Sam McGowan’s Blog

Like most Americans, the sight of gulls and other seabirds soaked in oil disturbs me greatly, but I am even more disturbed by the backlash against the oil industry that is sweeping the nation, and to some extent the world. It appears that most Americans are completely ignorant of just how important the oil industry is to the nation, and how it is the literal backbone of the national economy, a backbone that will cause the entire nation to collapse when it is broken.

The US oil industry started in 1859 near tiny Titusville, Pennsylvani, a town southeast of Erie on Lake Erie and northeast of Pittsburgh. At the time the primary use of oil was as fuel for lamps and for medicinal purposes. The internal combustion engine had yet to be developed and the steam engines of the day were powered by coal, perhaps in part because until “Colonel” Edwin Drake drilled his well, petroleum oil was only found in seeps scattered here and there around the countryside. The concept of an internal compustion engine had been around for some time but until Drake’s well came in, there was no ready supply of fuel for power since such engines required light liquids.

For the next forty years Pennsylvania was the center of the burgeoning US oil industry, although there had long been evidence of oil in Texas. Drillers looking for water often encountered oil, but considered it to be a nuisance. Finally some wells were drilled around Corsicana, and the Texas oil industry was born. Then, in 1901, it literally came in in a gusher, when a well drilled north of Beaumont literally blew the bit out of the hole and then started throwing out mud, water and, finally, crude oil in a column that rose more than 150 feet into the air. The Spindletop well had been expected to produce some 5,000 barrels a day - it actually produced over 100,000 for a time.

By the early 1900s the entire world was being revolutionized by the internal combustion engine, and the discovery of oil in large quantities allowed a ready source of crude oil that could be “refined” into light liquids that came to be known as gasoline. Automobiles - “horseless carriages” - had made their appearance and in 1903 the Wright Brothers made the first successful powered flight. Almost literally overnight the world had entered a new age, an age that would transform the entire human race.

The modern oil industry is the mechanism that brought Americans off of the farm and into cities to work in factories for it was oil that powered the engines that operated the machines. Thanks to the oil industry, science grew by leaps and bounds. More and more new products were developed from petroleum, everything from fuel oil to plastic. Oil powered plants produced electrical power. Fortunes were made on oil and millions of people the world over began enjoying a new life of general leisure such as the world had never seen before. Even “labor” became far less strenuous due to the development of powered equipment that ran on either gasoline or electrical power that was produced by oil. Even water-powered turbines depend on oil for some aspects of the production process.

In short, it is not only the oil industry that greases the wheels of industry as a whole, it is the oil industry that provides the energy that allows industry to function. Then there are the many, many off-shoots ranging from finance to transportation, not to mention the hundreds of thousands who are directly employed in the oil industry, whether it is an executive with an exploration company or the deck hands on the luggers that deliver supplies to the offshore drilling rigs that have become the primary source of domestic crude oil production in the United States.

Yes, the effect on the environment is terrible, but the impending effect on mankind may be even worse.   

Back in September everyone in the Houston area where I live was preparing for the approaching Hurricane Ike. All of the government agencies were posturing telling people what to do and most people were securing their homes and property as the hurricane approached. But once the storm neared shore, there was nothing anyone could do but “hunker down” where they were and wait for the worst, and hope they would still be there in the morning - and not a few people weren’t.

The current economic situation is like a hurricane. it’s not like no one knew it was coming; the signs have been around for years and even decades. The United States economy has been basically false since at least the end of the 1930s when the US industrial base was put to work producing weapons and other material for the military, products that were financed with US treasury bonds for the most part. The sudden influx of government money caused the economy to rebound from the Great Depression and America’s factories began humming as the country went back to work. That the military had a sudden need for warm bodies didn’t hurt the unemployment situation one bit. Military arsenals were set up all over the country, creating boom towns to house and service the thousands who came in to work in the plants. Communities that had been nearly destitute suddenly became booming centers of spending of the money that was flowing in through government contracts.

The war ended in 1945, leaving most of the world in a state of destruction - with one exception - the United States had seen no damage at all from the war. The handful of military actions that took place on US shores consisted primarily of shellings by Japanese submarines that did negligible damage. Even the much touted German U-boat operations in US waters were short-lived, lasting for a period of only six months in early 1942. But even as the war offically ended, the world was left with two major powers that were on opposite sides of the philisophical spectrum and even though the world was officially at peace, it really wasn’t and the war time buildup was simply transferred to a new arms race. New technology that came of age during the war led to the need to replace the hundreds of thousands of airplanes, tanks, ships and other equipment with newer versions incorporating new technology such as jet propulsion as the world entered the combined nuclear/jet age. Wartime factories were not idled, but continued producing new weapons and materials to replace those that had become obsolete during the war. America had become the world’s ”arsenal of democracy” during the war and the post-war Marshall plan insured that it would continue to provide the arms for the western world’s military forces as they re-armed.

