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The Archdruid Report: American Delusionalism, or Why History Matters
The Archdruid Report: American Delusionalism, or Why History Matters.
WEDNESDAY, MARCH 19, 2014
American Delusionalism, or Why History Matters
If you start from the assumption that the event you’re trying to predict is unlike anything that’s ever happened before, though, you’ve thrown out your chance of perceiving the common pattern. What happens instead, with motononous regularity, is that pop-culture narratives such as the sudden overnight collapse beloved of Hollywood screenplay writers smuggle themselves into the picture, and cement themselves in place with the help of confirmation bias. The result is the endless recycling of repeatedly failed predictions that plays so central a role in the collective imagination of our time, and has helped so many people blind themselves to the unwelcome future closing in on us.
A Gift From The Collapseniks | Peak Oil News and Message Boards
A Gift From The Collapseniks | Peak Oil News and Message Boards.
Of what possible use is it to imagine the end of civilization or even of the species? Is it simply a pessimistic indulgence or can it contribute to progressive and other positive results?
When I was a child, my family’s pastor used to elbow into almost every sermon an admiring reference to “St. John languishing in exile on the rock-bound, sea-girt island of Patmos.” He was referring to the author of the grisly Book of Revelation , the dominant Western source of apocalyptic imagery.
We chuckle at cartoons of robed men on city sidewalks carrying placards that claim, “the end is nigh,” and at bumper stickers that declare, “in case of Rapture, this car will be driverless” (which sounds more dangerous than driving under the influence). Since St. John’s fiery prose, there have been many predictions of the end, including the modern cult studied by social psychologist Leon Festinger in When Prophecy Fails (1956).
Those who see danger tend to accuse others of “denial,” of “refusing to listen.” Perhaps a tincture of denial has given humans an evolutionary advantage. Speaking positively, psychologists refer to “optimism bias.” Most of us tend to imagine that things will turn out better than they do, a common mental pattern studied by such authors as Tali Sharot. While this trait arguably encourages enterprises, some of which succeed, it may also, on occasion, blind us to the possibility of avoidable loss, even terminal loss.
In A Year to Live (1997), Stephen Levine asks readers to pretend they have the awful privilege of knowing when they will die (in 52 weeks) and challenges them to review their histories honestly and to live abundantly in the remaining time. As my wife and I know, from working through Levine’s book with another couple, the result can be an enhancement of life.
During the Cold War, Joanna Macy gave us Despair and Personal Power in the Nuclear Age (1983). Before writing on ecology, on general systems theory, and on hope, Macy taught that a fuller life, including activism, could be approached through uninhibited expression of the deep feelings that led us to be concerned. More recent examples are the grief work of Carolyn Baker, author of Sacred Demise (2009) and Collapsing Consciously (2013) and of Francis Weller, author of Entering the Healing Ground (2012).
Still, it’s going against the grain to ask people to imagine extreme loss. Unlike some so-called primitive groups, our society is not set up for it, apart from isolated workshops. According to both Baker and Weller, working through grief requires the support of a community and the additional safety of a ritual container. For all its virtues, U.S. culture is based more on individuality, the frontier, and risky enterprise, than on mutual support and safe space.
Nonetheless, a growing number of observers of climate change and other trends foresee disaster. We can describe them as collapseniks, a term with a suffix derived from Russian in honor of Dmitri Orlo*, who grew up in St. Petersburg (then Leningrad) and emigrated to the U.S. An engineer, sailor, and writer, Orlov believes that his adopted country will descend into collapse, and that the U.S. is less well prepared than the country where he was raised. If we define collapsenik as an observer who is conscious of the possibility of economic, political, and social collapse and who believes collapse is worth taking seriously, then Orlov has a parade of company, of which I will give chronological highlights at the end of this piece.
There are big differences among collapsenik authors and even in a single author at different times. A spectrum exists, from those who feel we could avoid the worst of climate change by changing our ways substantially (“we’re sleepwalking toward disaster but could conceivably wake up”) to those who believe our species is doomed (“it’s already too late”). For example, scientist Guy McPherson has come to believe that, as a species, we are headed toward “near-term extinction” (niftily abbreviated as NTE).
While pessimists predict NTE, optimists envision the triumph of a progressive politics that would render climate change survivable, perhaps shifting us toward a steady-state economy, slowing the sixth extinction of species, and fostering a network of local and democratic institutions. An optimistic scenario would resonate with what Macy, expressing hope, now calls “The Great Turning.”
In contrast, McPherson argues that it’s already too late for ad equate reform: humans have inadvertently created feedback loops that will keep making the situation worse. For example, the release of methane, caused (in part) by warming of the shallow Arctic ocean and the Siberian and Canadian tundra, will cause more warming because methane is a greenhouse gas even more dangerous than CO2. And so on.
Humans don’t have a very good record of predicting the future, in spite of various divinatory schemes. Whether developments are technological, political, or economic, we have proceeded without reliable forecasts. Given the surprises inherent in complex systems and in technical development, nobody can show that we face certain demise, though we can discuss probabilities.
Could we learn to regard collapse not as a firm prediction but as a scenario worth exploring? After all, the Pentagon has contingency plans for events that are arguably less likely and less devastating.
To return to our original question, what could be the use of taking seriously a scenario of collapse, especially the views that argue that it’s already too late or that changes could help, but probably won’t be made? If we feel grief at what seems to be happening, instead of simply seeming smug in a prediction of certain doom, if we invent ways to lessen the turbulence and create the best that is possible in the new circumstances, if we live intensely instead of habitually, then the scenario of demise might seem no worse than knowing that, as individuals, we each will die. Meanwhile, what are we capable of?
