Friday, October 30, 2009

October 30 2009: An interview with Stoneleigh - The case for deflation


Dorothea Lange Family Travel June 1938
Family walking on highway, five children. Started from Idabel, bound for Krebs. In 1936 the father farmed on thirds and fourths at Eagleton, McCurtain County. Was taken sick with pneumonia and lost farm. Was refused relief in county of 15 years' residence because of temporary residence elsewhere. Pittsburg County, Oklahoma


Ilargi: The following is a conversation between Stoneleigh and Euan Mearns of TOD Europe.

Stoneleigh







Euan Mearns: At the ASPO conference in Denver, October 2009, I had the good fortune to meet Stoneleigh, former editor of The Oil Drum Canada, who left the TOD crew with colleague Ilargi to set up The Automatic Earth where they publish stories, news and analysis of the unfolding financial crisis.

I spent a couple of days chatting with Stoneleigh where she recounted her rather gloomy prospects for the immediate future of the global economy. The following interview is a summary of her analysis of the unfolding situation. Note that in a departure from convention my questions are set in "blockquotes" to distinguish these from Stoneleigh's responses.







Euan Mearns: Stoneleigh, the world economy seems to be suffering from two great structural woes at present, namely stubbornly high energy prices that are linked to demand that is persistently ahead of the supply curve, and a level of debt that has destabilized the global finance and banking systems.

Can you explain for us the scale and structure of this debt and to what extent write-downs and quantitative easing (QE) have solved this problem?


Stoneleigh: Firstly, I would say that the energy prices that currently seem stubbornly high should fall substantially as the speculative premium evaporates and demand falls on a resumption of the credit crunch. The sucker rally that has spawned all the talk of green shoots is essentially over in my opinion.

The result should be a reversal of a number of trends that depend on the ebb and flow of liquidity - we should see stock markets and commodity prices fall, a significant resurgence in the US dollar and a large contraction of credit. The scale of the reversal should be substantial, as should its effects on energy demand. Demand is not what one wants, but what one is ready, willing and able to pay for, and in a severe credit crunch the capacity to pay for supplies of most things will be severely reduced.




As demand falls, and with it prices, investment in the energy sector is likely to dry up. Many projects will be uneconomic at much lower prices, meaning that the projects which might have cushioned the downslope of Hubbert’s curve (and the much steeper net energy curve), are unlikely to be developed. In this way a demand collapse sets the stage for a supply collapse that could place a hard ceiling on any prospect of economic recovery. That is a recipe for extremely high energy prices in the future.

Secondly, our vulnerability to the consequences of debt is extremely high at the moment. The scale of that debt is staggeringly large. The global credit hyper-expansion has been decades in the making and is now significantly larger than notable events of the past such as the South Sea Bubble of the 1720s and the Tulip Bubble of the 1630s. It dwarfs the excesses that led to the Great Depression.




Credit bubbles are inherently self-limiting, proceeding until the debt they generate can no longer be supported. We have already passed that point and we are now two years into a contraction phase that is about to accelerate. As the aftermath of a credit bubble is typically proportional to the scale of the excesses that preceded it, we should be in for the largest economic contraction for at least several hundred years, and it will be global.

Real estate, which is a major focus of the mania, should do particularly badly in the coming years (in fact the coming decades or longer). There is still so much deleveraging ahead, and so many danger signals, such as the scale of the coming interest resets on US mortgages between now and 2012 (below). While the subprime resets are ending, Alt A and Option ARMs are just beginning.




There will be a very significant undershoot of historically average values, as there always is following a mania (much more than the Case-Shiller projection below suggests). In my opinion, housing prices are likely to fall at least 90% on average. For those who own property on margin, this will be a disaster.




For evidence that this crisis is indeed global, look, for instance, at European housing bubbles, which were worse than in the US.




Unlike inflation, which divides the underlying real wealth pie into smaller and smaller pieces, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. Once a credit expansion reaches its maximum extent, and contraction begins, these excess claims begin to be extinguished.

Unfortunately, the leverage is such that there are probably over a hundred claims to each piece of pie. While contraction begins slowly, as is the nature of positive feedback loops, it picks up momentum until a cascade point is reached, whereupon one can expect the excess claims to be extinguished in a rapid and chaotic process. This amounts to a rapid collapse in the supply of money and credit relative to available goods and services, which is the definition of deflation.




The scale of the problem has been temporarily concealed by a market rally and the shovelling of tens of trillions of dollars of taxpayer’s money into a giant black hole of credit destruction. This has done nothing to reignite lending, but the temporary (and entirely irrational) resurgence of confidence has restored a measure of liquidity. As that confidence evaporates with the end of the rally, that liquidity will also disappear

Banks hold extremely large amounts of illiquid ‘assets’ which are currently marked-to-make-believe. So long as large-scale price discovery events can be avoided, this fiction can continue. Unfortunately, a large-scale loss of confidence is exactly the kind of circumstance that is likely to result in a fire-sale of distressed assets. The structure of the credit default swap component of the derivatives market makes this very much more likely.




The CDS market allowed large bets to be placed on certain prices falling, and by entities which did not have to own those assets. This creates a perverse incentive for some parties to cause others to fail for profit (akin to me being able to take out fire insurance on your house and thereby give me an incentive to burn it down).

An added complication is the extreme degree of counterparty risk that resulted from a complete lack of capital adequacy regulation. Many parties with winning bets will not be able to collect, so they may cause financial mayhem for nothing. The CDS market is worth some $62 trillion, and a meltdown is very likely in my opinion.

A large-scale mark-to-market event of banks illiquid ‘assets’ would reprice entire asset classes across the board, probably at pennies on the dollar. This would amount to a very rapid destruction of staggering amounts of putative value. This is the essence of deflation.





Euan Mearns: I have for a long time argued and believed that there are so many interests vested in protecting our current system that national governments, the IMF and institutions working together would keep the market flooded with liquidity in order to ward off the threat of deflation.

In fact, it seems that a prolonged period of inflation is the only way to diminish our debts. I sensed at ASPO International in Denver that this was the majority view. Do you agree that inflation is the most likely near term outcome of current monetary policy?


Stoneleigh: Absolutely not. I agree that this is the consensus opinion, but I see it as fundamentally mistaken. The debt monetization that is going on has done nothing to increase the supply of money and credit relative to available goods and services, which is the definition of inflation.

Credit contraction dwarfs debt monetization, leaving us in a state of net contraction, even though we have just experienced a large rally lasting months, which should have been the most favourable condition for reigniting lending if such a thing were in fact possible. I would argue that it is simply not possible and that deflation is inevitable.




Credit bubbles always end this way, with the mass extinguishing of the excess claims debt represents. They are essentially Ponzi schemes, crucially dependent on the continued buy-in of new entrants. Globalized finance brought a flood of new entrants following the liberalization of the early 1980s, but there are now no more new sources of wealth to tap.

Deregulation allowed the reckless to gamble away virtually everything, including bank deposits and pension funds. Globalized finance has created a giant Enron, which while appearing robust is actually almost completely hollowed out. Such structures implode, often without much notice.




In my opinion, deflationary deleveraging will continue until the (small amount of) remaining debt is acceptably collateralized to the (few) remaining creditors. Until that point, there can be no lasting return of the confidence required to rebuild shattered credit markets.

Deflation is ultimately psychological. Without trust we will see hoarding of the cash which will be very scarce in the absence of the credit that currently comprises the vast majority of the effective money supply. The combination of scarce cash and a very low velocity of money will be toxic.

Money is the lubricant in the economic engine and without enough of it that engine will seize up as it did in the 1930s, when farmers dumped milk they couldn’t sell into ditches while others were starving for want of the money to buy food. There was plenty of everything except money, and without money, one cannot connect buyers and sellers.

Potential buyers will have no purchasing power as they will have lost access to credit and their ability to earn an income will be hit by spiking unemployment. Those who still have jobs will find that they have no bargaining power and there is therefore no wage support.

Sellers and producers will have no market and will themselves lose the means to purchase supplies or raw materials for the things they would like to produce.

If conditions remain frozen for any length of time, they will go out of business. The deeper the collapse, the more protracted the trough and the more difficult the eventual recovery.

I would argue that we have no need to fear inflation until we have reached a trough - until the deleveraging impulse is spent. We can expect to spend a long time in the liquidity trap, where real interest rates will be much higher than nominal rates, leaving central bankers “pushing on a string”.





Euan Mearns: Some would argue that faced with the unimaginable specter of deflation that governments will seize control of interest rates from the bond market. Why do you think this may not happen?


Stoneleigh: The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.





Euan Mearns: But stock markets are booming again, several OECD economies are emerging from recession, unemployment has stabilized, there are green shoots everywhere. Surely the current QE strategy is working?


Stoneleigh: The green shoots are gangrenous. Some of the largest market rallies on record happened during the course of the Great Depression, as depressions are associated with very high volatility. Look for instance at the great sucker rally of 1930. There are always rallies of all different sizes in any bear market, just as there are pullbacks of all sizes in bull markets. No market ever moves in only one direction.

People tend to extrapolate recent trends forward, but this amounts to stepping on the gas while looking only in the rearview mirror. This is one reason why major trend changes are so rarely anticipated. Another is that the prevailing view of markets is fundamentally wrong. There is no perfect information, perfect competition, stabilizing negative feedback, rational utility maximization or efficient markets.

Markets are irrational, driven by swings of optimism and pessimism, or greed and fear, in an endless tug of war, and largely in an information vacuum. Investors chase momentum by jumping on passing bandwagons, hence demand for financial assets increases when prices are rising and falls when prices are falling, in classic positive feedback loops.