The military/industrial economy that began just prior to World War II and continued into the Seventies as one war after another broke out around the world. It was the end of the Vietnam War that led to the economic recession of the 1970s and early 1980s. Ronald Reagan receives credit for bringing prosperity back to America but in fact only certain parts of the country truly prospered during his administration a,d the prosperity once again was fueled by military spending. And as the Soviet Union collapsed, so did the US economy, leading to the end of Republican rule as Americans followed the adage “it’s the economy, stupid” and put Bill Clinton in the White House. Clinton was saved from presiding over economic disaster by the sudden increase in technology as the Printed Circuit Board literally took over the world. PCBs and the software to run them led to an economic boom and an expanding bubble that began collapsing durin the final years of the Clinton Administration. Clinton did something else to make it appear that the US economy was robust - his administration went to a new method of government accounting where government borrowing from government trust funds such as the social security, highway and aviation funds, each of which was financed by special taxes, was no longer reported as government debt. He falsely claimed that he had balanced the budget when in reality government spending financed by the sale of bonds was continuing to drive the national debt higher and higher.  Even though the high-tech revolution came to an end while Clinton was in office, a new boom came about in a housing market that was to a large degree financed by subprime lending. Now that bubble has collapsed and the entire world is in trouble.

Basically, the US is now in the same situation as those who suddenly found the winds increasing as Hurricane Ike (or Rita, Katrina or anyone of dozens of destructive storms) came ashore. Those in the path of the hurricane suddenly found themselves in the position where all they could do was ride it out, and hope their house or shelter withstood the storm. Once the storm had passed, their lives and the areas where they lived had been changed forever. We are in the same situation today economically - the hurricane is upon us and nothing the government can do is going to change it’s course. All we can do is ride that sucker out!

It’s barely been twenty-four hours since US Airways Flight 1549 went into the Hudson River but too millions of Americans the pilot, Captain Chesley Sullenberger, is already a hero for saving the lives of his passengers. While there is no doubt that Captain Sullenberger did a good job of putting his Airbus 320 into the water, what he did is really no more than what any other airline, corporate or other well-trained pilot would have done under the circumstances. As yet no one really knows for sure what those circumstances were - all that is really known is that the crew reported multiple bird strikes, possibly from a flock of geese - but whatever they were, they evidently caused the airplane to lose power and led to Captain Sullenberger’s decision to put the airplane down on the only suitable spot within sight, the frigid waters of the Hudson River. He evidently decided that the airplane wasn’t capable of making the runway at Teterboro, New Jersey and opted for a water landing instead. The airplane came down smoothly onto the river’s surface and floated long enough for all of the passengers to get out of the airplane before the fuselage filled with water. Miraculously, all were pulled to safety before any succumbed to the effects of hypothermia from the frigid waters.

While the media and much of America is hailing the pilot as a hero, they are missing the real point, and that is that airplanes don’t simply fall out of the sky and that pilots receive extensive training in handling emergency sitatuations, including making powerless landings. By regulation, all commercial pilots are required to attend simulator training twice a year, training that is so realistic that it seems like the simulator really is the airplane. If Captain Sullenberger is a hero, it’s not because he landed the airplane safely but rather that he elected to take his chances landing in the Hudson River rather than trying to land somewhere in one of the most congested areas of the world. He saved lives all right, but it is the lives of the hundreds of thousands of New Yorkers and New Jerseyites who populate the land on either side of the river. Assuming that the airplane truly had become powerless, an attempted landing anywhere but in the water could have been a disaster of magnanimous proportions. By landing in the water, he missed the buildings, telephone poles and other obstructions that would have caused the airplane to spin out of control on a heavily populated landscape. That’s the real miracle of 34th Street, not that everyone on board the airplane survived the emergency landing.

But back to my point, and that is that what Captain Sullenberger and his copilot did is not an act of heroism, but is rather the result of hours and hours of training. What they did is nothing any other professional pilot in the world couldn’t have done - if they made the decision not to try to make Teterboro but to land in the water instead.