According to Rebecca Solnit’s A Paradise Built in Hell (2010), disasters can bring out the best in people. If the scenario of the collapseniks plays out, we will have opportunities to discover what kind of gardens we can create in the ruins of our present society. So what is the gift? That by responding fully to the scenario, we can meanwhile live more intensely and develop the elements of a society that, under new conditions as they develop, would work.
Now here are the promised examples of recent writers who are aware of the possibility of collapse and who, in various cases, are sketching alternatives. In this century, we’ve been given Tim Flahherty’s The Weather Makers (2001), Richard Heinberg’s The Party’s Over (2003), Jared Diamond’s Collapse (2005), James Howard Kunstler’s The Long Emergency (2005), Clive Hamilton’s A Short History of Progress (2005), Elizabeth Kolbert’s Field Notes from a Catastrophe (2006), George Monbiot’s Heat (2006), another assessment report from the Intergovernmental Panel on Climate Change (IPCC, 2007), James Lovelock’s The Revenge of Gaia (2007), John Michael Greer’s The Long Descent (2008).
And in the past five years: Sharon Astyk and Aaron Newton’s A Nation of Farmers (2009), Hamilton’s Requiem for a Species (2010), Chris Martenson’sThe Crash Course (2011), Guy McPherson’s Walking Away from Empire (2011), Dmitri Orlov’s Reinventing Collapse (2011), Paul Gilding’s The Great Disruption (2012), an even more dire IPCC assessment report (2014), Elizabeth Kolbert’s The Sixth Extinction (2014), and the National Academy of Sciences and the Royal Society, Climate Change: Evidence and Causes (also this year). (With a few exceptions, I have listed only the first book in which each author shows a pervasive awareness of collapse.)
In addition, apart from the writers already listed, many of whom write blogs, you can find many provocative personal and organizational websites, some of which publish several writers, such as Arctic News (Sam Carara), Climate Progress (Joe Romm), Collapse of Industrial Civilization (xraymike 79), Collapsing into Consciousness (Gary Stamper), Culture Change (Jan Lundberg), Dark Mountain Project (Paul Kingsnorth), Grist, How to Save the World (Dave Pollard), Our Finite World (Gail Tverberg), Radio Ecoshock (hosted by Alex Smith), Speaking Truth to Power (articles gathered daily by Carolyn Baker), and Yale Environment 360 (edited by Roger Cohn Sr.).
We should of course judge not by the number of collapseniks, but by the quality of evidence these writers bring. It’s a conversation worth having.
A Gift From The Collapseniks | Peak Oil News and Message Boards
A Gift From The Collapseniks | Peak Oil News and Message Boards.
Of what possible use is it to imagine the end of civilization or even of the species? Is it simply a pessimistic indulgence or can it contribute to progressive and other positive results?
When I was a child, my family’s pastor used to elbow into almost every sermon an admiring reference to “St. John languishing in exile on the rock-bound, sea-girt island of Patmos.” He was referring to the author of the grisly Book of Revelation , the dominant Western source of apocalyptic imagery.
We chuckle at cartoons of robed men on city sidewalks carrying placards that claim, “the end is nigh,” and at bumper stickers that declare, “in case of Rapture, this car will be driverless” (which sounds more dangerous than driving under the influence). Since St. John’s fiery prose, there have been many predictions of the end, including the modern cult studied by social psychologist Leon Festinger in When Prophecy Fails (1956).
Those who see danger tend to accuse others of “denial,” of “refusing to listen.” Perhaps a tincture of denial has given humans an evolutionary advantage. Speaking positively, psychologists refer to “optimism bias.” Most of us tend to imagine that things will turn out better than they do, a common mental pattern studied by such authors as Tali Sharot. While this trait arguably encourages enterprises, some of which succeed, it may also, on occasion, blind us to the possibility of avoidable loss, even terminal loss.
In A Year to Live (1997), Stephen Levine asks readers to pretend they have the awful privilege of knowing when they will die (in 52 weeks) and challenges them to review their histories honestly and to live abundantly in the remaining time. As my wife and I know, from working through Levine’s book with another couple, the result can be an enhancement of life.
During the Cold War, Joanna Macy gave us Despair and Personal Power in the Nuclear Age (1983). Before writing on ecology, on general systems theory, and on hope, Macy taught that a fuller life, including activism, could be approached through uninhibited expression of the deep feelings that led us to be concerned. More recent examples are the grief work of Carolyn Baker, author of Sacred Demise (2009) and Collapsing Consciously (2013) and of Francis Weller, author of Entering the Healing Ground (2012).
Still, it’s going against the grain to ask people to imagine extreme loss. Unlike some so-called primitive groups, our society is not set up for it, apart from isolated workshops. According to both Baker and Weller, working through grief requires the support of a community and the additional safety of a ritual container. For all its virtues, U.S. culture is based more on individuality, the frontier, and risky enterprise, than on mutual support and safe space.
Nonetheless, a growing number of observers of climate change and other trends foresee disaster. We can describe them as collapseniks, a term with a suffix derived from Russian in honor of Dmitri Orlo*, who grew up in St. Petersburg (then Leningrad) and emigrated to the U.S. An engineer, sailor, and writer, Orlov believes that his adopted country will descend into collapse, and that the U.S. is less well prepared than the country where he was raised. If we define collapsenik as an observer who is conscious of the possibility of economic, political, and social collapse and who believes collapse is worth taking seriously, then Orlov has a parade of company, of which I will give chronological highlights at the end of this piece.
There are big differences among collapsenik authors and even in a single author at different times. A spectrum exists, from those who feel we could avoid the worst of climate change by changing our ways substantially (“we’re sleepwalking toward disaster but could conceivably wake up”) to those who believe our species is doomed (“it’s already too late”). For example, scientist Guy McPherson has come to believe that, as a species, we are headed toward “near-term extinction” (niftily abbreviated as NTE).
