Peak Oil and The National Automobile Slum

James Kustler has made a decent living of calling the end of the world, in particular its peak-oil incarnation. One thing I like about it is he responded with at least some good humour to the wags that keep reminding him that he got y2k wrong and that the world hasn’t ended due to peak oil. Good humour is something I’ve observed to be in short supply among peak oilers.

I thought I’d revisit some of his work after reading Movevator’s post on the End Of Oil. I disagree with the cheerful thrust of the video protagonist’s argument on that post, which essentially boils down to

We’re humans. We’re smart. So far in the history of the world we have never come across something that was so big that we couldn’t think our way out of it.

Don’t get me wrong, I sincerely hope he’s right. And I can’t argue with the fact that these statements on their own are correct. However, past performance is not a guide to future performance, of species as well as stocks. The dinosaurs were pretty successful in their way too and look what happened to them.

One of the items I dredged up was Kunstler on one of his other hobby-horses, the dire straits of US urban design. Brits can take a look at a more local example of the horror at something like Lakeside shopping centre, though it thankfully hasn’t got the associated residential sprawl.

Something that struck me on holiday in America, particularly the West Coast, was that public urban spaces was designed to accommodate the motor car so completely. Parking is hardly even an issue ad you never seem to pay for it when shopping. The streets are wide enough for people to do U-turns. Try doing that in Britain and you’ll take out ten pedestrians, a lampost and a couple of shop fronts.

The downside is that everything ends up so far away from everything else. I was in a LA motel selected for its low price rather than ambience, and fancied a beer.

I asked directions to the nearest place, and was told it was only a short distance by car. Trying to walk that distance, however, was an exercise in frustration because it was the devil’s own job to cross the roads – the streetscape is really not designed for pedestrians, and those pedestrian crossing that there are are designed for the likes of Usain Bolt, not a guy carrying beer.

Either the average American citizen is a damn sight fitter than I am or the traffic light timing is set by someone who hates pedestrians with a vengeance. I’d typically only get half-way across before the hurry up signal started to hassle me. I learned my lesson and drove everywhere after that.

Kunstler is not as engaging as Richard Sears on Monevator’s The End of Oil post, but he has his own charm. He gets pumped up on the worthlessness of US surburbia in a post-Peak Oil future in the last few minutes.

As a European I don’t have his intense dislike of suburbia. Our suburbs are typically mixed-use, which seems rare in new-build America, and I can walk from one end of town to the other in a couple of hours. At home there are three co-op stores, several convenience stores and newsagents, a laundrette and a few odd stores like butchers, hardware and takeways all within a one-mile radius. So he may have a point that the Old World may have an easier time getting around because our cities were designed before the automobile, on a slightly more human scale. Even London shows its history as an agglomeration of almost village-sized units once you get past Hyde Park to the west and Bow to the east, something I wasn’t really able to detect in LA.

Why Office Work is Bad For You

Why Office Work Is Bad For Us

I’ve just read Matthew Crawford’s The Case For Working With Your Hands, subtitled Why Office Work is Bad For Us and Fixing Things can Feel Good.

It’s a great book, marred by writing that ranges from the turgid to the sublime. The author’s observation of  “knowledge work” echoes the changes I have seen in the modern workplace, accelerated by globalisation. The problem, basically, is that wages in the West are high relative to emerging economies, so work that is relocatable will be relocated to cheaper regions. His advice is to choose a career in fields that require a physical presence – doctors good, radiologists bad. Image files can be transferred to cheaper wage economies for radiology, by the surgeon who opens you up has really got to be there with you…

At the same time, the separation of thinking from doing makes knowledge work increasingly unsatisfying. It is hard to see where your piece fits in, unlike the example of an electrician, who knows he has succeded if the lights come on and stay on. This deracination of work makes management of knowledge workers harder. You can see if the carpenter’s door fits or the shelves are level, but performance management is virtually impossible for knowledge workers – what on earth do you measure that you can ascribe to a particular individual’s efforts? The description of the essentials of knowledge worker management is inspired. When reduced to its fundamentals, the principles of much contemporary management is

“push details down and pull credit up”

A good carpenter’s work will develop his career for him – people will favour someone whose work is aesthetically pleasing and stands the test of time, whereas progression in offices is frequently down to luck, being in the right place at the right time in reorganisations and avoiding being associated with any projects that become train wrecks.

The original title of the book as “Shop Class as Soulcraft, an Inquiry into the Value of Work” but British readers wouldn’t recognise [work]shop class; older readers might be able to relate to shop class as woodworking and metalworking subjects at school but there is little current equivalent.

The Germans do not appear to be pleased

They’ve been winding people up left right and centre with their ban on short-selling without holding the underlying assets. Whether that’s a good idea or not I haven’t got the smarts to understand, though it does appear to have something to do with the exposure of their banks to some dodgy Greek debts.The legendary German rep for financial rectitude may get to take a hit when the skeletons have come out of the closet.