We have just lived through a period of several months when greed and complacency were in the ascendancy, but that trend is about to reverse in my opinion. Looking at markets as constructs of human herding behaviour allows them to be probabilistically predictable, permitting the forecasting of trend changes. For anyone who is interested in pursuing this idea further, I suggest looking into Bob Prechter’s socionomics - a fascinating subject which delves into the many effects of changes in collective mood.

For instance, as pessimism deepens, driving economic contraction, one would expect to see many manifestations of collective anger and mistrust. As this progresses it is likely to lead to xenophobia and a blame-game, with skillful manipulators (such as the fascist BNP leader Nick Griffin in the UK) poised to direct the anger of the herd towards their own chosen targets.

The potential for serious social fragmentation is very high when expectations have been dashed and there is not enough to go around. Having lived through a very long period of manic optimism and increasing inclusion, we in the developed world are not used to expressions of the dark side of human nature, except for entertainment purposes in popular television programmes. It will come as a considerable shock.





Euan Mearns: Would you care to give your opinion on where the Dow Jones Industrial Average is headed in the near (1 year) and medium terms (2 to 5 years)?


Stoneleigh: I think the market will fall hard (intervening short rallies notwithstanding) for perhaps 18 months. This was the length of the first leg down (October 2007-March 2009) and so represents a reasonable first guess at how long the next leg at the same degree of trend might last.

I think we will see falls of thousands of points in a series of cascades. I don’t see the markets reaching a lasting bottom until probably the middle of the next decade, and even then I don’t expect it to be a final bottom. This has been the largest credit bubble in history, and the aftermath of a major bubble always undershoots where it began before any kind of recovery begins.




The aftermath of the last major mania - the South Sea Bubble in the 1720s - lasted decades and culminated in a series of revolutions. We are still relatively near the beginning of our own crisis, but already it compares with the Great Depression.





Euan Mearns: How do you see the US$, gold and oil trading in the same time frame?


Stoneleigh: I think almost all assets will fall as price support is knocked out from underneath them, but the dollar should rise initially on a flight to safety. Scarce cash will be king for a long time, and the value of one’s currency relative to available goods and services domestically will matter much more for most people than its value relative to other currencies internationally.

In a deflationary scenario, prices fall, but purchasing power typically falls even faster, meaning that everything becomes less affordable despite the lower nominal prices. Prices in real terms, adjusted for changes in the supply of money and credit, are what matter.

In a world where almost everything is becoming rapidly less affordable, the essentials will be the least affordable of all, as a much larger percentage of a much smaller money supply will be chasing them. This will confer relative price support.

Although we could initially see a large glut in energy supply as demand falls off a cliff, this is likely to lead to supply collapse as investment dries up, hence I expect energy prices to bottom early in this depression.

Both financial and physical risks to energy exploration are likely to increase substantially in a destabilized and capital constrained world, and even maintaining existing assets could become very difficult. This is a recipe for much greater state involvement in ownership and exploitation of (probably deteriorating) energy assets, with increasing conflict over those assets as supply gets dramatically tighter with lack of investment.

As for gold, I expect it to fall initially as people sell not what they would like to, but what they can, in order to raise the cash they need for living expenses and debt servicing. Owning gold is likely to become illegal again (as it did in the Great Depression) in my opinion.

This wouldn’t necessarily stop you owning it, but would stop you trading it (at least without taking major risks) for other things you might need. Owning gold now therefore only makes sense if one is confident of being able to sit on it for a very long time, as it will hold its value over the long term as it has for thousands of years.





Euan Mearns: What will be the consequences for unemployment levels and services provided by government?


Stoneleigh: Unemployment will go through the roof as the prospects for selling most goods and services decline dramatically. In the developed world we are nations of middle men - generally service economies where we make a living figuratively taking in each other’s laundry.

Most of us produce relatively little. Even those who do will find almost no market for their exports, and those who could find buyers may not be able to send shipments as credit contraction prevents shippers from getting the letters of credit they need to ship goods. A glance at what has happened to the Baltic Dry Index (below) indicates the difficulties already facing shipping companies.




Unfortunately middlemen are almost completely expendable, and the services of others are likely to become unaffordable for the majority very quickly. While there will be a huge surplus of labour, and the few who retain purchasing power will be able to hire anyone they want for very little, most people will have to do everything for themselves, as poor people have done throughout history and as most of the population of the world does now.

Not only will we lose access to the paid labour of others, but we will lose our virtual energy slaves as well. This will represent an enormous fall in the standard of living for the vast majority.




Whereas inflation can conceal a fall in purchasing power, so that people may not even realize it is happening, deflation brutally exposes it. Wages would have to fall just to keep purchasing power the same, but keeping it the same will not be an option for cash-strapped employers. In addition, with a large surplus of labour, workers will have no bargaining power.

This is a recipe for exploitation the like of which we have not seen for a very long time, but in the intervening adjustment period it is likely to lead first to war in the labour markets.

I would expect general strikes and a breakdown in the reliability of centralized services such as healthcare, education, power systems, water treatment, garbage (and snow) removal etc. This will be exacerbated by plunging tax revenues for all levels of government, which governments will try to compensate for by raising taxes, on anyone still capable of paying, to punitive levels. We would thus expect rapidly deteriorating services at much higher cost.

Many people are at risk of being eventually priced out of the market for goods and services, and particularly the essential ones, entirely.

In my opinion, we stand on the brink of truly tragic circumstances.









Euan Mearns: End note:

The day before the ASPO conference began in Denver, Stoneleigh, Rembrandt Koppelaar and myself took a drive into the Rocky Mountains National Park providing the opportunity to discuss and reflect upon the current global situation. As the week unfolded I realised that I was in denial about the gravity of the global financial situation. In what has become a situation of complexity that is beyond the ken of most folks, I find it simpler to break this down into smaller components that I can relate to.

In the UK, we have an escalating burden of government debt that we can unlikely ever repay. Unemployment is rising, tax receipts are plunging whilst expenditure on social security, health and the elderly go through the roof. We have been living way beyond our means, which with the peaking of UK oil and gas have suddenly become more meagre.

We have an election in May 2010. The new government will want to raise taxes and cut public spending. The current reversal in global growth is sending energy prices higher. Higher unemployment, higher taxes, higher energy prices and reduced public services are a toxic mixture for an ailing economy. If the bond market decides to price in the risk premium for escalating debt it will be game over. The questions are if and when? Figure 12 (Fed Follows the Market) is one of the more interesting for me.



That's me (Euan) on the left and Rembrandt Koppelaar on the right, contemplating our future after a most enlightening, if not very cold day in the Rocky Mountains. Photographer - Stoneleigh.



















Ilargi: The Automatic Earth’s Fall Fund Drive (see the left hand column) is going well, and we owe heartfelt thanks to all of you who have donated. That said, in order to execute what we think would be the appropriate and logical next steps for us, more is needed, and quite a bit of it actually.

There are many thousands of people who read us every single day, and if everyone of them would donate just a dime for every time they read us we'd be doing just fine. But obviously, most never will.

We would love to be able to expand on what we do, to involve more people, more opinions, a more diverse view from more places in the world. And that is unfortunately not possible right now. Along the same lines, we would like for Stoneleigh to be much more involved at TAE. Not happening. On a happy note, our brand-new Twitter and Facebook presences are directed by our good friend VK, all the way from Nairobi, Kenya, the first time we’ve been able -and willing- to expand and relinquish control at least a little.

The Automatic Earth will be busier than ever as the real economy deteriorates in the months to come and things come to a head. Inevitably that will take more from us, and we hope you will do more as well.

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279 comments:

1 – 200 of 279   Newer›   Newest»
getyourselfconnected said...

Stoneleigh and Ilargi,
Great interview, great case! Very well presented.

My issue:
"The bond market is far more powerful than governments at this point."

At what point are you talking about? Now? A year from now? If the US Government printed enough money tomorrow to make 200 million Americans 1 millionaires, would the bond market revolt? What if that number is the same as the total pledges of our goverment as of now, what is the difference?

The vigilantes are over. There is no limit to what can be done. Last year into now proves it. Show me I am wrong.

Ed_Gorey said...

@ getyourselfconnected

Re: show me where I'm wrong???

The fact that we still have a functional bond market tells you everything you need to know.

The pledges the government has made are just that, "pledges." It's all a confidence game. The pledges are verbal contracts, and they aren't worth the paper they're written on.

Can the FDIC really borrow 6 Trillion dollars to backstop all deposit accounts? Of course not. That's why we are incessantly told deposits are safe. Confidence game.

What would happen if the government suddenly made every American a millionaire? Would investors still buy 10yr Treasury bonds with a 3.5% yield? What would happen to the price of oil or food? We'd be the saddest bunch of millionaires you've ever seen.

I. M. Nobody said...

getyourselfconnected Said...

If the US Government printed enough money tomorrow to make 200 million Americans 1 millionaires, would the bond market revolt?


You do realize that you have just suggested the printing of 200 Trillion dollars. And by a government that doesn't currently print any at all.

Would the bond market revolt?

If governments could just print all the money they wanted, why would there even be a bond market? I mean, who would issue them?

ronald said...

powerful presentation!

Bullturnedbear said...

Stoneliegh and Illargi,

I agree totally with Stoneleigh's conclusions. As a result I have been preparing mentally and financially for the last few years for the coming collapse.

I believe the phase after the crash will be all about income. Wealth will be unachievable for most, but income will sustain life.

My problem is that after 3 years of pondering, debating and agonising I still can't think of what to do for income (even modest income) post crash. Have you guys thought about this? I'm guessing that blogging for income will not work post crash.

Stoneleigh said...