While pessimists predict NTE, optimists envision the triumph of a progressive politics that would render climate change survivable, perhaps shifting us toward a steady-state economy, slowing the sixth extinction of species, and fostering a network of local and democratic institutions. An optimistic scenario would resonate with what Macy, expressing hope, now calls “The Great Turning.”
In contrast, McPherson argues that it’s already too late for ad equate reform: humans have inadvertently created feedback loops that will keep making the situation worse. For example, the release of methane, caused (in part) by warming of the shallow Arctic ocean and the Siberian and Canadian tundra, will cause more warming because methane is a greenhouse gas even more dangerous than CO2. And so on.
Humans don’t have a very good record of predicting the future, in spite of various divinatory schemes. Whether developments are technological, political, or economic, we have proceeded without reliable forecasts. Given the surprises inherent in complex systems and in technical development, nobody can show that we face certain demise, though we can discuss probabilities.
Could we learn to regard collapse not as a firm prediction but as a scenario worth exploring? After all, the Pentagon has contingency plans for events that are arguably less likely and less devastating.
To return to our original question, what could be the use of taking seriously a scenario of collapse, especially the views that argue that it’s already too late or that changes could help, but probably won’t be made? If we feel grief at what seems to be happening, instead of simply seeming smug in a prediction of certain doom, if we invent ways to lessen the turbulence and create the best that is possible in the new circumstances, if we live intensely instead of habitually, then the scenario of demise might seem no worse than knowing that, as individuals, we each will die. Meanwhile, what are we capable of?
According to Rebecca Solnit’s A Paradise Built in Hell (2010), disasters can bring out the best in people. If the scenario of the collapseniks plays out, we will have opportunities to discover what kind of gardens we can create in the ruins of our present society. So what is the gift? That by responding fully to the scenario, we can meanwhile live more intensely and develop the elements of a society that, under new conditions as they develop, would work.
Now here are the promised examples of recent writers who are aware of the possibility of collapse and who, in various cases, are sketching alternatives. In this century, we’ve been given Tim Flahherty’s The Weather Makers (2001), Richard Heinberg’s The Party’s Over (2003), Jared Diamond’s Collapse (2005), James Howard Kunstler’s The Long Emergency (2005), Clive Hamilton’s A Short History of Progress (2005), Elizabeth Kolbert’s Field Notes from a Catastrophe (2006), George Monbiot’s Heat (2006), another assessment report from the Intergovernmental Panel on Climate Change (IPCC, 2007), James Lovelock’s The Revenge of Gaia (2007), John Michael Greer’s The Long Descent (2008).
And in the past five years: Sharon Astyk and Aaron Newton’s A Nation of Farmers (2009), Hamilton’s Requiem for a Species (2010), Chris Martenson’sThe Crash Course (2011), Guy McPherson’s Walking Away from Empire (2011), Dmitri Orlov’s Reinventing Collapse (2011), Paul Gilding’s The Great Disruption (2012), an even more dire IPCC assessment report (2014), Elizabeth Kolbert’s The Sixth Extinction (2014), and the National Academy of Sciences and the Royal Society, Climate Change: Evidence and Causes (also this year). (With a few exceptions, I have listed only the first book in which each author shows a pervasive awareness of collapse.)
In addition, apart from the writers already listed, many of whom write blogs, you can find many provocative personal and organizational websites, some of which publish several writers, such as Arctic News (Sam Carara), Climate Progress (Joe Romm), Collapse of Industrial Civilization (xraymike 79), Collapsing into Consciousness (Gary Stamper), Culture Change (Jan Lundberg), Dark Mountain Project (Paul Kingsnorth), Grist, How to Save the World (Dave Pollard), Our Finite World (Gail Tverberg), Radio Ecoshock (hosted by Alex Smith), Speaking Truth to Power (articles gathered daily by Carolyn Baker), and Yale Environment 360 (edited by Roger Cohn Sr.).
We should of course judge not by the number of collapseniks, but by the quality of evidence these writers bring. It’s a conversation worth having.
The Archdruid Report: The Steampunk Future
The Archdruid Report: The Steampunk Future.
WEDNESDAY, FEBRUARY 05, 2014
The Steampunk Future
That is to say, it’s time to talk about the role of fascism in the deindustrial future. We’ll begin that discussion next week.
The Archdruid Report: A Bargain with the Archdruid
The Archdruid Report: A Bargain with the Archdruid.
Ahem. So there you have it; if you want to bargain with the archdruid, those are the terms I’ll accept. For whatever it’s worth, those are also the policies I’d propose to a Senate subcommittee or a worried panel of long-range planners from the Pentagon if I were asked to testify to some such body,. Of course that’s not going to happen; archdruids can draw up proposals on the basis of what might actually work, instead of worrying about the current consensus in or out of the peak oil scene, because nobody considers archdruids to be serious public figures. That may not sound like an advantage, but believe me, it is one.
Forecast 2014 — Burning Down the House | KUNSTLER
Forecast 2014 — Burning Down the House | KUNSTLER.
Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.
Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.
Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.
Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency and Too Much Magic (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.
At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. And then all kinds of dishonest side rackets are run around this central credit racket — shadow banking, “innovative” securities (i.e. new kinds of frauds and swindles, CDOs CDSs, etc.), flash trading, insider flimflams, pump-and-dumps, naked shorts, etc. These games give the impression of an economy that seems to work. But the reported “growth” is phony, a concoction of overcooked statistics and wishful thinking. And the net effect moves the society as a whole in the direction of more destructive ultimate failure.