There is something else that seems to be missed, and that is that had the water landing under those conditions been made anywhere else but in the Hudson River, it is likely that many if not all of the passengers and crew would have perished even after a successful water landing and evacuation of the airplane. The water temperature in the Hudson was reported as 36 degrees Fahrenheit. A person partially submerged in water of 55 degrees can expect to survive for only approximately five minutes without special protective equipment that is only available to crewmembers and passengers on military aircraft. Flight 1549 came down in an area where there are literally dozens of boats in the water at all times, boats that were able to come to the aid of the airplane’s occupants before it sank. Air temperature was twenty degrees, well below freezing and cold enough that a person in wet clothes in a life raft would become hypothermic within a very short time, no more than twenty minutes at most. Had the boats not been in close proximity to the landing spot, it is likely that few would have survived.

It is January 16; in less than a week Barack Obama will be inaugarated as President of the United States. He and his fellow Democrats in the US Congress are talking about how they are going to throw billions, perhaps trillions, of dollars into the US economy as an economic stimulus package. But there is something they are not addressing, and that is just where are they going to get this money from? The United States Treasury is just as bankrupt as the industries Obama and the Congress are planning to bailout, and there is no way they can raise the funds to pay for the programs they are proposing through tax revenues. After all, tax cuts for “the middle class” were one of Obama’s campaign promises and he seems determined to follow through on that promise. With a Federal Budget that far exceeds expected revenues - the US government hasn’t been able to pay its debts for decades - there is only one way to raise the revenue and that is through borrowing, which means the sale of government bonds, bonds that are often purchased by foreign investors, including foreign governments, particularly Communist China. In short, the Federal government plans to do the very thing that has wrecked the US and world economy in the first place, which is to borrow far beyond its means to pay back, assuming they can find anyone to buy the bonds since most other nations are also headed toward bankruptcy if they’re not already there.  

There are a lot of Americans, many of whom should know better, that think that the US government is exempt from obligation to pay back the debts it has incurred. Their logic is that since the money supply is controlled by the government, all the goverment has to do is print more money. But this logic fails to recognize that the Federal government has ALWAYS borrowed money from others, particularly through the sale of bonds. For example, World War II was financed by the sale of bonds, bonds that promised a return that essentially doubled their face value after a specified number of years. Each bond sold is essentially a promissary note that is paid back with interest whenever it is redeemed. The US monetary supply is based on something - until the 1960s it was backed up by silver and before that by gold and silver. When Richard Nixon was president, the basis for the value of the US dollar became the national productive output, the gross national product. Regardless of how it is backed up, the value of the US dollar is backed by something, and it is that something that those who lend money to the US Treasury expect to recieve in payment for their investment.

There is really only one way to deal with the current economic situation and that is to let it run it’s course. The role of goverment should be to provide a lifeline to keep those who are most affected from sinking under the tide, but the LAST thing it needs to do is to make the crisis even worse by borrowing more money to try to solve problems that were caused by borrowing in the first place.

Last night I watched “The Road to Glory,” Hollywood’s account of the early days of folk singer Woody Guthrie, who left Pampa, Texas in 1936 and hitchiked to California. The “Okies”, many of whom were actually Texans, who made the journey to California in hopes of finding a better life instead found conditions that were worse than those they had left behind. Although the California agricultural economy was thriving, there were few jobs and those that were offered featured hard work with low wages. So many Okies were coming to California that the Los Angelese police force set up barricades 300 miles away on the Arizona and Nevada borders and turned away families and individuals with less than $50.00 in their pockets. It was a dismal time.

As 2008 fades away and 2009 is awaiting birth, it appears that we may be headed for hard times again. The US financial markets have collapsed and credit, while offered at low interest rates, is hard to get. Hundreds of thousands have already lost their jobs and it appears that the numbers will be well into the millions by mid-2009 as more and more companies cut back or shut down altogether. To make matters worse, on January 20, 2009 the administration of the US government will change hands and the man in charge is going to be one with little government experience and no administrative experience at all. Unlike Franklin D. Roosevelt, who had spent more than two decades in government in various capacities including Secretary of the Navy and governor of New York, Barack Obama’s entire experience before he became a member of the Illinois legislature was as a community organizer and civil rights attorney. His proposals to “jump-start” the economy are mainly government spending of money it doesn’t have to finance government projects with Federal funds. Although his party thinks of themselves as the party that ended The Great Depression, they overlook two important facts - that more than half of the party’s support in the 1930s is no longer a part of an organization that has moved into the leftist philosphies of the 1930s and that it wasn’t the government that ended the Depression, it was the onset of World War II and the drafting of the millions of young men who were seeking jobs and the purchasing of vast quantities of military equipment that was financed through the sale of government bonds, not through taxation.

