There’s a picture floating around on the internet but I’m not going to show it to you. It depicts several rows of half-buried automobile tires, off in a distance behind a chain-link fence. A dusting of snow covers the ground. A trash-heap of sorts or perhaps a small hill just behind. The sky? A pale blue (in an Iowa sort of way). And then this: sharpie-black lettering on a piece of rough cardboard announces: Used Rainbows.
I came across this photograph today while listening to a macroeconomic panel session from Davos. I was multi-tasking at the time. Which is to say, I was writing my monthly research note which generally runs 15 pages. And so I was pushing global coal data into Excel, and making charts with that data, and then pulling those charts into Microsoft Word, and then testing it all out in quick conversions to Adobe Reader. (The charts are looking fine). The voice of Nouriel Roubini played in the background. He was saying something about the back half of 2010. Or was it the front half of 2011? Years that once seemed so far away are now arriving.
If you’re still thinking about the photograph, you could always google now for used rainbows. I’m sure you’ll find the photograph, and you may find other ideas too. After all, that’s exactly how I found that image: by breaking away from my writing as the Davos panel played in the background. I was getting to the part in my research report where I talk about oil surpassing coal. That happened in 1965. After several hundred years of coal domination, the world switched mainly to oil. As I search the LIFE magazine archives for 1965 photographs, David Rubenstein begins to speak from Davos. David was saying that alot of people were going to make alot money, from deals they did in 2009. He also said the worst for the economy was over. Then he takes a swipe at economists after offering faint praise for Roubini.
Just as they start to laugh at Davos I find a nice image of the Gemini space walk, November cover of LIFE magazine 1965. I also notice my stock market screen and see everything has turned red, as the afternoon close approaches. I’m liking my research note. In one of those rare coincidences that only comes along so often, I think back to the bedtime story I read the night before to my son: Mike Mulligan and His Steamshovel, published in 1939. Adoption of oil was slow and steady in the United States in the first half of the last century. And then it broke out strongly to the upside after World War Two. The 1939 children’s story captures this perfectly, as Mike’s beloved steamshovel, named Mary Anne, is replaced by oil based machines. Speaking of rainbows and 1939, The Wizard of Oz was made in 1939.
Today is Friday the 29th of January and I start to recall that last week I emailed BLS.gov, the Bureau of Labor Statistics, asking when they would produce the broader measure of unemployment for individual States. I search for the reply in my gmail inbox. But by the time I learn the full year 2009 data for the States is due out today, I am already opening the link to the webpage. It’s here! Published. Right there in the Alternative Measures of Labor Underutilization for States section. (Alot of people don’t know about this data. It is, after all, a new series). There is of course one state in particular I am watching out for: no surprise, California.
Starting last year with a series of posts, a Financial Times article, and a couple of interviews, I began to make the case that California was so leveraged to cheap oil via its automobile system that now with the arrival of the high oil price era California would never be able to recapture the efficiencies that made it work so well, at 25 dollar oil. I also conjectured that Americans would finally accept that we were in an inflationary depression should oil get to 100 dollars a barrel on top of, say, 15% unemployment in the Golden State. Well, we did see oil get as high as 84 dollars. And while the standard measure of unemployment has reached 12.4% in California (the highest since WW2), the broader measure rose as high as 19.6% at the end of the third quarter 2009. Given that I watch all data and news out of the state quite closely, I figured the final quarter would take U-6 above 20%. And that’s exactly what was reported today. California broad unemployment has now reached 21.1%.
If you recall the 1939 children’s story mentioned before, Mary Anne the steamshovel tries to prove her worth by digging a new town hall foundation all in one day. She and Mike dig so fast, however, that they wind up at the bottom of the pit with no way out. You know it’s the end of Mary Anne’s productive life as the world transitions from the Coal Age to the Oil Age. Mike proposes that she be kept down there, in what will become a Town Hall basement, to be refitted as the boiler plant for the new building. I suppose this is a consolation, a form of happiness. When I read the story to my son, he goes quiet.
My monthly research note has a tough message also. It was only 55 years ago that the world crossed over to use more oil than coal. In another five years, we will be going back to coal. As I restart the Davos videocast the voice of David Rubenstein comes back up again on my media player. David is saying you really can’t prevent bubbles. Agreed. Then David says we’ll have bubbles for another 600 years to come. I don’t agree. Arif M. Naqvi, on the same Davos panel, makes the point that in world of plateauing and then declining oil supply, the GCC (Gulf Coast Council/MidEast countries) will increasingly gain influence over the remaining supply of oil, and that will spawn a number of serious pressures. Agreed, agreed, and agreed. Out of 227 sessions at Davos over five days, only two session actually contained the word “energy.”
As I study the unemployment data out of California, Michigan, South Carolina, I bring the Davos video to the front of all my windows and I can see the dark blue, windowless room in which the session has been taking place. They’re getting to the end now. A somewhat passionate man from California stands up to explain that his venture capital business had a great year last year, but the problem now in the world (as he sees it) is that innovation may not necessarily lead to a decrease in global unemployment. Into my research report I insert images of Wood, Coal, the logo from the World Economic Forum, and a photo of the 1965 space walk. I push the Davos video into the background again. But I can still hear the voice of a conference organizer. She pleads with everyone to exit as they prepare for the next session.
-Gregor
Photos: 1965 LIFE Magazine cover. | Mike Brodie (The Polaroid Kidd) from the Riding Dirty Face series, via Needles and Pens Gallery, San Francisco. | Mike Mulligan and His Steamshovel.