Now, a number of stories have been employed lately to keep all these rackets going — or, at least, keep up the morale of the swindled masses. They issue from the corporations, government agencies, and a lazy, wishful media. Their purpose is to prop up the lie that the dying economy of yesteryear is alive and well, and can continue “normal” operation indefinitely. Here are the favorites of the past year:
- Shale oil and gas amount to an “energy renaissance” that will keep supplies of affordable fossil fuels flowing indefinitely, will make us “energy independent,” and will make us “a bigger producer than Saudi Arabia.” This is all mendacious bullshit with a wishful thinking cherry on top. Here’s how shale oil is different from conventional oil:
- A “manufacturing renaissance” is underway in the US, especially in the “central corridor” running from Texas north to Minnesota. That hoopla is all about a few chemical plants and fertilizer factories that have reopened to take advantage of cheaper natural gas. Note, the shale gas story is much like the shale oil story in terms of drilling and production. The depletion rates are quick and epic. In a very few years, shale gas won’t be cheap anymore. Otherwise, current talk of new manufacturing for hard goods is all about robots. How many Americans will be employed in these factories? And what about the existing manufacturing over-capacity everywhere else in the world? Are we making enough sneakers and Justin Beiber dolls? File under complete fucking nonsense.
- The USA is “the cleanest shirt in the laundry basket,” “the best house in a bad neighborhood,” the safest harbor for international “liquidity,” making it a sure bet that both the equity and bond markets will continue to ratchet up as money seeking lower risk floods in to the Dow and S & P from other countries with dodgier economies and sicker banks. In a currency war, with all nations competitively depreciating their currencies, gaming interest rates, manipulating markets, falsely reporting numbers, hiding liabilities, backstopping bad banks, and failing to regulate banking crime, there are no safe harbors. The USA can pretend to be for a while and then that illusion will pop, along with the “asset” bubbles that inspire it.
- The USA is enjoying huge gains from fantastic new “efficiencies of technological innovation.” The truth is not so dazzling. Computer technology, produces diminishing returns and unanticipated consequences. The server farms are huge energy sinks. Online shopping corrodes the resilience of commercial networks when only a few giant companies remain standing; and so on. Problems like these recall the central collapse theory of Joseph Tainterwhich states that heaping additional complexity on dysfunctional hyper-complex societies tends to induce their collapse. Hence, my insistence that downscaling, simplifying, re-localizing and re-setting the systems we depend on are imperative to keep the project of civilization going. That is, if you prefer civilization to its known alternatives.
Notice that all of these stories want to put over the general impression that the status quo is alive and well. They’re based on the dumb idea that the stock markets are a proxy for the economy, so if the Standard & Poor’s 500 keeps on going up, it’s all good. The master wish running through the American zeitgeist these days is that we might be able to keep driving to Wal-Mart forever.
The truth is that we still have a huge, deadly energy problem. Shale oil is not cheap oil, and it will stop seeming abundant soon. If the price of oil goes much above $100 a barrel, which you’d think would be great for the oil companies, it will crash demand for oil. If it crashes demand, the price will go down, hurting the profitability of the shale oil companies. It’s quite a predicament. Right now, in the $90-100-a-barrel range, it’s just slowly bleeding the economy while barely allowing the shale oil producers to keep up all the drilling. Two-thirds of all the dollars invested (more than $120 billion a year) goes just to keep production levels flat. Blogger Mark Anthonysummarized it nicely:
…the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report “profits”, despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out paces revenue stream by several times… shale oil and gas producers tend to over-exaggerate productivity of their wells, under-estimate the well declines…in order to pitch their investment case to banks and investors, so they can keep borrowing more money to keep drilling shale wells.
As stated in the intro, these perversities reverberate in the investment sector. Non-cheap oil upsets the mechanisms of capital formation — financial growth is stymied — in a way that ultimately affects the financing of oil production itself. Old credit cannot be repaid, scaring off new credit (because it is even more unlikely to be repaid). At ZIRP interest, nobody saves. The capital pools dry up. So the Federal Reserve has to issue ersatz credit dollars on its computers. That credit will remain stillborn and mummified in depository institutions afraid of lending it to the likes of sharpies and hypesters in the shale gas industry.
But real, functioning capital (credit that can be paid back) is vanishing, and the coming scarcity of real capital makes it much more difficult to keep the stupendous number of rigs busy drilling and fracking new shale oil wells, which you have to do incessantly to keep production up, and as the investment in new drilling declines, and the “sweet spots” yield to the less-sweet spots or the not-sweet-at-all spots… then the Ponzis of shale oil and shale gas, too will be unmasked as the jive endeavors they are. And when people stop believing these cockamamie stories, the truth will dawn on them that we are in a predicament where further growth and wealth cannot be generated and the economy is actually in the early stages of a permanent contraction, and that will trigger an unholy host of nasty consequences proceeding from the loss of faith in these fairy tales, going so far as the meltdown of the banking system, social turmoil, and political upheaval.
The bottom line is that the “shale revolution” will be short-lived. 2014 may be the peak production year in the Bakken play of North Dakota. Eagle Ford in Texas is a little younger and may lag Bakken by a couple of years. If Federal Reserve policies create more disorder in the banking system this year, investment for shale will dry up, new drilling will nosedive, and shale oil production will go down substantially. Meanwhile. conventional oil production in the USA continues to decline remorselessly.
The End of Fed Cred
It must be scary to be a Federal Reserve governor. You have to pretend that you know what you’re doing when, in fact, Fed policy appears completely divorced from any sense of consequence, or cause-and-effect, or reality — and if it turns out you’re not so smart, and your policies and interventions undermine true economic resilience, then the scuttling of the most powerful civilization in the history of the world might be your fault — even if you went to Andover and wear tortoise-shell glasses that make you appear to be smart.