There is a major factor that is different in the United States of 2008 and that of 1935, and that is that over the past seventy years, the United States has shifted from an agrarian to an industrialized society. a large percentage of the millions of young men who left the farms and small towns to fight World War II never returned, but migrated to the cities where they found work in factories and in the businesses that supported them. A large percentage took advantage of the wartime GI Bill to pursue higher education or training in trades. Their children and their children’s children became part of an urban society that depended to a very large degree on the influx of goverment money that was used to purchase military equipment during the Cold War. Instead of disaster for farm families, it is urban and suburban dwellers who are being most affected by the current financial downturn. Unemployment is highest in the states that have depended on industry for their sustenenance - Rust Belt of the New England States, the Great Lakes States and the West Coast - and it was the voters from those states that put Barack Obama in the White House. It is also the voters from those states who are going to be migrating to other states in search of new opportunities. They will be following millions of others who have migrated south from Michigan, Ohio, Indiana and other northern states to Atlanta, Dallas and Houston during previous economic downturns.

There is a new twist to the current situtation, one that was forecast by some economists but largely ignored by the general public and by the politicans we have elected to represent our interests. Over the past few decades even as US industry was on the decline, the financial community was on the rise in a pattern that has characterized other nations as they have risen to prominence, then fallen into decline. As the US steel, automotive and oil industries were subordinated to those of other nations, US banks and other financial institutions became more and more powerful and more and more of the US gross economic output resulted from the management and lending of money. Americans - indeed, citizens of the world - adopted lifestyles that were more and more dependent on credit as they purchased homes, automobiles, electronics equipment and other items they really couldn’t afford and adopted a lifestyle well beyond their actual means. They gambled on future earnings and on investments that have lost nearly half of their worth. The media and politicans seems to focus on the minorities who have lost homes that were financed with mortgages they really couldn’t afford, but the real problem is that those who were formerly wealthy no longer are as their investments and savings have declined. This time instead of Detroit, which was already down the tubes, the worst affected have been the people who worked in the banks, insurance companies and investment firms on Wall Street. It is within the financial community that job losses have been the heaviest. The automobile industry has been affected and no doubt will see worse losses in the future, but it is the job losses in the financial community that have caused the economic downturn that is affecting both the the nation and the world.

The election is over and now the Democrats in Congress are back to their usual tricks of throwing money at problems instead of solving them, or even recognizing that the problem really is. Their latest effort is to give the automobile industry $25 billion, evidently so they can keep making payments to the retirement packages for their overpaid union workers. What politicians seem to have forgotten is that the US Treasury has no money to give, it’s been bankrupt for decades and even though the Clinton Administration claimed to have balanced the budget, they really didn’t and the Federal deficit has increased by well over $3 trillion since GW Bush took office in 2001.

The “problem” with the economy is that there really isn’t a problem as such at all, but rather that the US functioned under a false economy from 1939 when military spending as the world headed for war brought the US industrial base out of The Great Depression until the collapse of the Soviet Union and the end of the Arms Race led to a decrease in Federal spending on military equipment at the end of the 1990s. The economy started to restructure during the elder Bush presidency but the final result was held off during the Clinton Years by the high-tech boom that led to the Dot.Com crash in 2000. Things would have gone to hell in a hand basket then but for the housing boom brought on by subprime lending and low interest rates that led people to buy new homes - that they often really couldn’t afford. Now that bubble has also burst and there is nothing on the horizon to stave of the inevitable again.

Americans need to get used to the fact that the world’s economy and the US economy in particular is adjusting back to the way things were in the 1930s before a sudden increase in government spending of money it didn’t have brought on a period of prosperity that carried us through more than half a century of government purchasing of equipment to maintain military superiority. The national economy started heading downhill in the early 1990s with the end of the Cold War and the cancellation of hundreds of contracts for new military equipment that had been ordered during the Reagan Years. Specifically, the collapse started in St. Louis when the Navy cancelled a contract for a new generation jet fighter and spread to the aviation industry in California. The first President Bush was voted out of office and his successor, Bill Clinton, was saved from failure by the sudden demand for personal computers and the software to run them as every corporation in the world converted from paper and pencil to digitalized data.

