I ran across a graph the other day, posted on an Internet forum. It showed, in stark form, the juxtaposition between what we (meaning our federal government) spent last year on research and development of differing types of energy vs. what we spent prosecuting the war in Iraq.

Along the bottom of the graph were little centimeter-high bars representing solar, nuclear, coal and other fossil fuel research. And then there was another bar, about 2 feet tall (at least on my Apple laptop), and that bar was Iraq. (See Solar Power Rocks).

The war in Iraq is costing us about $120 billion dollars a year. In contrast, we spend less than $500 million a year on finding ways of powering the world without having to resort to using oil, purchased from people who hate us.

Circling the drain

This weekend, mortgage giant IndyMac collapsed in what is looking like the largest bank failure in U.S. history. Covering just the insured deposits at the bank could deplete 20 percent of the Federal Deposit Insurance Corporation's cash. Again, that's covering just one (albeit large) bank collapse.

And IndyMac wasn't the first bank to go down, nor is there any indication that it will be the last.

What's behind the current financial crisis? Simple devaluation. Loans collateralized on bubble real-estate values are going bad as the actual worth of the buildings they underwrote is being radically downgraded. The $500K taken out to buy the McMansion now has nothing but $150K worth of pressboard and pine to back it up, while NASCAR Dad and Soccer Mom have stopped paying their mortgage and just walked away -- leaving the bank holding the bag.

As Donald Trump would say, it's all about quality or, in this case, the lack thereof.

Five-thousand square feet sounds like a great idea, until you have to heat it in the winter.

A couple acres and a cul-de-sac likewise, until you're spending 200 bucks a week on gas, just to get your job an hour away.

What went up, is now coming down

Finance and energy are two sides of the same coin. As the cost of a barrel of oil goes up, the value of housing goes down -- because everything about the housing we've built since at least the end of the Second World War has been built on the presumption of limitless amounts of cheap oil. Cheap oil that made heating a nonexistent worry.

Cheap oil that made endless motoring costless.

As the cost of energy goes up, the suburban-value proposition evaporates. But what doesn't evaporate is all that paper, collateralized by things that no longer have value.

And that's a recipe for financial and economic collapse. IndyMac isn't a one-of, it's the camel's nose under the tent.

But what if we'd been able to spend the money being thrown away in Iraq instead of building the suburban-value proposition here at home?

Estimates of the final cost of the Iraq war currently range as high as $3 trillion. There are just north of 100 million households in the United States.

That's $30,000 a household.

Opportunities lost

Thirty grand buys a lot of geothermal systems. It buys a lot of electric vehicles. It buys new, energy-efficient windows and insulation. It buys the difference in affordability between a suburban stick-built and an energy-efficient, urban condominium.

We are engaged in one of the greatest misallocation of scarce and dwindling resources the world has ever known. And, while iconic, Iraq is only one example of that misallocation. Virtually everything we do, from road widening to taxpayer-subsidized suburban greenfield development, is an incremental shovelful of dirt removed from a hole we've dug for ourselves.

And promise gained

I hope we can look at the collapse of IndyMac, and the banks that will inevitably follow, not as a last gasp of the American dream but as a talisman of a better future -- a future where investment is made in lifetstyles less vulnerable and more sustainable, not squandered in an expeditionary projection of power-for-power's sake, nor disinvested domestically in relics of a familiar past but nonetheless a past without a future.

Gregory Travis can be reached at greg@littlebear.com.