The Fed painted itself into a corner the last few years by making Quantitative Easing a permanent feature of the financial landscape. QE backstops everything now. Tragically, additional backdoor backstopping extends beyond the QE official figures (as of December 2013) of $85 billion a month. American money (or credit) is being shoveled into anything and everything, including foreign banks and probably foreign treasuries. It’s just another facet of the prevailing pervasive dishonesty infecting the system that we have no idea, really, how much money is being shoveled and sprinkled around. Anything goes and nothing matters. However, since there is an official consensus that you can’t keep QE money-pumping up forever, the Fed officially made a big show of seeking to begin ending it. So in the Spring of 2013 they announced their intention to “taper” their purchases of US Treasury paper and mortgage paper, possibly in the fall.
Well, it turned out they didn’t or couldn’t taper. As the fall equinox approached, with everyone keenly anticipating the first dose of taper, the equity markets wobbled and the interest rate on the 10-year treasury — the index for mortgage loans and car loans — climbed to 3.00 percent from its May low of 1.63 — well over 100 basis points — and the Fed chickened out. No September taper. Fake out. So, the markets relaxed, the interest rate on the 10-year went back down, and the equity markets resumed their grand ramp into the Christmas climax. However, the Fed’s credibility took a hit, especially after all their confabulating bullshit “forward guidance” in the spring and summer when they couldn’t get their taper story straight. And in the meantime, the Larry-Summers-for-Fed-Chair float unfloated, and Janet Yellen was officially picked to succeed Ben Bernanke, with her reputation as an extreme easy money softie (more QE, more ZIRP), and a bunch of hearings were staged to make the Bernanke-Yellen transition look more reassuring.
And then on December 18, outgoing chair Bernanke announced, with much fanfare, that the taper would happen after all, early in the first quarter of 2014 — after he is safely out of his office in the Eccles building and back in his bomb shelter on the Princeton campus. The Fed meant it this time, the public was given to understand.
The only catch here, as I write, after the latest taper announcement, is that interest on the 10-year treasury note has crept stealthily back up over 3 percent. Wuh-oh. Not a good sign, since it means more expensive mortgages and car loans, which happen to represent the two things that the current economy relies on to appear “normal.” (House sales and car sales = normal in a suburban sprawl economy.)
I think the truth is the Fed just did too darn much QE and ZIRP and they waited way too long to cut it out, and now they can’t end it without scuttling both the stock and bond markets. But they can’t really go forward with the taper, either. A rock and a hard place. So, my guess is that they’ll pretend to taper in March, and then they’ll just as quickly un-taper. Note the curious report out of the American Enterprise Institute ten days ago by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion. Which would pretty much negate the proposed taper of $5 billion + $5 billion (Treasury paper + Mortgage paper).
And in so faking and so doing they may succeed in completely destroying the credibility of the Federal Reserve. When that happens, capital will be disappearing so efficiently that the USA will find itself in a compressive deflationary spiral — because that’s what happens when faith in the authority behind credit is destroyed, and new loans to cover the interest on old loans are no longer offered in the non-government banking system, and old loans can’t be serviced. At which point the Federal Reserve freaks out and announces new extra-special QE way above the former 2013 level of $85 billion a month, and the government chips in with currency controls. And that sets in motion the awful prospect of the dreaded “crack-up boom” into extraordinary inflation, when dollars turn into hot potatoes and people can’t get rid of them fast enough. Well, is that going to happen this year? It depends on how spooked the Fed gets. In any case, there is a difference between high inflation and hyper-inflation. High inflation is bad enough to provoke socio-political convulsion. I don’t really see how the Fed gets around this March taper bid without falling into the trap I’ve just outlined. It wouldn’t be a pretty situation for poor Ms. Janet Yellen, but nobody forced her to take the job, and she’s had the look all along of a chump, the perfect sucker to be left holding a big honking bag of flop.
We’re long overdue for a return to realistic pricing in all markets. The Government and its handmaiden, the Fed, have tweaked the machinery so strenuously for so long that these efforts have entered the wilderness of diminishing returns. Instead of propping up the markets, all they can accomplish now is further erosion of the credibility of the equity markets and the Fed itself — and that bodes darkly for a money system that is essentially run on faith. I think the indexes have topped. The “margin” (money borrowed to buy stock) in the system is at dangerous, historically unprecedented highs. There may be one final reach upward in the first quarter. Then the equities crater, if not sooner. I still think the Dow and S &P could oversell by 90 percent of their value if the falsehoods of the post-2008 interventions stopped working their hoodoo on the collective wishful consciousness.
The worldwide rise in interest rates holds every possibility for igniting a shitstorm in interest rate swaps and upsetting the whole apple-cart of shadow banking and derivatives. That would be a bullet in the head to the TBTF banks, and would therefore lead to a worldwide crisis. In that event, the eventual winners would be the largest holders of gold, who could claim to offer the world a trustworthy gold-backed currency, especially for transactions in vital resources like oil. That would, of course, be China. The process would be awfully disorderly and fraught with political animus. Given the fact that China’s own balance sheet is hopelessly non-transparent and part-and-parcel of a dishonest crony banking system, China would have to use some powerful smoke-and-mirrors to assume that kind of dominant authority. But in the end, it comes down to who has the real goods, and who screwed up (the USA, Europe, Japan) and China, for all its faults and perversities, has the gold.
The wholesale transfer of gold tonnage from the West to the East was one of the salient events of 2013. There were lots of conspiracy theories as to what drove the price of gold down by 28 percent. I do think the painful move was partly a cyclical correction following the decade-long run up to $1900 an ounce. Within that cyclical correction, there was a lot of room for the so-called “bullion banks” to pound the gold and silver prices down with their shorting orgy. Numerous times the past year, somebody had laid a fat finger on the “sell” key, like, at four o’clock in the morning New York time when no traders were in their offices, and the record of those weird transactions is plain to see in the daily charts. My own theory is that an effort was made — in effect, a policy — to suppress the gold price via collusion between the Fed, the US Treasury, the bullion banks, and China, as a way to allow China to accumulate gold to offset the anticipated loss of value in the US Treasury paper held by them, throwing China a big golden bone, so to speak — in other words, to keep China from getting hugely pissed off. The gold crash had the happy effect for the US Treasury of making the dollar appear strong at a time when many other nations were getting sick of US dollar domination, especially in the oil markets, and were threatening to instigate a new currency regime by hook or by crook. Throwing China the golden bone is also consistent with the USA’s official position that gold is a meaningless barbaric relic where national currencies are concerned, and therefore nobody but the barbaric yellow hordes of Asia would care about it.