But former BundesBank supremo Karl Otto Pöhl, interviewed in Der Spiegel summed it up as all about rescuing banks and rich Greeks, and wasn’t chuffed at all about the fundamental changes made to the Euro from a currency union to a Federation of Europe, with the implied steady transfer of cash from richer regions to poorer regions, effectively North to Southern Europe. And he made a pretty good case, in characteristically blunt German way that takes no prisoners.

One fo the takeaways is that inflation is coming to the Euro too…

inflation up to 5.3% in April and has been OTT for seven months in a row

D’oh. What part of Quantitative Easing do they not understand. According to the Guardian

This is the seventh time that the governor has had to write a “Dear Chancellor” letter since the inflation target was set in 1997, when Gordon Brown handed control of interest rate policy to the monetary policy committee. Today’s letter will be published at 10.30am.

What should it say

Dear George

We made up a load of money to bail out the banks, and rather than call it money printing we called it Quantitative Easing. It was probably the best thing to do at the time, but the next few years are payback time for living high on the hog on dosh we didn’t have.

Cheers, Merv

Inflation ahoy – here’s how you can beat it

An increase in VAT seems to be on the cards, and that leads to pretty much the same increase in inflation, less a little to allow for the fact that food isn’t subject to VAT in the UK.

Tax-free Index-linked National Savings Certificates look like one way to try and claw this back from the Government, I am toying with throwing in the towel on my Cash ISA, which I struggle to get 2.5-3% variable on. RPI scans back a year on prices to get the interest rate. The VAT rise will probably be announced on June 22nd so buying certificates on the last day in May would capture the entire inflation boost from the rise in VAT on maturation in 3 years, plus of course the inflation boost from the earlier printing money like drunken sailors quantitative easing.

Since the purpose of an emergency fund is to buy stuff, probably VAT rated, doing nothing is letting George steal 2.5% from the value of my fund next month. True, if the emergency happens in the first year I am stuffed, as these can be cashed in early but attract no index-linking in the first year.

UK Con-Dem coalition, who’d have thought it

Well, we finally found out what we had voted for, though not many had expected a Con-Dem pact. Uneasy bedfellows I would have thought, though so far they seem to have been busy clipping off the extremes of each other’s wilder policies.

The Tories have had to give up their cherished inheritance tax threshold raising, while the Lib Dems have had their IMO nuttier policies on defence and energy moderated. They’ve got a massive increase in capital gains tax past the Tories.  Buy-to-letters are spitting bricks. I’m not sure whether this was specifically targeted to take out BTL landlords, since business owners can usually find ways of getting rewarded that aren’t capital gains. It is a hit on people who have bought shares outside of ISAs and the like, and indeed may trash one of my employee sharesave schemes. I’ll live, though – this isn’t too much of a hit on me.

For me personally the one Lib Dem policy that scares the hell out of me is their wish to abolish 40% tax relief on pension contributions, which could seriously bugger up my plans, as I am going for a contributions sprint at the end of my working life. If they get that through I will seriously look at switching to part-time working, as I can use my time more effectively building up my business and writing, rather than using nearly half of it to bail out financial institutions.

However, on the upside, their proposal to increase the tax threshold to £10,000 will make my pension more valuable as I won’t be losing much of it to tax. A VAT increase may well take a lot of that back again though :(

So like the Economist, and Monevator I find myself pleasantly surprised. I am still not sure whether the Tories and the Dems can stay in bed together, though they do all right on many local councils.

There are some other nice wrinkles. FFS, why should I pay for middle class people’s sprogs via the Child Trust Funds and Child Tax Credits?

I just love the moniker this unlikely marriage has acquired – Con-Dem, let’s hope it isn’t what it sounds like!

we can generally have anything we want, we can’t have everything we want

Hat-tip to Get Rich Slowly for this piece of philosophy. There’s a deep truth in it – just like the lie has finally been given to the myth of ‘having it all’ that polluted womens’ magazines for so much of the 1990s. Life involves choices, and and what areas to focus one’s intent on is perhaps the most important choice of all.

It’s easy to want to have it all, and let’s face it, who doesn’t? But in a world of finite resources, and finite nervous energy, it is necessary to know our values and priorities.

In the case of that article, it was the case of a guy in his 20’s who was saving so much for his retirement that he wasn’t living life. He didn’t move out of his parents’ home, so he was missing out on one of the key rites of passage. It is far easier to become an independent adult in your 20s, not because you have lots of money – you don’t, you’re at the lowest point of your earning potential. It is because you are at your most adaptable, you aren’t weighed down by lifestyle expectations. You’ll put up with conditions that you’d find a hardship later on in life when you have experienced better.

I shared houses with students, and then with pals and workmates until I was 28. I could do that because I didn’t have expectations. I remember the first house I shared with four other guys which had a leaky washing machine. It was an upgrade for me because I didn’t have to go to the launderette. It was no bad thing that the kitchen floor got washed once a week as a byproduct of the leak. This was a house with five guys in it :) 15 years later when my own washing machine sprang a leak I was on the net to order a replacement within an hour – my expectations were totally different.

