, still has a paying audience for his drivel none of whom, by definition, are at all troubled by his record.

Obviously, they're getting something other then useful predictions out of the likes of Ehrlich, Campbell, Deffeyes, et al, but they are getting something they find worth paying for.

roland wrote:

Particularly if you don't have background knowledge in the subject.

How much background knowledge is necessary though? Most decisions can be boiled down to understandable terms, you just have to sort out the axe-grinders from the honest reporters. Given some time, the axe-grinders have to expend greater and greater effort to explain why they're so relentlessly wrong and making excuses for failure is something alot of people can identify.

 
At Monday, April 24, 2006 at 6:52:00 AM PDT, Blogger HedgeFund said...

JD, excellent last paragraph.

If the doom-and-gloom crowd wants to truly be taken seriously, I suggest that "they put their money where their mouth is". Talk is cheap, very cheap.

If you REALLY want to now what a person believes in, look through their checkbook & track their actions. If the PO/doom-and-gloom goofballs really believe what their saying, are they backing up these words with actions & money?

Should these people put their money on the line and end up wrong, perhaps they will learn a lesson or two. If not, perhaps they'll be too poor to have time to opine in the future.

 
At Monday, April 24, 2006 at 8:23:00 AM PDT, Blogger Override367 said...

As an optimist, I can really stop and ask myself "what if I'm wrong?".

The answer I get is that I might be wrong, it might somehow end up being the end of the world, this peak oil thing. Then again what if *they* are wrong?

You see if they are right, I am suddenly let off the hook - I have no responsibility to conserve or better my life because THE PARTIES OVER!!! WOOO!!! If they are wrong, however, I should start learning how to leave with less petroleum usage, because there will be hard times ahead for people who currently rely on long distance personal transportation who don't carpool.

So far I've saved a tremendous amount of money by conserving gas and NG since I learned of peak oil, so even if they turn out to be right at least I had a little more spending money in the years before "TSHTF"

That said, I don't think they are right, and I would be willing to bet the reason most of the doomer community so readily accepts that they are right is that it frees them of any personal responsibility to make the world a better place :)

 
At Monday, April 24, 2006 at 9:43:00 AM PDT, Blogger JD said...

As an optimist, I can really stop and ask myself "what if I'm wrong?"

This is an important thought. I've thought it often. It explains a lot of my approach to this subject.

I don't make predictions, so I can be sure I'm not wrong on that front. I respect the indeterminacy and unpredictability of the future, and prefer to just shut up, rather than arrogantly pose as a "prophet". You're just asking for trouble that way. In the end, prophecy is just driven by personal vanity and other base motives, IMO.

So I focus on mechanisms, not prophecies. When the peak oilers say things like, "Relocalization will occur because expensive oil will make long distance transport impossible", that's a mechanism that can be *proven* wrong. I don't have to worry about turning out wrong on that point because I refuted the mechanism with clear numerical analysis.

But the world is a freaky, capricious place. A nuclear war or an asteroid strike or some weird new plague or any other number of other catastrophes could occur, and devastate/wipe out humanity. I don't dwell on such things, but I understand them and take them seriously. Like I said, I'm not a prophet, and I don't presume to know the future.

I don't worry about it that much, though, because the absolute worst case TSHTF scenario is that I die, and that's going to happen anyway, so why waste time worrying about it? I'm here to live not fret about dying. That's one reason why I don't like survivalists. They're pussies -- too scared of death. Real studs don't worry about it.

Of course, I do sometimes say that people will lick the peak oil problem, but that isn't a prophecy. That's a statement of resolve! ;-)

 
At Monday, April 24, 2006 at 3:59:00 PM PDT, Blogger DC said...

Weaning off autombile use or learning to conserve is not a big deal. Quitting your job because it's not "PO-proof", prematurely nuking your retirement assets to dive headfirst into gold, and having relationship issues with a non-believer significant other are a big deal.