Bullturnedbear,

My problem is that after 3 years of pondering, debating and agonising I still can't think of what to do for income (even modest income) post crash. Have you guys thought about this? I'm guessing that blogging for income will not work post crash.

I reckon some will earn actual money and others will barter skills. Personally I can imagine being a seamstress, probably for barter. My daughter and I can spin, weave, knit, sew, crochet, design and make clothes by hand etc. I could also teach for barter.

knutty knitter said...

Thats pretty much where I'm at too. Teaching/making is my game anyhow so maybe I'll become a better asset than before :)

I've always thought my skills were rather out moded and my last career was trashed by cheap imports.

Maybe this time...

viv in nz

GGM said...

Post crash, At least I can fix or repair just about anything. Hopefully that will be worth something.

Ed_Gorey said...

Check out Peggy Noonan's op/ed in the WSJ

The first 1/3 is very good. It smacks you across the face with our dilemma in pyschological terms. She's reading TAE or something like it. It's refreshing to finally see this in a flagship publication. Public mood is turning.

Money quotes:
-------------
"The most sophisticated Americans, experienced in how the country works on the ground, can't figure a way out......This is historic. This is something new in modern political history, and I'm not sure we're fully noticing it. Americans are starting to think the problems we are facing cannot be solved.

Nelson said...

Brilliant, absolutely brilliant interview, and clearly one for the Must-Read column of primers.

I've watched what a really poor population does when competing for jobs, and it's tragic. The things I've witnessed in China over the past several years are heartbreaking.

The young mothers know that their children are being slowly poisoned, but they can't move away from the factories or they'll die in the first Winter.

The welders know that they're going blind from working without protective gear, but they need to eat, and to feed their one child each.

They all face the same choice: Take it or leave it.

For those of us who still have the means and courage to plan for the worst, it means setting yourself up to be the one buying the labor, not selling it.

It's cold, but that's survival.

Henry said...

From a different perspective, I'm over here in SE Asia working in a factory. We have a huge increase over the last 3 months of orders for our product (electronic components). The graph of the last year is a solid v shape with the rise faster than the fall.

I'm also very concerned about the future direction of the western unserviceable debt, but the fact we can not hire enough workers to cover our orders makes this a strange contrast to what is happening in USA.

gylangirl said...

I would have liked to have seen Montana.

team10tim said...

getyourselfconnected,

You forget who runs the show. If the government were in charge of it's self then it might print to the bond market's dismay. But the money runs the government so it won't happen until after the bond market revolts.

We don't have a representative democracy these days, we have an oligarchy of wealth masquerading as one. Plan accordingly.

Kimberly said...

@ Henry,

China's credit bubble is about to pop. State banks have been lending money like it's going out of style. But those electrical components are not being built due to demand pull. They are being built due to lending push. Sadly, they are destined for a warehouse, or a device that's headed for a warehouse - and eventually that will put an end to the credit bubble. True demand is contracting worldwide. Why has China built its own time bomb after witnessing the US disaster? Because the alternative involves hoards of angry people like the ones described by Nelson - people with hungry and sick children and nothing left to lose.

Slumlord said...

Thank you for posting the interview. I plan to forward it to everyone who I think might listen.

Also, thank you for posting the picture of the Seattle Hooverville circa 1933. I didn't see a caption, but I know my hometown when I see it!

Jean said...

Stoneleigh,

First, thanks so much for sharing the photo of yourself and colleague.

Second, I think it important for us all to reflect on productive skills that we have that are our "diffentiators" and could be enjoyed by others in a society not dominated by corporate providers. Now is perhaps a good time to hone any skills to the utmost, as well as to store up on the necessary materials/tools.

Stoneleigh said...

Jean,

Actually, that photo is of Euan Mearns (who wrote the interview questions) and Rembrandt Koppelaar, both colleagues from my days at The Oil Drum. Euan and I are readily distinguishable as I am female ;)

I was the photographer.

snuffy said...

I thought some folks got their wires crossed Stoneleigh[smile]

You scare me sometimes with the quiet,rational explanations of why we are facing financial Armageddon,as well as a return to some form of neo-feudalism...I am assuming you use the historical roman model of centralization of collection of resources to the centers of power..."taxing any who CAN pay..."

I am hoping we get to the part where the fedgov has trouble responding to a phone call..from pure energy starvation...soon.The local state and county are a lot closer and a lot more hands on than the feds...

But a bleak Christmas,and a hellava new years is where we are headed.


Hug your friends,talk of better days we will have...to help face the hell of our daily live...this will be sooo necessary sooo soon...


later..sleep calls.

snuffy

APC said...

"...and others will barter skills. Personally I can imagine being a seamstress, probably for barter."

How do you barter with the banker, from whom we have borrowed 50 thousand euros in the past year and a half?

I suppose the good news is that I have a neighbour that just managed to sell his home. Asking 125, he got 118k euros. Mind, if I had to do that, we, my wife 2 sons and I, would be homeless.

With only 430 euros of payments per month, at the time we thought it was a good idea to redo the barn. With 2 houses on a property that was priced at about 300k 2 years ago, we fear losing the whole fucking thing for a 50k debt (70 with interest...). What to do, aside from lose sleep...

MikeB said...

I've always been pessimistic, but, jesus, reading this interview is like a hit of doomer crack.

That's a compliment, btw.

John Hemingway said...

@ MikeB, love that line "like a hit of doomer crack":-) LOL.

@Stoneleigh, that was a great interview and while I agree that it might take too long for you to get your book published for it to do any good, I still think you should try. I could refer you to my agent if you need one. I definitely think that there is a market for what you have to say and you have the expertise to write about the coming collapse and what people can do to help themselves and their communities.
Publishing as an industry is not in the best of shape, to put it euphemistically, but books are still being sold on commission, although commissions are nowhere near as high as they were before the stock market crash.
Un abrazo,
John

Dan W said...

@ Stoneleigh...

I concur with your position. I think that the hyper-inflationist camp under-estimates the sheer volume and power of DEBT---The END of the money-as-credit system of finance that has molded our global economy for centuries is at hand. No amount of desperation or coercion or Guttenbergian monetary policy can sustain a essentially moribund system of CREDIT.

As such, I believe (In the USA anyway) that states, or even simply collections of towns and municipalities, need to look seriously at the possibility of political SECESSION when it comes to a thoughtful examination of what the future may hold.

M said...

In a life defined and delimited by one impractical career choice after another, I now learn that my time on earth may very well coincide with the Mother of All Financial Collapses. Typical, but looking on the bright side, it’ll just make the big "let-go” all that much easier at the end of the day.

There must be something wrong with me. Despite Stoneleigh’s fantastically sobering presentation (I shudder to think prescient), and a future that looks as bleak as an industrial evening London fog, I find myself left with this thought at the end of the lead post: Why isn’t Stoneleigh sitting on some chilly Rocky Mountain National Park seat smiling back at her audience?

Ahimsa said...

Stoneleigh,

Great interview! Thank you for sharing your profound analysis.

california womanl said...

Stoneleigh

This looks like a peek into the future.

No one, and I mean absolutely no one in my circle of friends and acquaintances has a clue.
Homes here, which is near San Francisco, have had a selling spurt, restaurants are thriving, shopping centers are still being built. Foreclosures are increasing but for the most part, everyone seems hopeful.

Common sense tells me that something is very wrong.I am 60 years old and have never experienced such weird economic cycles.
I come to this blog daily because I need confirmation that my innate forebodings are justified. Very eerie . I feel as if I live in an alternate reality and I am glad that I am not alone.

Thank you Ilargi and Stoneleigh, from the bottom of my heart for your honesty, integrity,and prophesy.
May you both get showered with tons of blessing

gylangirl said...

And now for something completely different:

http://www.earthtimes.org/articles/show/global-consumer-confidence-rebounds-nielsen,1017797.shtml

LOL

gylangirl said...

Stoneleigh: "Personally I can imagine being a seamstress, probably for barter. My daughter and I can spin, weave, knit, sew, crochet, design and make clothes by hand etc."

How can your deflation scenario not end in a die off; resulting in an over-supply of unused clothing for the remaining population; reducing demand for clothmaking skills?

el gallinazo said...

Ilargi,

Looks like you called the one day wonder yesterday. At least it gave the banksters an evening to pop the best bubbly and lease their $1000 a night hookers before reality set in again.

Stoneleigh said...

This post is running simultaneously at The Oil Drum: Europe, and should be appearing on the front page at TOD later today.

rumor said...

Gylangirl,

I'll take a crack at this one. In a deflationary environment where shipping suffers due to lack of credit and underlying lack of trust, global supplies may have little relation to supply availability in local areas, particularly for basic necessities that can be provided more locally at low-technology and low-labour cost (the latter due to deflation, of course). In particular, replacement of local supply from its earlier, distant sources may be impossible, and repair skills for basic necessities, like clothing and some machinery, may be a very valuable skill.

Cassandra said...

Ilargi + Stoneleigh, re:

"Cassandra, Memphis, and basically everyone else,

Assuming that you have years left to prepare for pretty much anything that involves a major change from where and what you are now, is really not a smart proposition. You don't. And when you presume you do, you will not do what does need doing."

We're doing what we can, I appreciate the spurs. Thank you.

To use the recommend parlance when discussing terminal illness with a doctor, who doesn't want to commit to an ETD...

I'm hoping we get till early summer 2010 with an international trade system sufficiently intact to allow haulage, oil deliveries and goods purchases using the banking system.

Is it reasonable to think like this?


Stoneleigh, pellucid words as ever, thank you.

Re timing of particular events -

Do you envisage cash being the only 'lubricant' in the economic engine *after* a bond market dislocation - or do you think this will happen before then?