Eventually I looked and came to the conclusion that though I loved living in London I was making too many compromises to stay there. I wanted to be able to live on my own by the time I was 30 in a house I was buying. That meant I had to move out of London, and get a job with better pay and prospects. Staying in crummy shared houses was great in my 20s and reduced my costs, but I had to move on as I got older.

The 20s are a special time in life, however. This decade is the time when you are working out your place in society, many people look to finding that special someone to live with in this decade, you are building and consolidating the foundations of your career, and you may have to move area either for work, university or for that special someone.

In my view, one’s twenties aren’t the time to acquire illiquid assets like a mortgaged house or to stay at home with the parents saving like mad and deferring life, but each to their own, as long as they do intentionally rather than being sucked into the hype ‘you have to get on the housing ladder as early as you can‘. I couldn’t afford to buy a house until I was 29, but I still managed to pay the damn thing off in less than 20 years.

So the subject of that article deferring his development into an independent adult in favour of his 65-year old self is not necessarily A Good Thing. It depends on his values and priorities, as GRS said

we can generally have anything we want, we can’t have everything we want

I love it. There’s a world of difference between saving like a nutter for retirement in 45 years and saving like a nutter for retiring in five years!

what can you do to preserve capital these days

Money performs two roles in the economy, One is to provide a medium of exchange and intermediation. If I have a goat to sell and exchange it for pounds, I can buy a loaf of bread from the baker even if he doesn’t need a small piece of a goat at the time :)

For most people, who earn money, and (ideally) spend what they earn but no more on their lifestyle, that is all they need money to do for them. It lets them transfer the value they gain from selling their services to their employer to paying out to whatever they need to support their lifestyle.

However, since I am trying to save to give to my future self, I need money to perform a second role. That role is one which the Great British Pound Sterling seems ill-suited to perform for me. That second role of money is as a store of value. If I forego a £100 worth of bread now, I would like some mechanism to be able to buy the same amount of bread in the future.

In theoretical terms I did quite well last year with global index ETFs, even after the hammering of recent weeks I am still about 20% up, in pound terms. However, against that I have to allow for the corrosive effects of inflation, currently at 5% and rising. I experience RPI-X as I have no significant housing costs being mortgage-free, so I experience higher inflation, as housing costs are artifically depressed by Government action on interest rates. Fuel and food in particular have gone up seriously over the last year.

I chose L&G’s global ETF in an attempt to diversify out of the UK, for in Britain we have been living beyond our means for almost a decade and these chickens seem to be coming back to roost.

RPI - 5% and rising

RPI-X - 5% and rising

However, we seem to be entering a dangerous period of probable monetary inflation, as a result of printing money, euphemistically called quantitative easing round these parts. That looks like being coupled with a nasty dose of asset deflation as the stock market rally falters or starts trading sideways, for the reason that there don’t seem to be any good underlying reasons for the rally to continue, other than providing a home to park some of that government-issued money.

So the question is, really, what can a chap do to store value? What I need is real stuff that holds its value, preferably something which can’t be printed by the government to devalue its debts. Commodities and land are the obvious choices, and yet both are lethally illiquid, and land is not fungible either. Preserving capital looks like it comes with some nasty baggage.

Kudos to Nat West for not shafting its previous ISA savers this year

It’s usual for banks to quietly trash the interest paid on older accounts, on the principle that most people can’t be bothered to move and the bank gets to keep the money they’d pay out in interest. so you end up with some derisory interest rate of 0.5%.

So hat tip to Nat West. I was getting ready to shift last year’s cash ISA, and looking mournfully at the paltry 2.75% that the best buy ISA accounts on Martin Lewis’s site offer for new business. Then I looked at the current rate I am getting, and so far, touch wood, they have retained the interest rate at 3.01% even though the account isn’t available for new business. That’s better than I could get if I shift it. So I get to save all the aggro of moving the ISA and get a better rate.

What’s not to like… oh yes, it’s that the RPI is skyrocketing at 4.5%, so at current rates I am losing 1.5% a year in purchasing power. Mind you, last year I was getting 3% when RPI was negative, so it wasn’t all bad. But this does not look like it’s going to a good place in future.

RPI - looks like 4.5% and rising. Yikes

Weekly roundup – some of the best posts I’ve come across this week

New to me, Consumerism Commentary on Start The Decade off Right, Do Something You Love. Doing something you love is supposed to be the holy Grail of work-life balance, but it sounds like a great way to turn a passion into a drudge to me.

Financial Samurai’s incendiary Don’t Have Children if You Can’t Take Care of Yourself is exciting, I salute his courage. The title pretty much says it all, and I’ve often been amazed at how some folk don’t consider the financial hit of child-rearing before they experience it.

RetiredSyd on No More Performance Reviews is inspired. I despise the annual (and increasingly quarterly) charade of performance reviews.

Monevator reminded me that I need to keep sight of why am I doing this with his Don’t Forget Your Can Opener post. It doesn’t sound too bad, “you could end up surrounded by pots of money and no clue how to use it – or even how you got there.” But it’s easy to lose the thread of living with intent amongst all the noise of living day-to-day.

And finally, I predicted a riot earlier this week. I didn’t expect it to come so soon.

 
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