Other nations don’t feel that way. Russia and Switzerland have been accumulating gold like crazy at bargain prices this year. Lat year, Germany requested its sovereign gold cache (300 tons) to be returned from the vaults in America, where it was stored through all the decades of the cold war, safe from the reach of the Soviets. But American officials told the Germans it would take seven years to accomplish the return. Seven years ! ! ! WTF? Is there a shortage of banana boats? The sentiment in goldville is that the USA long ago “leased” or sold off or rehypothecated or lost that gold. Anyway, Germany’s 300 tons was a small fraction of the 6,700 tons supposedly held in the Fed’s vaults. Who knows? No auditors have been allowed into the Fed vaults to actually see what’s up with the collateral. This in and of itself ought to make the prudent nervous.
I think we’re near the end of these reindeer games with gold, largely because so many vaults in the West have been emptied. That places constraints on further shenanigans in the paper gold (and silver) markets. In an environment where both the destructive forces of deflation and inflation can be unleashed in sequence, uncertainty is the greatest motivator, trumping the usual greed and fear seen in markets that can be fairly measured against stable currencies. In 2014, the public has become aware of the bank “bail-in” phenomenon which, along with rehypothication schemes, just amounts to the seizure of customer and client accounts — a really new wrinkle in contemporary banking relations. Nobody knows if it’s safe to park cash money anywhere except inside the mattress. The precedent set in Cyprus, and the MF Global affair, and other confiscation events, would tend to support an interest in precious metals held outside the institutional framework. Uncertainty rules.
Miscellany
I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.
Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.
Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office. It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.
Elsewhere in the World
Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.
The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.
I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.
The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.
The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.
That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.” They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.
By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.
As it happens, the third in the series of my World Made By Hand novels, set in upstate New York in the post-collapse economy, will be published in September by the Atlantic Monthly Press. It’s a ripping yarn. Whether anyone will have enough money to buy a copy, I can’t predict. Happy 2014, Everybody!
New Features this week at kunstler.com:
Jim’s Garden Report, 2013
Jim’s New Paintings, 2011-2013
Published as an E-book for the first time!
The 20th Anniversary edition
With an entertaining new introduction by the author
Apocalypse 2012: The one-year anniversary of Nothing Happened Day
Apocalypse 2012: The one-year anniversary of Nothing Happened Day.
Three hundred and sixty-five days ago, millions of people felt a growing sense of — I was going to write “relief,” but it might have been “disappointment” — when the world didn’t end on Fake Mayan Prophecy Day. Social media users around the world greeted the non-event with the kind of viral mockery everyone loves these days, so long as it’s someone else’s beliefs being mocked.
Such scares, however, can be serious business; a few weeks before the predicted end of the world, Britain’s Telegraph newspaper reported that “panic buying of candles and essentials has been reported in China and Russia, along with an explosion in sales of survival shelters in America. In France believers were preparing to converge on a mountain where they believe aliens will rescue them.”
China might seem a strange place for the apocalypse idea to crop up, but the Telegraph said that “In China … a wave of paranoia about the apocalypse can be traced to the 2009 Hollywood blockbuster ‘2012.’ The film … was a smash hit in China, as viewers were seduced by a plot that saw the Chinese military building arks to save humanity.”
That $200 million steaming pile of callous manipulation, I suspect, did a great deal to boost the 2012 myth from New Age circles into the mainstream. As I wrote a couple of years ago, we might be able to forgive filmmakers for creating an overpriced package of ridiculous escapism like The Core or Volcano. Unlike those films, however, and like the fundamentalistLeft Behind series, the film implied their fictional work presaged actual and imminent tragedies.
The filmmakers also dropped the “Rapture” name for extra points among the mega-church crowd, both in the script and in the cruel advertising line, “Will You Be Left Behind?” The difference is that the Left Behind authors seem to truly believe their dubious theology, whereas the filmmakers seemed to be exploiting the genuine fears of real people to make some quick cash.
Even if only one person in ten thousand takes them seriously, scares like the 2012 fakery can cost real people their lives. David Morrison, an astronomer at NASA, told the Telegraph that “at least once a week I get a message from a young person, as young as 11, who says they are ill and/or contemplating suicide because of the coming doomsday. I think it’s evil for people to propagate rumours on the internet to frighten children.”
Apocalyptic scares have cropped up throughout history, and no one has written a more readable overview of them than John Michael Greer. His drily funny book Apocalypse Not: Everything You Know About 2012, Nostradamus and the Rapture is Wrong probably saw sales fall off after Nothing Happened Day, but should still be read as immunisation against the next one.
One area Greer could have explored more, perhaps, was “Why Mayans?” Why not prophecies from Norwegians, or Saudis, or any other group? The answer seems to be twofold; first, it’s easier to project any beliefs or ideology you like on a now-extinct group that can’t protest. There are some descendants of the Mayans left, who have rightly objected to their pop-culture co-opting, but poor Third-Worlders do not generally have the media influence of California New Age gurus.
The other reason has to do with the exalted place Native Americans hold in popular culture. Of course Native Americans were the victims of the greatest human genocide in history, and even into the mid-20th century were portrayed in popular fiction as villainous savages. The response of the Sixties counterculture, though, was insulting in a different direction, projecting onto Native tribes whatever ancient wisdom they wanted to hear. This was done mainly through the use of Italians and other Europeans pretending to be Natives, making up New Age teachings and passing them off as authentic.