There's no room for subtelty in the doomer cult. Consequently, there is plenty of motivation to rationalize the sunks costs of these large, imprudent decisions. Even if it means bastardizing economics, thermodynamics, and so on.

 
At Monday, April 24, 2006 at 5:08:00 PM PDT, Blogger bc said...

I believe in cultural evolution, some people refer to this as meme theory (originated by Richard Dawkins).

Ideas are like genes, they replicate, mutate and are subject to selection. Thus if not exactly evolution, there is a strong analog.

So I see the generation of many different predictions about the future as part of the process of cultural evolution. Many ideas are created, "good" ones are replicated and if become widespread become the norm, and may be acted upon.

So there will always be people predicting imminent doom, as there will be people predicitng the opposite. We probably need both sets of people. Somewhere in the middle a consensus opinion forms, and becomes an influence on behaviour.

Of course, it is not necessarily true that the consensus always forms around the correct analysis, but in general, it provides a form of collective problem solving.

So I wouldn't worry too much about how or why these predictions occur. The thing to do is to assess them critically on the merits, which is difficult, but I think JD does pretty well, although I don't agree with all his conclusions.

 
At Thursday, April 27, 2006 at 9:45:00 PM PDT, Blogger Stephen Gloor said...

JD - " As an optimist, I can really stop and ask myself "what if I'm wrong?"

This is an important thought. I've thought it often. It explains a lot of my approach to this subject.

I don't make predictions, so I can be sure I'm not wrong on that front. I respect the indeterminacy and unpredictability of the future, and prefer to just shut up, rather than arrogantly pose as a "prophet". You're just asking for trouble that way. In the end, prophecy is just driven by personal vanity and other base motives, IMO."

You can admit the reality of Peak Oil without being a doomsayer. Oil is a finite resource and it will supply will begin to not meet demand in the near future. That really is a no brainer. You do make some predictions. You predict that alternatives to oil will smoothly take up the slack of demand destruction as supply and demand come back into balance. That is a prediction.

I am not so sure that this transition will be as easy as you predict.

Firstly unless we start now to reduce demand there could exist a gap period between lack of oil and availablity of suitable alternatives. You saying that peak oil is a myth is not helping here.

Secondly none of the alternatives have oil's EROI which means sustaining our current economic output would require vastly more energy input. To use alternative fuels we would have to increase efficiency or reduce economic output or both. Again unless we start the process now there could be disruptions while we change over due to long new technology lead times.

I am pretty sure that peak oil will not lead to die-offs and the like. You really should not characterise the mainstream of people concerned about our society's lifeblood by the more extreme elements. Concern about oil supplies does not mean you think that we will all die. I am sure that something will be worked out however it is the change over that could be painful for some people. That is what I am worried about and most mainstream peal oil people are the same. Simply denying peak oil is pretty non-productive and will contribute to the length and harshness of the changeover.

 
At Sunday, April 12, 2009 at 6:22:00 AM PDT, Blogger Sergiu said...

What a difference 3 years make !
I always admired their two books. One is dead by now, I think.
There is a post, elsewhere, by the other, saying that what better prediction one can possibly ask for; and he is sooo right.
What a difference 3 years make ! Eh?
Sergiu

 
At Saturday, July 31, 2010 at 6:58:00 AM PDT, Blogger martin said...

I think you all should go back and read the book again!
and read another by James Dale Davidson and Rees Mogg titled The Great Reckoning
Everything the authors predicted is coming true so wake up and for your own benefit do your homework now
The problem with all predictions is they always take longer to materialise
Martin Hopkins

 
At Thursday, May 24, 2012 at 3:32:00 PM PDT, Anonymous Ty said...

I have read all 3 Davidson/Reese-Mogg books more than once and they got far more right than they did wrong. Their predictions were always couched in caution and never accompanied with a specific timetable. Their major prediction - the end of the nation state - is happening day by day. It isn't being covered in the news because it is't recognized as such. But the factors that led to the creation of the nation state no longer exist and so the way we humans organize ourselves is changing to reflect the new factors. Very interesting reading at any rate.

 

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