What is happening now is that Congress, meaning the Democrats who control it, are trying to stave off the inevitable by spending money they don’t have to prop up a failed system. Unless some new industry comes along to drive the economy upwards again, we’re headed for disaster and there isn’t anything Barack Obama can do about it.

BOAHIC!

it’s in the wee hours of the day after election day and Barack Obama has won the election by a landslide in terms of electoral votes. But he still hardly has a mandate. The popular vote has yet to be fully counted but as it stands right now, he won by about four or five percentage points, which means that if you put ten people together, half of them voted for him and the other half against him. The political pundits will no doubt be crowing that America has finally put its racial prejudices behind her and elected the first black man in history as president. Well, “black” is a relative term that was invented by people of color in the 1960s because they didn’t like negro anymore and is applied to anyone that is known to have any ancestry from the African continent at all. (I don’t know how they treat the people around the Mediterranean whose ancestry is far removed from sub-Saharan Africa.) Barack Obama may have an African name but he was raised by a white grandmother and his roots are a lot closer to Ireland than they are to the native Kenya of his father. His African identity only came about when he was in college and around others of his race for the first time in his life.

But Obama’s ancestry/racial mix really had nothing to do with this election. Granted, he got the votes of large numbers of blacks, but they vote in large numbers for Democrats anyway. It really didn’t matter who the Democrats ran, after the economy went in the tank in September, the outcome of the election was in the cards. What is amazing is that Obama didn’t win by a much larger margin than he did. His opponent was not only running against him, he was also running against an unpopular sitting president and the worst economic news this country has seen since the 1930s. Obama may have been running as the candidate for change, but he was actually the candidate from the party that was not in the White House and which has managed to escape the blame it actually deserves for the economic mess the country is in. And while his supporters may have been touting him as the candidate who can unify the nation, he is actually going to be the president who drives it further apart. Take a look at the national map in USA Today tomorrow. Once again it will be made up of islands of blue in a sea of red. Obama’s support came from Urban America, not from a widespread sampling of the American population as a whole. What’s going to change after he takes office on January 20th? Not a damn thing.

http://www.youtube.com/watch?v=P36×8rTb3jI

This video is very sad because it is a good indication of what a lot of the people who are voting for Barack Obama are expecting to get now that he has been elected. The man has not discouraged them, either. Hundreds of thousands, if not millions, of people cast their vote for Obama believing that if he is elected, he is going to take care of all of their needs. After all, he said he wanted to spread the wealth around. Now he will be taking office on January 20 and it’ll be time for him to pay the piper. His supporters have high expectations from their man, expectations that he is not going to be able to meet without somehow promoting radical change in the entire American way. People are expecting to have their mortgage paid, gas put in their cars and food in their mouth by The Great One. What are they going to do when he isn’t able to deliver?

It’s two days before election day and the polls are showing Barack Obama ahead in all of the polls, but not by much. Most are within the margin of error and in the case of Zogby, one day of polling actually showed John McCain ahead although the overall three-day margin still had Obama up by a few points. Since presidents are chosen based on electoral votes, the popular vote really doesn’t count. Most polling agencies are showing Obama leading, basing their estimations on polls, although its unclear as to just how representative their polling truly is. A classic example is Virginia, the state that finally gave the Democrats the majority in the US Senate when the final count gave the state to conservative Democrat Jim Webb by a landslide margin of .3 of 1% of the vote! My guess is that Virginia is going to be the indicator next Tuesday night.

I used to live in Virginia and have family there now. It’s one of my favorite states and if there is one thing I know about it, it’s that the people are primarily conservative. The most recent poll taken in the state shows Obama with a small lead but there is something that the media is not taking note of, that he is leading in only two parts of the entire state. His lead is in Northern Virginia, which is basically a suburb of Washington, DC and in the Hampton Roads area just north of Norfolk, which has the largest percentage of blacks in the states. McCain is leading everywhere else in the state.

Democrats have had success in Virginia in recent years but not by much. Webb’s election with .3% of the vote is a good example - and Webb is hardly a social liberal as Obama is. Former Governor Wilder was elected with a similar margin even though all of the polls had him well ahead. My guess is that polls in Virginia result in a responses more from the heavily black urban areas more than from the state as a whole, and this is probably true in other states as well.

Virginia is going to be a good indicator of how the election goes and considering the demographics of the state as a whole, don’t be surprised to see it go for John McCain.