I.e. does the machine snarl up in phases, with pockets of liquidity, or in one monstrous contagious sticky-toffee-pockets/let's-all-check-down-the-back-of the-sofa-cos-that's-all-that's-left
moment?

We have the option of heading out earlier if the circumstances warrant it.

Thanks. Gutted you were the photographer, not the subject. The Scarlet Pimpernel has nothing on you ;)

Ahimsa said...

A thought-provoking "Interview with Derrick Jensen on Science and Technology."

"Against Prometheus" by Frank Joseph Smecker

http://www.counterpunch.org/smecker10282009.html

Dan W. said...

Love the Seattle picture at the end...can you make it a link to a larger file? Would make a nice desktop...

Ilargi said...

El G.,

"Ilargi,

Looks like you called the one day wonder yesterday."


As you will remember, I talked about that phenomenon a lot last year: every subsequent bit of news, and every bail-out, comes equipped with less hangtime.

I was leafing through the BEA report yesterday, income numbers, taxes, government spending, and I figured the smart money would leave in a hurry.

Absent new dog and pony tricks early next week, today may come to look like a romance novel.

European markets are down as we speak, but there's a palpable sense that they just can't quite believe yet that it's time to shut the bar and put the big lights back on.

.

el gallinazo said...

Great interview Stoneleigh. Thank you.

@Dan W

I had the same thought. If Americans were anything but idol watching zombies, they would start to form county militias to keep the state and federales (bankster minions) off the property and issue a county wide script to oil the wheels of internal commerce.

rumor said...

Holy crap, I think the last time I saw a straight vertical drop in the Dow was... around this time last year.

Greenpa said...

Stoneleigh (and Ilargi of course) in case I haven't recommended it yet, I think you would not only enjoy but benefit from reading Philip Regal's "Anatomy of Judgment". It's become a cult classic for the secular humanist movement, to his surprise. He is also a huge polymath- PhD in neural physiology; cover of "Science" with theoretical article on the evolution of birds and the origin of angiosperms, major authority on bonobos...

I won't really try to describe the book; just get it, and read it. Basically a synthesis of history, science, religion, and other stuff.

One of the pre publication reviewers (this is not public) wrote to the publishers "I hate books like this. But this one has to be published."

Not that you need to learn stuff- it's that his viewpoint might tip a new insight off the edge for you, from your perspective.

(the rest of you guys are welcome to read it too, I guess.) :-)

Cheap on Amazon now- like $5. Be careful you don't buy the wrong book; there's another with the identical title from 1960; different authors, of course.

el gallinazo said...

Something big just happened around 11:30 eastern to cause Wall Street and Europe insiders to poop in its diapers. Anyone know what?

Mike said...

Spectacular interview! I printed it out, and will be saving this one and dissecting it with my wife. Thanks to Ilargi and Stoneliegh for another brilliant column.

You guys are incredible.

MikeB said...

Something big just happened around 11:30 eastern to cause Wall Street and Europe insiders to poop in its diapers. Anyone know what?

They just read today's TAE post.

I'm sooooo glad I've been preparing for the WORSE for the last five years.

Ilargi said...

Dan W,

I looked around for you.


This one is 2800x2147 pixels (1.6 MB). That provides a ton of details.

Caption: Seattle’s Hooverville squatter settlements, 1930’s. Photo courtesy Washington State Digital Archives.

.

Ilargi said...

"Something big just happened around 11:30 eastern...."

Madoff's accountant pled guilty?

Ilargi said...

Cassandra,

"We have the option of heading out earlier if the circumstances warrant it. "

They do so now.

You're taking way more risk than you realize by procrastinating.

VK said...

This looks like Wave 3 down! Dan Eric's elliot wave had this to say yesterday,

So the wave options are:

1) Minuette (iv) is peaking and market will reverse tomorrow and head back down. Monday will likely make new lows?

2) Up day tomorrow (or some consolidation) after some higher highs as part of a Minute wave [ii] bounce to form a H&S peak sometime next week.

3) This was a reversal that will bring about new highs in some of the indexes, but not all. That would leave many intra-market negative divergences.

4) They drive the market up to 1121 or 1158 on some desperation move to constantly stay above the rising trendline and then the mother of all black swans explodes the market under its own dead weight.

(hehe I just playing with that last one)


I am leaning heavily toward option 2 if option 1 proves a failure. Then Option 3 makes sense.


It's option 1, and evil speculator has a chart up suggesting that mid november marks the start of the descent into the abyss...

thethirdcoast said...

Tyler Durden at Zero Hedge has spent the morning reporting on trading volumes that are straining the NYSE servers, here's one of the links:

NYSE Update: Getting Scary Out there

Looking at the current DJI trajectory I'd guess it might tap the circuit breakers unless the PPT/Fed/Treasury steps in and starts buying everything in sight.

rumor said...

I long ago grew weary of this illusion. Let it be option 1.

(Yet, I am prepared to have my wishes thwarted.)

VK said...

Holy sh*t

VIX just shot up 17%!!!

NYSE servers can't handle sell order volumes, had to move to backup exchanges.

DOW off 200ish points.

bluebird said...

The so-called Halloween Indicator, which says that we should be invested in the stock market for just six months each year, from Halloween until May Day. During the other six months we are to be in cash -- which is why this Indicator also goes by the name "Sell in May and Go Away."

The Halloween Factor

@Stoneleigh - Thank you, great interview.

switters said...

My problem is that after 3 years of pondering, debating and agonising I still can't think of what to do for income (even modest income) post crash. Have you guys thought about this? I'm guessing that blogging for income will not work post crash.

I've chosen to become an acupuncturist and herbalist. The modern, industrialized healthcare (actually disease-care is more accurate) system will become increasingly inaccessible to the average person. It is one of the first things that will break down completely during a sustained deflationary period.

There's a new model of delivering acupuncture called Community Acupuncture. Treatments are given in a large room with patients lying in recliners. Only points below the elbows and knees are used, which means patients don't need to disrobe. Because of the group setting, practitioners can treat up to 6 patients in an hour, which in turn lowers the cost to $15-$35 per treatment. This makes effective health care available to a significant percentage of the population.

When thinking of what vocation I would choose, I basically thought of occupations that existed in Medieval villages and went from there. People always need food, health care, shelter, clothing and some form of transportation. Those are all good places to start.

Almost no shoes are manufactured in the U.S. anymore. Why not become a cobbler? :)

switters said...

Stoneleigh,

I agree with nearly everything you've said. One thing I'm not as sure about is the performance of gold during the coming period. Mish argues that gold is not a hedge against inflation but against uncertainty. Seems to me that we're headed for uncertainty in a very big way. So why wouldn't gold appreciate along with the dollar as it did during the Depression?

Cassandra said...

Switters
That I think, makes three acupuncturists on TAE. Get your stocks of pins in :)

Ilargi - are you saying we're now at Defcon - 1? Yikes. We'll get a shift on.

Shamba said...

Thanks for the outstanding interview! This is a nice composition of what you think is to come that I can send or point out to others to read.

I have a couple of friends who are willing to listen or read about this message but it would be easier for them to take it in in a better way than me trying to explain it to them over a hurried lunch or coffee.

For post peak occupations: wouldn't being a decent cook-- know ing how to do the very basic stuff, bread from scratch kind of stuff--be a good idea? To do it yourself or to teach others?

Someone has to teach all those restaurant dwellers what to do with those vegetable when you pick them or pull them out of the earth?


Peace, shamba

switters said...

That I think, makes three acupuncturists on TAE. Get your stocks of pins in :)

Yeah, I've thought about that. But keep in mind that acupuncture was practiced successfully for thousands of years before the invention of stainless steel needles and huge ships transporting them from China.

Even in the West, when acupuncture was first introduced disposable needles weren't used. Re-usable needles were sterilized in an autoclave between uses. Sure, that doesn't happen anymore (at least in CA), but I have a feeling that might come back into practice when the ships stop coming from China.

Now I've got to figure out how to make a solar autoclave! :)

And of course herbs on their own can be very effective.

cjb said...

Stoneleigh

You mentioned that one would have to hold on to gold for a very long time. How long do you think that might be?

Thank you, Greg

I. M. Nobody said...

Regarding post-crash skills value, I think Stoneleigh has been overly modest. Since at least ancient Greece, there has been a market for sooth saying skills. I think most here believe she is one of the very best of the current crop. All she has to do is conjure up a reputation as the Oracle of (wherever she lives) and the local part of the world may beat a path to her door.

switters said...

In addition to acupuncture, I've also been teaching myself how to make good beer!

However, it's not so easy when you have to grow your own grain. It's amazing how much even homebrewing is dependent upon the industrial system.

Of course mead and other simpler alcohol ferments can be made quite easily with local ingredients.

Alcohol will always be in demand and easy to barter with. Dmitri Orlov likes to tell the story where he went back to Russia during the collapse and was able to barter his way around with several bottles of vodka.

Coy Ote said...

"I cannot imagine any condition which would cause a ship to founder. I cannot conceive of any vital disaster happening to this vessel. Modern ship building has gone beyond that."

-Captain Smith, Commander of Titanic

zander said...

4 things I never fail to do each day
Breath.
Eat/Drink.
Sleep.
Read TAE.(+comments)

I feel like I've missed out on my pep talk for the day if I don't have time to read TAE in the morning before going out to do whats left of my job.
Brilliant Stoneleigh, absolutely brilliant, worthy of another donation.
the word indispensable springs to mind

Z.

Coy Ote said...

Don't those propagandists realize how asinine and irrelevant press releases like this infuriates the people?

WASHINGTON – About 650,000 jobs have been saved or created under President Barack Obama's economic stimulus plan, the White House said Friday, saying the president's goal of 3.5 million jobs by the end of next year is on track.