As John Miller wrote in the National Review, “Between 1960 and 2000, the number of Americans claiming Indian ancestry on their census forms jumped by a factor of six. Neither birth-rates nor counting methodologies can account for this explosive growth. Instead, the phenomenon arises in large part from the increasingly idealistic place Indians occupy in the popular imagination. Much of it is based on harmless sentiment mixed into a hash of unverifiable family legends and wishful thinking among folks who hang dream-catchers from their rear-view mirrors. But for a distinct subset, it’s all about personal profit. They’re professional imposters who have built entire careers by putting the sham into shaman.”
In some cases people just claim to be Native when they are not: author and provocateur Ward Churchill, actor “Iron Eyes” Cody, and many others. In others Europeans claim special insight into Native culture: Carlos Castaneda, for example, wrote his entire Don Juan series with supposed interviews based on a reclusive Yaqui Indian no one else ever met, while Lynn Andrews did something similar with her Medicine Woman series. The Celestine Prophecy, Mutant Message from Down Under — for a while it seemed every year brought more books from dead or remote peoples, offering life-coaching for upscale Westerners.
Some of these teachings are useful in their own right; Canadian ecologist “Grey Owl” married into Native American communities and wrote beautifully about protecting wilderness, even if he was originally an Englishman named Archie Blayney. “The Education of Little Tree” is a lovely story, even if it turned out to be fiction written by a white segregationist.
Decades of such romanticising, though, means that followers of the Sixties counterculture treat Native teachings with a special reverence – even fake ones, and they usually are. I know a number of people who sneered at Harold Camping’s numerous Rapture predictions who seemed to take the Mayan claims seriously – at least, as seriously as anyone takes anything these days, forwarding memes while filtering any convictions through layers of post-hip meta-irony.
The 2012 books I leafed through also yanked science-sounding terms into the discussion whenever possible, describing a “quantum leap” forward in human “evolutionary levels.” Basically, it’s the same technique used by the religious cult “scientology,” stealing bits of words from actual scientific research and using them to imbue their vague hokum with a bogus legitimacy.
Many people I talk to seem unconcerned with doomsday crazes, considering them throwbacks to an earlier age of superstition, which will die out eventually. It’s been a standard line of science and science fiction for a hundred years, recited in everything from H.G. Wells’ Things to Come to the Star Trek series, that technology would allow humans to outgrow primitive ideas. Instead, however, the opposite has happened — as people spent more of their hours staring at electronic media, they became more susceptible to superstition, for several reasons.
First of all, news and fake news travel instantly around the world, and are increasingly difficult to escape. A year ago today, I was listening to neighbours talk about the alleged Mayan prophecy … at our local pub in rural Ireland. Locals would have been sitting at the same pub fifty or a hundred years ago — several apocalypse scares ago — but would not have easily known about them; until a few decades ago, few places in Ireland had electricity or modern media. Today, though, people here hear the same celebrity gossip, and watch the same blockbusters and visit some of the same internet sites as people everywhere. Instead of a dubious notion having to infect a critical mass of people in a town before spreading to the next town, a con or conspiracy theory can appear everywhere in the world – to a teenager in Saskatchewan, an old lady in Turkmenistan and an Irish farmer – simultaneously.
The modern world has made us more susceptible to superstition in other ways; when we spend most of our time staring at glowing rectangles rather than living in the real world, it becomes easy to become isolated, paranoid, or trapped in a misinformed bubble of like-minded people. Also, when we spend most of our time moving pixels on a screen for a paycheque, it becomes all the easier to fantasise about fighting zombies or some other more hands-on existence.
Finally, the very nature of our online lives means that information flits in and out of our minds quickly, leading us to forget, only a year later, that there were millions of people who genuinely thought the world would end. It leaves us singularly unprepared for the next fake Apocalypse, whose rumours are already circulating somewhere.
You might think that people are right to be alarmed, even if it takes a fake Mayan thing to alarm them. Between fossil fuels and climate change, an increasingly fragile economy and a disintegrating culture, humanity faces all kinds of problems. I’ve been writing about them for years; is it hypocritical of me, you might ask, to criticise someone else’s doomsday theory?
But here’s the thing: peak oil was never the apocalypse. When the theory of peak oil was revived around the turn of the millennium, some well-intentioned and otherwise beneficial thinkers saw in it the doomsday they had been waiting for. Ten years ago, however, when I wrote my first magazine cover story on peak oil, I said that we “won’t wake up Amish one day,” and when conventional oil peaked a few years ago, we didn’t. Rather, the promising peak oil movement dissipated somewhat after that, perhaps because the countdown had ended and the world had not collapsed. Framing peak oil as the apocalypse harmed the movement’s credibility, and undermined the very useful contributions of volunteers in local communities around the world.
Climate change is also not the apocalypse, in that sense. Almost all scientists agree that humans are causing climate change at a geologically alarming pace, but on a human scale the change is slow and scattershot enough to leave many non-scientists unconvinced. Even when events do happen – this or that city being devastated, a record-breaking summer, droughts and floods like no one has ever seen – no one can prove that climate change caused it, and with our short modern memories we quickly move on. Claiming that “we have only ten years left” to stop climate change, as some activists have done for decades, only discredits climate science in the eyes of the public when, ten years later, the changes have been small or quickly forgotten.
None of these crises in our culture, our economy, or in the living world constitute the Apocalypse of John of Patmos, or any of the rest of the Antilegomena. They are not the Big One people have been waiting for, and people need to stop waiting. None of them will wipe out everyone you don’t like, and leave them sorry they doubted you. None of them will eliminate all those other humans standing in front of you in the grocery queue, leaving you with all their stuff.
