The United States, just like California, now sits astride massive, gargantuan post-war infrastructure that was built with cheap energy and leveraged with cheap energy, for over 50 years. Many parts of the US right now are actually experiencing something closer to a depression, and yet oil is above 60 dollars a barrel. That's a price that was considered ridiculous just 5 years ago, when even 40 dollars a barrel was viewed as unsustainable.
The United States has been in an inflationary recession since the start of the decade, which now threatens to become an inflationary depression. To make matters worse, the federal government is in the midst of one of the largest policy mistakes in US history as it has chosen to make enormous new investments in car companies, cars, biofuels, roads, and highways to the exclusion of public transport.
This is a classic, textbook example of the sunk cost effect in decision making and is a hallmark of the collapsed societies of antiquity. The choices the US makes from this point forward will likely have more of an effect on how the decline is mitigated. As I wrote in my newsletter, we do not view the post-war decline of Britain as a human tragedy, and there’s no reason to see the US decline as either shocking, or unexpected. However, it is indeed regrettable that we did not face up appropriately to the changes that unfolded, at the start of this millennium.
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