Hey Dan W! Lookey here! We're right on track!!

el gallinazo said...

I.M. Nobody

How about "The Oracle of Ontario." Nice ring to it. Wonder how Stoneleigh presents in white robes? :-)

However, I still favor the very Roman Catholic "Our Lady of the Irrefutable Conception."

rumor said...

I don't think oracles that are all bad news (ie. the truth, at this point in time) tend to get all *that* popular.

But in any case, I've always been very fond of El G's nickname for Stoneleigh.

el gallinazo said...

The 13 week T-Bill is down to 0.05%. An alternative to the DOW dropping 4% in a day to select the lucky winner of the all polyester lounge suite could be the 13 week T-Bill going negative. Now that's as serious a panic as a loaded Depends.

TAE Summary said...

* What will happen to the EU? It won't survive in it's present form; Bubble will take its toll on UK, Ireland and Spain

* Expansion engenders trust and commonality; Contraction fosters mistrust and isolation; The Roman Empire demonstrated this

* Desperate people will sacrifice their health for food; Once the US masses are weak from hunger they will figure out who is to blame and right all wrongs; Whose blood will flow in the streets? Anyone's who can't afford Coumarin

* Candidates for national offices are all chosen by TPTB; In the US democracy doesn't exist outside of the boxing ring; Politicians are like interchangeable parts; Never vote for a candidate who might win; Will all those who voted for the Lobotomy Party please fess up?

* The Army spread the flu in 1918 through personnel shuffling; Personnel shuffling circumvents bonding with locals; Health emergencies are a useful way to stop peacable assembly

* Freedom depends on credit and energy and will decrease; We are approaching the era of Big Men; I am localized, thou are territorial and he is feudal

* Giving each citizen $1 million would solve all our problems; Your money and your life will be digitized for your convenience

* Group accupuncture is a good future job; Also teaching others how to cook vegetables (Ahimsa, Dr. J - Don't even think about it); Stoneleigh has knit-rich quick scheme

* Fair value and the mind of a woman are unknowable; The best and brightest don't know how to fix the economy; They are out at the stables asking the King's horses for advice; The horses suggest pooping their diapers

* Aussies dependent on global resources; SE Asia electronics industry sees up tick in orders to fill warehouses; China's credit bubble about to pop

* States should consider seccession; HiDef Hoovervilles makes a great screensaver; The economy is like a wet t-shirt contest inside a circle j*rk

* Ilargi accused of wielding indirect imperatives; Tsk, tsk

* People are repelled by pessimism; Doomers have clueless friends; Rational explanations of collapse are far scarier than wild eyed, half assed ones; Just say no to doomer crack

* EU indices broke Tuesday's downward trend; Ilargi called yesterday's head fake correctly; Descent into scheduled for the Ides of November; TPTB won't be able to maintain their standard of living as the machine stops; Get ready for the parade of scapegoats

* Word of the day: pellucid – adjective
1. allowing the maximum passage of light, as glass; translucent.
2. clear or limpid: pellucid waters.
3. clear in meaning, expression, or style: a pellucid way of writing.

* TAEers were hoping for a picture of Stoneleigh

They seek her here, they seek her there
Those doomers seek her everywhere
Is she in heaven or is she in hades
That damned, elusive Stonelady

timgephardt said...
This comment has been removed by the author.
lord.bacon said...

@ El g and other gamblers

If the markets begin to cascade downard, the risk of a credit market freeze obviously grows. The solvency of online brokers could be put in jeopardy. Authorities could also step-in to ban shorting. At what point do you plan to bail?

kdlatta2 said...

el gallinazzo Said...

How about "The Oracle of Ontario." Nice ring to it. Wonder how Stoneleigh presents in white robes? :-)

Well, when I mentioned that I had pressed ThisBe1900 into service as the centerpiece of my desktop wallpaper, she informed us all that the lovely lady bore an eerie resemblance to her daughter. If we were to assume a fairly normal family resemblance, then I'd guess she would present quite well in white robes. .)

As to the Roman Catholic alternative, it could be a problem if she doesn't happen to be Catholic. Although, with Ratzi the Nazi trying to erect the big tent (why are they always trying to seize more territory?) maybe it wouldn't matter much. But isn't there a certain ambivalence in the meaning of Irrefutable Conception? Perhaps, Our Lady of the Immaculate Prognostication might do?

lord.bacon said...

@ TAE Summary

Hilarious! I just watched Anthony Edwards portray the Scarlet Pimpernel a few nights ago.

KJ said...

gylangirl said...
I would have liked to have seen Montana.

Was that Das Boot?

Farmerod said...

The Brain of Bleakonomics.

.

Paleocon said...

gylangirl said...
I would have liked to have seen Montana.

"And I will marry a round American woman and raise rabbits, and she will cook them "


Hunt for Red October

el gallinazo said...

lord.bacon

All the dangers you mention I am vividly aware, as well as a few you didn't mention, such as inverse ETF's have a small, mathematical hole in the bottom of their respective buckets, and over time value leaks out. I would note that when Señor Coxucker banned the so-called financial stocks last fall, the inverse ETF's fell like a stone in the panic, but into the 30 day ban, they picked up a lot of steam. It appeared to me that even when they were banned from altering and renewing positions, they had a lot more "staying power" than I ever expected. Sort of like Bob Dole and an erectile dysfunction ad.

To paraphrase my fellow buzzard, J.P. Morgan, the smart money makes its profit in the middle 60%, so I don't expect to ride a position down to Hades. This is also the last time I ever intend to be involved in the equities market. Just one last one for the Gipper and Bonzo.

But to answer your question, I will have to defer to the Supreme Court and pornography - I'll know it when I see it.

KJ said...

Ah yes - Hunt for Red October. I knew there was a submarine :)

lord.bacon said...

@ El g

re "I'll know it when I see it."

Isn't this a dangerous strategy? As soon as you start making big bucks, the greed emotion will take control. Won't your mind tend to focus on all those unearned winnings and discount the danger? How will you maintain control of your emotions during this downward trending roller coaster?

Farmerod said...

I bet the net financial worth in Haiti's sovereign territory will double when this sucker steams in.

.

VK said...

@ Farmerod

The Brain of Bleakonomics.

A certain vulture I know would much prefer Beakonomics.

Ed_Gorey said...

lord.bacon

I think I'll cash out of SH after a 10% gain (I'm still 1.6% underwater). That seems reasonably safe to me. I don't normally gamble. I only placed this bet because it seemed like the potential losses (caused by a significant market upswing) were constrained by reality. Last week I felt foolish. Now I feel brilliant. I agree that the emotional roller coaster does indeed play havoc with cool and rationale decision making.

Farmerod said...

Speaking of bets, who's in for a friendly game of Guess the Number of Failed Banks This Friday?

I'll take 10.

.

Farmerod said...

I don't normally gamble.

It isn't gambling when you know the outcome ;-)

.

FB said...

Hello,

Jean said:
First, thanks so much for sharing the photo of yourself and colleague.

Now that made me laugh out loud.
On seeing the photo, my immediate thought was "Ach, she slipped away".


@ Stoneleigh
Excellent. That can serve as a second-level primer. What struck me was that I use some of the same graphs in my presentation here. One small point that you could mention to reinforce the impact of the second graph (Total debt as % of GDP) is that the peak circled "Great Depression" is after 1930, i.e. it is due to a severe drop in GDP, not to a rise in debt. The 1929 level was about 150, much lower than the 260 shown in the circle. That makes the current level proportionately much worse.
By the way, there is an updated version of that curve at… TAE, 8 August 2009.


@ M
The career choices may be impractical, but you have other things to show us.
About the empty seat and the smile, I agree.


@ Greenpa
Amazon says the book by Ph. Regal is not available.


@ TAE Summary
About pellucid, I had to look it up too.


Ciao,
FB

el gallinazo said...

lord. bacon asks

"How will you maintain control of your emotions during this downward trending roller coaster?"

Self-flagellation. I keep all the equipment next to my P90X DVD's including a styptic pencil the size of a Havana.

VK said...

I've been posting quite a bit on the TOD thread of this article today, thought I'd share this here as well, in response to this by Sam Foucher

Great analysis but I'm still not convinced, as others have pointed out above we are maybe giving debt too much importance. The US may default but so what? this analysis is US (or at least OECD) centric, as Memmel would probably say, the big elephant in the room is the emergence of the Chinese consumer. There is now a clear decoupling between the OECD and the non-OECD, the world engine of growth is not in the Western world but in Asia.

Eeeeek!!!

Peak credit will have the same effects as peak oil.

I repeat Peak credit will have the same effects as peak oil.

The entire global economy is dependent on the extension of credit. Just in time systems, global trade and commerce all depend on a functioning credit system. As the system gives way, our way of life will alter entirely. Think global shortages, farmers not getting enough credit to grow crops, no investments in new and existing oil projects due to falling demand and no investment in solar, wind, geo etc as purchasing power dramatically declines. Credit is required for virtually every facet of life in the West, turning it off is akin to hitting the emergency stop button on the economic train.

The notion that China can exist outside of the US sphere of influence is a no go, in his book on The collapse of Complex societies, Joseph Tainter clearly states that if we are to face collapse today it would be global in nature.

About 35-40% of China's economy is dependent on exports and no matter how they fudge their statistics, their economy is hurting real bad.