I do expect a great many crises in the years to come – more weather disasters, economic crashes, wars and rumours of wars. I expect that actions that were once considered unspeakable might become commonplace, just as actions fifty or a hundred years ago are unthinkable to us, and vice versa. Preparing for such long-term events, though, means working with others, making your little corner of the world more resilient in the face of change, and adhering to a consistent set of principles even when the culture shifts tectonically under your feet. It means changing your life in a thousand small and tangible ways.
At some point, of course, the world will end – for you. That sobering realisation – in Greek,Apocalypsi, or Revelation – is what most apocalyptic scriptures are really about; the commonly cited passages about the end of the world take on a very different meaning when you posit that they are not talking about a universal end, but a personal one. That’s what most religions are about: When done rightly, they help you spend your remaining years meaningfully, to think of others before yourself, to set an example the world can see, and to bring you closer to God.
Doomsday thinking, as in the Mayan 2012 belief, does the opposite. It encourages people to retreat into a bubble of believers. It discourages people from making small improvements, when everything is about to be swept away. It makes people passive in the face of predestination. It tells people that God will come to them, and they don’t need to do anything.
charles hugh smith-System Reset 2014-2015
charles hugh smith-System Reset 2014-2015. (source)
Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced.
The global financial system will reset in 2014-2015, regardless of official pronouncements and financial media propaganda hyping the “recovery.” Despite the wide spectrum of forecasts (from rosy to stormy), nobody knows precisely what will transpire in 2014-2015, so we must remain circumspect about any and all predictions– especially our own.
Even as we are mindful of the risks of a forecast being wrong (and the righteous humility that befits any analysis), it seems increasingly self-evident that financial systems around the world are reaching extremes that generally presage violent resets to new equilibria–typically at much lower levels of complexity and energy consumption.
John Michael Greer has described the process of descending stair-step resets (my description, not his) as catabolic collapse. The system resets at a lower level and maintains the new equilibrium for some time before the next crisis/system failure triggers another reset.
There is much systems-analysis intelligence in Greer’s concept: systems without interactive feedbacks may collapse suddenly in a heap, but more complex systems tend to stair-step down in a series of resets to lower levels of consumption and complexity–for example, the Roman Empire, which reset many times before reaching the near-collapse level of phantom legions, full-strength on official documents, defending phantom borders.
In the present, we can expect the overly costly, complex, inefficient, fraud-riddled U.S. sickcare (i.e. “healthcare”) system to reset as providers (i.e. doctors and physicians’ groups) opt out of ObamaCare, Medicare and Medicaid; like the phantom armies defending phantom borders of the crumbling Empire, the vast, centralized empire of sickcare will remain officially at full strength, but few will be able to find caregivers willing to provide care within the systems.
Just as much of the collateral supporting the stock, bond and housing bubbles is phantom, many other centralized systems will reset to phantom status. As local and state governments’ revenues are increasingly diverted to fund public union employees’ sickcare and pension benefits, the services provided by government will decline as the number of retirees swells and the number of government employees actually filling potholes, etc. drops.
Local government will offer services that are increasingly phantom, as stagnating tax revenues fund benefits for retirees rather than current services. On paper, cities will remain responsible for filling potholes, but in the real world, the potholes will go unfilled. In response, cities will ask taxpayers to approve bonds that cost triple the price of pay-as-you-go pothole filling, as a way to dodge the inevitable conflict between government retirees benefits and taxpayers burdened with decaying streets, schools, etc. and ever-higher taxes.
As for phantom collateral–the real value of the collateral will be undiscovered until people start selling assets in earnest. As long as everyone is buying, the phantom nature of the collateral is masked; it’s only when everyone tries to get their money out of asset bubbles is the actual value of the underlying collateral discovered.
When assets go bidless, i.e. there are no buyers at any price, the phantom nature of the supposedly solid collateral is revealed. Price discovery is one way of describing reset; transparent pricing of risk is another way of saying the same thing.
When risk has been mispriced via state guarantees, fraud, willful obfuscation, complexity fortresses, etc., then the repricing of risk also resets the system.
Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced. The greater the manipulation and financial repression, the more violent the reset. What been manipulated, obscured or repressed? Virtually everything: risk, credit, assets, labor, currency, you name it. Everything that has been manipulated by central banks and central states will be repriced.
Trust is difficult to price. Every reset erodes trust in the capacity of the centralized status quo to manipulate/repress price to its liking. Once trust in the system is lost, it cannot be purchased at any cost.
Related articles
- The Gathering Storm (theburningplatform.com)
When Ephemeralization is Hard to Tell from Catabolic Collapse
When Ephemeralization is Hard to Tell from Catabolic Collapse. (FULL ARTICLE)
My main problem with the Jared Diamond/John Michael Greer/Jim Kunstler theory of “catabolic collapse” is that it ignores one of the most central distinguishing characteristics of our technology: ephemerality.
Thanks to technological change, over the past few decades the capital-intensiveness of emerging successor infrastructures has been collapsing faster than the existing infrastructure itself. The classic example, from Buckminster Fuller, is replacing a transoceanic cable system emdodying God only knows how many thousand tons of metal with a few dozen communications satellites weighing a few tons each.
It’s quite true that the mass-production industrial civilization that peaked in the 20th century is falling into ruin, failing to invest in upkeep at sustainable levels, and generally eating its seed corn — just as happened with Rome. The difference is, the Interstate Highway System, the civil aviation infrastructure, and the old electrical grid aren’t something to mourn. They’re something that would decay anyway, because they’re increasingly irrelevant to the kinds of production technology and economic organization the emerging successor society will be based on…..
Related articles
- How to Wake People Up: A Time-Travel-to-the-Year-1970 Gedanken (sgtreport.com)