-Real unemployment might be close to 40-50 million as in China someone who 'quits' voluntarily after a slight nudge and a better severance package is NOT counted as unemployed.
- 6 Million graduates annually need a job, this will NOT be possible as Japan, Europe, US etc all succumb to the credit crunch.
- China considers shipments of cars from the factory to the dealerships as sales. So while car 'sales' have increased sharply, the use of fuel has gone up only ever so slightly.
- In the first six months of the year electricity use declined YOY, this is not consistent with the rosy 8%+ economic growth projections.
- In Shanghai average income is 500 dollars a month, yet most construction is taking place at the high end of the market which costs 100,000 per unit or something around there.

Hugh Hendry takes a short look at the gigantic empty buildings in China

http://www.youtube.com/watch?v=ektMQGbW3wk

And the Mall of China which is the largest mall in the world is virtually empty, it has 12 shops. YES 12 shops!!!!

http://bit.ly/3IwH9O

But the New South China Mall, which opened in 2005, stands empty with 99 per cent of its shops having remained unleased and attractions including a 553-metre indoor and outdoor roller coaster standing idle.

It was designed to attract an average of more than 70,000 visitors a day to the city of Dongguan, but has less than a dozen shops in its 9.6million sq ft of floor space.

VK said...

And part two of my response as all of it didn't fit....

China has blown a huge credit bubble of it's own in the past 10 months, loaning out trillions of yuan! Something close to 1.4 trillion dollars.

This has had the effect of propping up asset prices across the board and fuelling speculation in commodities.

Andy Xie writes, http://www.bloomberg.com/apps/news?pid=20601080&sid=aWmgMyTQJHgU

“People are looking at the bubbles as a way to gain economic growth in the short term,” Xie said in a Bloomberg Television interview in Hong Kong today. “They are not sure of long-term damages that they may suffer.”

Property sales and values have surged as the government implemented a $585 billion stimulus package and banks extended a record $1.27 trillion of credit. China’s economy expanded 8.9 percent in the third quarter from a year earlier, the statistics bureau said today, while home prices rose at the quickest pace in a year in September, government reports showed last week.

....

“Land prices have become so elevated,” said Xie, who correctly predicted in April 2007 that China’s equities would tumble. “The economy has become so dependent on property and the prices are so high and it carries a lot of risk for the country going forward.”


China is an economic bubble waiting to burst. Extreme malinvestment across the board and the sharp declines in wages and incomes across the world are going to hit it hard, Asia will be locked with the US and Europe in a deflationary death spiral.

el gallinazo said...

Stoneleigh

What do you think about the economic future of Germany in relationship to the rest of the so-called developed world? It's banks are as screwed up as any, but the citizens are not quite as stupid as the typical American, they still make good stuff, and there was no housing bubble.

bluebird said...

Famerod @ 4:50 - World's largest party boat. wow.

Greenpa said...

FB- it may be country specific; here's the list for the US:

http://tinyurl.com/ya9gjyc

A couple of book dealers are apparently in despair of selling them- and will give them away for shipping-

I'm thinking of buying some of those myself!

Ed_Gorey said...

My bets are with Russia as a world leader in the future.

They've got the energy supplies.
They've got the military infrastructure. They've got a population that is accustomed to deprivation and authoritarian rule. They'll have a sphere of influence that's more powerful than todays. Germany will either toe Putin's line, or they'll freeze in the Winter. The same holds true for Eastern Europe.

VK said...

Hi El G

Stoneleigh wrote this on the TOD thread today with regards to Germany,

For that reason, Germany's relative power within Europe should increase, even though their export markets are likely to collapse with demand for a period of time. The housing bubble nations will be significantly disadvantaged, particularly the UK and Ireland which are at the wrong end of a long energy pipeline from Russia. The pressure in that pipeline is already essentially zero when it's cold on the continent.

Neither of them will have the means to earn the income to pay for energy (or other) imports anyway. The implosion of the Irish bubble (and with it national income) will leave the Irish unable to heat all the new large homes they've built in recent years. The UK's income results largely from North Sea oil and gas (rapidly depleting) and the City of London (where huge fees are generated from money chasing its own tail). Without those sources of income the UK will be an over-populated basketcase, and a powder keg as well. My concern is that nascent fascism, especially when Nick Griffin of the BNP makes mainstream TV appearances. This is precisely why I no longer live there.

el gallinazo said...

Well, my thoughts about Germany right now really circle around the question of putting some of my T-Bills into short term German Treasuries some time in the upcoming dollar bounce. Since I have no intention of returning to reside in the US, I cannot follow Stoneleigh's prime directive of keeping my savings in the currency of my country of residence. It looks like I just might settle down in Costa Rica though it's a bit more expensive than I like. But it has a western European type social net and it's a drag being well fed among the destitute. But I am not about to put my savings in Colones - not real fond of the name either which is Columbus in Spanish. Most of the CR gene pool is European which might explain the name.

Besides its screwed up banks, I also see Germany's biggest problem as energy dependence on Russia, but the German's have done so much more than the US in the field of energy conservation.

Anyway, what is the feeling about splitting my risk by moving a lot of my US T-Bills savings to short term German sovereigns when the dollar firms?

lord.bacon

Another strategy I used last year to good effect when I made almost 100% return on my S&P ETF's (mainly but not always short), was to cash out my investment money when I was unsure of future trends, put it in T-Bills, and just let the profits ride in ETF's.

el gallinazo said...

P.S.

And one also has the German national terror of hyper-inflation from its Weimar days.

Stoneleigh said...

Switters,

One thing I'm not as sure about is the performance of gold during the coming period. Mish argues that gold is not a hedge against inflation but against uncertainty. Seems to me that we're headed for uncertainty in a very big way. So why wouldn't gold appreciate along with the dollar as it did during the Depression?

Gold will appreciate eventually, although it will fall initially as people are forced to sell in order to raise cash. If you can afford to hang on to it for a long time and you've already done everything else on the lifeboat list, then go for it, even though you'll see a paper loss before the appreciation begins. Gold will hold its value over the long term as it has for thousands of years. You just don't want to be in a position where you're forced to sell into a temporarily declining market (in nominal value at least).

Stoneleigh said...

Cassandra and Gylangirl,

I am also thinking in medical terms. I have a reasonable degree of medical knowledge, having been a biologist and medical researcher (albeit a long time ago). I would need to spend some time gathering more clinical knowledge, but knowledge gathering is what I do best :)

My eldest is headed for a career in primary healthcare as well, so we could work together if seamstressing turns out not to be viable (although I think clothing repairs will always be needed).

Ed_Gorey said...

@ El G

What is your immigration status in Costa Rica (tourist, legal resident, citizen)? How do you plan to deal with immigration issues? I imagine that as the global economic crisis intensifies, the freedom to move internationally could decrease substantially. Perhaps exceptions would be made in third world countries if you're a wealthy American who is bringing his foreign wealth into the local economy. However, as we slide into the abyss, I'd expect the US to place severe restrictions upon international monetary transfers.

Stoneleigh said...

Switters,

Alcohol will always be in demand and easy to barter with. Dmitri Orlov likes to tell the story where he went back to Russia during the collapse and was able to barter his way around with several bottles of vodka.

Alcohol is great for sterilizing water supplies. In England in Shakespeare's time everyone drank ale, even babies, because surface water supplies were so heavily contaminated. Even a small amount of alcohol made drinking the water much less likely to kill you. The babies drank the weakest pressings of course.

VK said...

Guffaaww!!

I can't believe someone wrote in the TOD thread that stoneleigh doesn't understand the difference between inflation and deflation.

I think I need a stiff drink!! :S (That's my befuddled look)

Stoneleigh said...

CJB/Greg,

You mentioned that one would have to hold on to gold for a very long time. How long do you think that might be?

Perhaps 10 years. Even then you would need to be very careful trying to convert it for what you need. Concentrated wealth is a dangerous thing to own - a double edged sword if ever there was one.

Stoneleigh said...

El G,

What do you think about the economic future of Germany in relationship to the rest of the so-called developed world? It's banks are as screwed up as any, but the citizens are not quite as stupid as the typical American, they still make good stuff, and there was no housing bubble.

I think Germany's relative power in Europe will increase, even though their export markets will tank. France should do relatively well too, while the European periphery is likely to suffer enormously. The UK and Ireland are especially vulnerable, and the UK is headed for fascism IMO.

Ed_Gorey said...

Future Careers

I'd expect there to be work in demolition. Lots of banks/governments are going to try to recoup a tiny fraction of their "investments" by dismantling their empty houses and condos. The wood will be a good source of fuel to prevent people from freezing to death in the winter.

Coal mining will also come back in a major way. Enviornmental regulations/laws will be an early casualty of economic collapse. We'll pollute our rives, bury toxic waste near residential slums, and blow the tops off of mountains in West Virginia for years to come.

Once living standards in the US fall far enough, and environmental laws are completely discarded, the US may actually start manufacturing essential goods domestically again.

I'm skeptical of the health care industry as a future career. Considering that national governments will soon be forced to shed their healthcare liabilities, we'll have enormous amounts of healthcare overcapacity. Like housing, more and more people were drawn into healthcare based the assumption that government healthcare expenditures could be extrapolated into the future. Most people are simply going to die in their bedrooms at home - no Lipitor, no emergency room visit, and no hospital stay.

The military will open its doors nice and wide. Who else is going to guard Saudi Arabia's oil fields and repress dissent domestically?

Stoneleigh said...

Ed Gorey,

My bets are with Russia as a world leader in the future.

They've got the energy supplies.
They've got the military infrastructure. They've got a population that is accustomed to deprivation and authoritarian rule. They'll have a sphere of influence that's more powerful than todays. Germany will either toe Putin's line, or they'll freeze in the Winter. The same holds true for Eastern Europe.


I'm inclined to agree. Russia will certainly enjoy yanking western Europe's chain, as they always did to eastern Europe. I wrote a book about this once.

Bukko_in_Australia said...

Did you know that "Pellucidar" refers to a Hollow Earth, not an Automatic one?

Nelson said...

For all you aspiring seamstresses out there, I'd point you to Player Piano, written by Kurt Vonnegut in the deliciously simple year 1952.

He foresaw mass unemployment in the US due to automation, and everyone was fed, but nobody had much else - least of all hope. Most worked in "Reconstruction and Reclamation," aka the Reeks and Wrecks, their version of the WPA.

They thought at first that they could become self-employed auto mechanics and seamstresses - until it appeared that there were dozens on every block, and not enough fixin' to do to keep 'em all occupied even in the best of times. And they were not the best of times.

el gallinazo said...

Ed_Gorey

I came in on a 90 day tourist visa. This can be renewed several times if you hang out on the Nicaragua or Panama side of the border for 72 hours and live. If you do it often enough, the immigration officials get irritated.

They have a visa status called pensionado or pensioner. All you need to get it is to not be a mass murderer and prove you are receiving a pension, preferably government, of over $1000/mo (recently raised from $600). The pension payment must be wired to a Tico bank and converted to Colones. This allows you to stay indefinitely but one is not permitted to be an employee. However, one is encouraged to set up one's own business and hopefully employ Ticos with it. I will probably just compete in the sloth races until the sky falls in. After three years, this can be converted to their equivalence of a "green card" where you can do anything but vote. I knew about this ahead of time and packed my full social security documentation with me which is over a grand a month.

switters said...

Ed,

There are plenty of different forms of healthcare besides the heavily industrialized, techno-obsessed version of medicine currently practiced. They will make a huge comeback when people have to start paying out of pocket for those hospital stays and Lipitor prescriptions.

Every tribe, village, town, culture, society at every point in history, no matter how large or small, has always had healthcare providers, whether they were witch doctors, shamans, midwives, herbalists, primary care doctors or cardiologists. That's not going to change.

I agree with you that the future of our current system is very bleak. I would not be optimistic about starting a career in primary care and working for an insurance company right about now.

Stoneleigh said...

Nelson,

They thought at first that they could become self-employed auto mechanics and seamstresses - until it appeared that there were dozens on every block, and not enough fixin' to do to keep 'em all occupied even in the best of times. And they were not the best of times.

Well, our family business is in power grids, and I have a reasonable amount of medical knowledge, so I should have some other choices, even though I'm not an engineer or a doctor. If push comes to shove, I will do what I have to do, just like everyone else.

switters said...

Well, our family business is in power grids, and I have a reasonable amount of medical knowledge, so I should have some other choices, even though I'm not an engineer or a doctor. If push comes to shove, I will do what I have to do, just like everyone else.

Yes, it's very difficult to plan for a future when we have no idea what it will look like. The best approach is to build resilience, and part of resilience is flexibility and the ability to adapt to changing circumstances.

One thing I'm almost certain of is that no matter how much I plan and prepare, whatever ends up happening will be different than what I imagined.

Dana said...

Thanks Stoneleigh, very interesting. You seem to suggest that psychology is the primary cause of our economic descent; eg, markets are based on optimism/pessimism. It would be appropriate to fold energy availability into the equation. The monetary price of energy is up, the energy return of petroleum is down, and the per capita access to energy peaked years ago. The latter two, the ones that really matter, are invisible to the human eye, and so the squeeze on fossil-fueled economies goes unnoticed. It is easier and more successful to be greedy when energy slaves are abundant and cheap.

Dana

ccpo said...

I am amazed that with all the people talking about the need to prepare, few, if any, are banding together.

A: "We're all gonna die!"
B: "You must prepare!"
C: "We really, really wanna!!"

A: "We're all gonna die!"
B: "Let's all prepare!"
C: "We really, really wanna!!"

A: "We're all gonna die!"
B: "Let's all prepare together?"
C: "We really, really err..... uh.."

A: "We're all gonna die!"
B: "Yes. Yes, you are."
C: "Us? What about you?!"

B: "Um... kinda ready. And, uh, no room at the inn."
C: "Oh. Damn."

A: "We're all gonna die!"
B: "Maybe."
C: "Yup."

Isn't it weird?

LynnHarding said...

'Player Piano' is a wonderful book! I was too young to appreciate it when it was published. It is good to hear that smart people are still reading it. By the way, has anyone read the new book, 'Daemon' by Daniel Suarez? Big big serving of Doomer Crack!

Chaos said...

@ El Gal,

I am really enjoying your posts on CR, but it's a double-edged sword...I'm envying you being there at this moment, because some time has to pass before I can pack up and go, leading to this feeling of being left behind (slightly panicking). I long ago decided that the US was a particularly bad place to be, in the coming attractions that await us. New Zealand was my second choice.

Ilargi said...

9 more U.S. banks fail; $2.5 billion hit for FDIC fund

Nine more U.S. banks, all owned by the same Illinois holding company, were closed Friday by regulators, and the Federal Deposit Insurance Corp. said U.S. Bank of Minneapolis would assume their deposits.

The closings brought the 2009 total to 115 in 2009 -- the first year since 1992 that more than 100 banks have gone under. The banks as of Sept. 30 had combined assets of $19.4 billion and deposits of $15.4 billion, the FDIC said. The deposit insurance fund will take an estimated $2.5 billion hit, the FDIC said.

All nine banks were subsidiaries of FBOP Corp., a holding company based in the Chicago suburb of Oak Park, Ill., according to the FDIC. Privately held FBOP, which originated as the parent company of First Bank of Oak Park, wasn't involved in Friday's closures, the FDIC said.

The FBOP subsidiaries that were closed Friday were identified as Bank USA, Phoenix; California National Bank, Los Angeles; San Diego National Bank, San Diego; Pacific National Bank, San Francisco; Park National Bank, Chicago; Community Bank of Lemont, Lemont, Ill.; North Houston Bank, Houston; Madisonville State Bank, Madisonville, Texas; and Citizens National Bank, Teague, Texas.



.

getyourselfconnected said...

Halloween Contest tonight! Rate your fim IQ!

Stock Picker said...

Nice pictures and charts. But that was one monster sized post. I guess you had to cover the interview.

Farmerod said...

Stock Picker,

Gotta ask. Which stocks are you picking these days?

.

Psittakos said...

Stoneleigh,

You mention oil in a few places in this interview, but I am not sure how important peak oil is to your analysis. I agree with most of what you say about debt deflation, but I get the impression that your discussion of oil is partly an artifact of the context of the interview.

I wonder if you see a strong connection between your analysis and the oil-centered analysis of The Oil Drum.

Submit your advice said...

Fucking brilliant edition today.



I should say that the only thing that surprises me about how right Stoneleigh is, is that I'm not surprised that she's right. My lack of surprise surprises me, and this troubles me, slightly. I mean, no one should be so right, it's not right.

--I reckon some will earn actual money and others will barter skills. Personally I can imagine being a seamstress

["I surely was a tailor" ?]

This'll sound odd, for now, but one of my skills is knowing how to be happy. Happiness is about to become a much more rare commodity, precious, even. No longer taken for granted. Ilargi will puke at the notion, but happiness will be a currency. Happiness will become a laser in the jungle. Gold.

(I continue, to my disgust, to become better and better off every day. This is going to become a serious problem. This week I saw big chunks of my local society collapse around me, good people losing jobs, and ways of life, and my accounts grew by thousands. But I cannot save all the good people I love.)

Verdandi said...

Stoneleigh & Ilargi,
thanks for publishing this interview. Even though I have been reading here for almost a year to have the cards layed on the table, as it were, is quite shocking.

Further to the discussion of useful skills see "200 Artisan Skills Required to make a Victorian Town Functional" on Transition Culture.


http://transitionculture.org/2009/01/22/the-200-artisan-skills-required-to-make-a-victorian-town-functional/

How many of these skills will stand the test of collapse and time is the question. Note that acupuncturist is not here!

I truly value the information and comment presented here and will donate as soon as I can.

thanks & cheers,
Verdandi

M said...

Verdandi,

Interesting post regarding skills and crafts. From the looks of some of the trades in question--bone carver--we may be in for a labor shortage.

http://apaintingcarver.blogspot.com/2009/10/old-trades-for-new-economy.html

Slumlord said...

Regular readers of TAE know that the US government is struggling to find buyers for treasuries. This is because China, Japan, Germany, and the oil exporters are all moving to diversify their reserve holdings out of treasuries because of currency risks. While this problem is not exactly new, I think I may have stumbled on a novel new approach that the government is taking to help shore up its finances. I will explain and would like to know what others, including Ilargi and Stoneleigh think.

I got a letter from the property manager for a rental condo that I own. The subject is next year’s association dues and budget. It says, in part, that the Federal Housing Authority (FHA) as of:

“November 2, 2009 they [the FHA] are changing their requirements of [Homeowner’s Association (HOA)] Reserve Funding levels from 10% to at least 60% funded…. [the] current Reserve Study [for my condo’s HOA] indicates that we are only 8% funded. This is not good news as this new requirement is going to make it very difficult for anyone to sell (or buy) their condominiums with FHA/VA financing.”

This means that currently HOAs will try to maintain a 10% reserve in their budget for emergencies. The change will force HOAs to increase their reverse by 6-fold (more in my case) if they want to the ability for people to buy and sell condos in that building, and therefore to maintain property values.

To remedy the situation, my HOA is adding a special assessment where the owners will pay an average of around $1,000 per year extra for five years in order to build up the reserves. My unit is one of 154 in the building, so this around $770,000 that needs to be added to the reserve account.

What brings this back to federal funding is how those reserves are held. My HOA requires that we hold the reserves in the safest possible investment, US treasuries. This means that the change in FHA requirements has compelled all 154 owners to each buy $5,000 in treasuries over the next five years through the HOA.

Most other HOAs also hold their money in treasuries. According to the 2007 American Housing Survey that the Census Bureau did, there are 8.4 million condominiums in the US. Assuming, on average, that each owner will now need to buy $1,000 in treasuries through their HOA, the government has just raised 8.4 billion per year for the next five years, for $42 billion in total. Another way of looking at this is that the FHA funding change just paid for a little over 5% of the $787 billion stimulus package.

How many other backdoor tricks is it going to take to fill the federal budget hole?

APC said...

"I am amazed that with all the people talking about the need to prepare, few, if any, are banding together."

I've found "banding together" to be a major challenge, seeing as how anyone I've talked to about this crisis still think I'm stark raving mad... I have, for all intents and purposes, been marginanlized in the small french town I live in.

FB said...

Hello,

@ El Gal
If you want to read about Germany, try this:
http://www.rgemonitor.com/euro-monitor/257897/the_french_rebound_continues_in_october_while_germany_moves_sideways

You will also learn a bit about another interesting country!

I have maintained for a while that the southern fringe of the north-western section of that peninsula jutting into the eastern Atlantic is the place to be.

About Germany, did you ever follow through with the DFA? If not, I would do it.

Here is what they offer.
http://www.deutsche-finanzagentur.de/fileadmin/Material_Deutsche_Finanzagentur/PDF/Brosch%C3%BCren/bundeswertpapiere_auf-einen-blick_farbig.pdf

That is the latest edition. As you will see, very short bills are not commonly offered, but you can pick up the most recent 5-year note free of commission and it is currently pretty cheap, though that may not last.

On a completely different subject, about that list of 200 artisan skills posted by Verdani above, I saw a familiar name in position number 4 in the comments. The topic of the comment did not surprise me either ;-)

Ciao,
FB

Coy Ote said...

Submit Your Advise - Why don't you?

Johanna Knox said...

Re the search for a post-crash occupations or vocation:

I've had talks about this with the small number of others I know who are also grappling with it right now, and what I've noticed is that whatever vocational dilemmas we've had pre-crash are following us into the post-crash scenario.

Those who've never felt they know what they truly want to do, still can't find what they truly want to do.

Those who've flitted from one passion to another, ever fascinated by the next new interest or activity, still can't settle on one idea long enough to really put it properly into practice.

Those for whom it's been an ongoing challenge trying to earn a living at the same time as finding creative fulfillment, are still constantly trying to figure out how to do this post-crash.

Myself I fit into two of those categories, but I'm still hopeful that the shakeup this crisis will bring will allow me to find a new balance in what I do and how I approach it. I suppose that's naive, but I might as well try.

VK said...

On a completely different subject, about that list of 200 artisan skills posted by Verdani above, I saw a familiar name in position number 4 in the comments. The topic of the comment did not surprise me either ;-)

hahahaha

Like shooting MILF's in a barrel :P

Redbriars said...

In all of the discussions on future occupations I am surprised that no-one has suggested 12v electricity generation, conversion and appliance repair as useful skills.

In my area prior to the grid coming down our road (1952) lots of folks used automotive-parts based 12v systems to power lights and radios. Now, with the RV industry, almost any appliance can be found in a 12v config.

It is my view that electricity will become less of a utility (always on) and more of a tool (used when most effective) and so I suspect that anyone with skills in cannibalising and re-working automotive electrical systems into other useful systems (household-scale hydro, wind, muscle) that can power specific and useful tools (drills, pumps, saws) will be a popular person indeed.

Norcal said...

Another skill set likely to be needed is private security.

Wealthier neighborhoods, businesses, and others will need private security.

Local police may be cut back as tax revenue continues to drop rapidly.

There are also job ideas on Ferfal's blog. He listed the jobs that are in demand in Argentina after their economy completely collapsed.

ferfal dot blotspot dot com

M said...

Assuming that Stoneleigh’s incredibly traumatic economic scenario unfolds in the manner she predicts, I have a hard time envisioning anything close to a arts and crafts revival in a post-collapse world. Much more likely, in my opinion, is a scratch and claw situation, such as fixing a shoe for, say, an acupuncture treatment. But hardly an environment that accommodates the consistent activity of teeming workshops. Occupational viability is a post-collapse world would also dependent on the particular skill or trade in question. Shoe making strikes me as an occupation that might engender a limited form of livelihood, marble carving, not so much.

Ironically, the idea of post-collapse artisans and craftspeople scratching out a living in a barren economic world based upon their own independent efforts is exactly the type of desperate structure that would lead to a race to the bottom dependence on the few remaining bourgeois. These privileged ones will only be too happy to pick what little meat remains off the bones off independent craftspeople who fancy themselves self-sufficient in a hostile economic world.

Like it or not, the best hope for a revival--or even a limited environment of hand to mouth survival--for those who work with their hands is a WPA type program sponsored by the government. But in a politically deluded world with far too much foaming Republicanism fermenting under the surface, I see little hope of that happening. And where does the spirit of Bauhaus architect and founder Walter Gropius reside in every person for themselves America? Nowhere to be found, is the sad answer.

But if a “Made By Hand” world does come to pass. I certainly don’t see any fancy chance of charming Victorian front porches popping up in idyllic Norman Rockewell settings. I see, instead, something like the rebirth of Russian Constructivism and the spirit of Vladimir Tatlin’s faktura-- an approach contingent on the essential truth of materials as opposed to the divine inspiration of the inspired and autonomous artist. In other words, people will have to work together, in a productivist spirit, and make do with whatever is available.

Stoneleigh said...

Ed Gorey,

Once living standards in the US fall far enough, and environmental laws are completely discarded, the US may actually start manufacturing essential goods domestically again.

Rather than discarded, I think US environmental legislation could transition into an engine of corruption, as similar legislation is in India for instance. There people pay a great deal of money for a job dealing with permitting, because they can extract huge bribes for disapplying the rules. Of course in a cash-strapped world where no one is building anything anyway, this would be nowhere near so lucrative, but it might still happen on a much smaller scale. I am essentially expecting corruption to become endemic throughout society, and this could be one manifestation.

I'm skeptical of the health care industry as a future career. Considering that national governments will soon be forced to shed their healthcare liabilities, we'll have enormous amounts of healthcare overcapacity. Like housing, more and more people were drawn into healthcare based the assumption that government healthcare expenditures could be extrapolated into the future. Most people are simply going to die in their bedrooms at home - no Lipitor, no emergency room visit, and no hospital stay.

Agreed. Healthcare will be pay-as-you-go, and most people won be able to afford much. I certainly wouldn't contemplate a career in that direction in the sense of paying a huge amount for a qualification and then expecting a huge salary to cover the debt. Accumulating medical knowledge and experience is useful though. Eventually no one will much care about formal qualifications.

The military will open its doors nice and wide. Who else is going to guard Saudi Arabia's oil fields and repress dissent domestically?

Agreed. I think this will be one form of debt slavery.

Greenpa said...

APC said...
"I've found "banding together" to be a major challenge, seeing as how anyone I've talked to about this crisis still think I'm stark raving mad..."

And that is not the only problem with it. I've lived in co-ops, founded co-op houses, and been invited to join several doomer-style communes. But we have a family operation. I seriously doubt I could live long term in any of the arrangements I've seen so far.

Any one interested in banding together should first study the history of all the utopian communities founded by religionists, philosophers, scientists, and hippies. They have a huge amount in common, and very few last longer than 20 years.

One of the most insightful, and valuable, observations I've run into was from a guy who was a community leader and had spent decades trying to make a commune of 50 adults or so actually work- well. "The biggest problem," he said, "is that the competent people leave."

If you don't immediately understand why, you need to do a LOT more studying.

Joseph j7uy5 said...

Regarding the future of healthcare, there is a small literature on the subject of healthcare after peak oil, but I have not seen anything about healthcare after peak credit.

I will speculate that many hospitals will either close, or contract severely. Many are dependent upon the income from high-ticket or high-volume procedures; for example coronary bypass (expensive), and colonoscopy (common). Why screen for cancer, if you are not going to be able to treat it? Even a small reduction in some of these revenue streams would be very difficult to manage. Medical activities that depend upon exotic equipment/supplies are toast.

On the other hand, I would expect to see an increase in orthopedic injuries, as people unaccustomed to manual labor, bicycling, or walking long distances, start to do so. Also expect an increase in farming and carpentry-related injuries, for the same reason (inexperienced workers).

Ancillary health fields, such as physical and occupational therapy, might do OK in that context. If you can get someone to be able to be productive again, they will like you a lot, and ought to be willing to give you a slice of what they make.

Antibiotic resistance is going to be a big problem. We've been depending upon pharmaceutical companies to develop new antibiotics. But without capital, and with laboratory supplies being limited, that is going to be very difficult. Development of a new drug typically costs hundred of millions of dollars, often over a time span of a decade, before the first penny of return-on-investment. In this context, I suspect that herbalism will become a valuable skill.

A colleague of mine used to deliver babies for the Amish. He said that the couples were always young, and did not have any money. But they always paid. It might be five years later, but they always paid. I doubt that hospital-based birth will be very common, but people who are good a facilitating homebirth will have a role to play.

Greenpa said...

FB: (and VK) " On a completely different subject, about that list of 200 artisan skills posted by Verdani above, I saw a familiar name in position number 4 in the comments. The topic of the comment did not surprise me either ;-)"

Hey, now!! Do I gather I have acquired a reputation as someone preoccupied with sex here??

I assure you- it's perfectly true. :-)

Although not, I would contend, because I am just excessively salacious- it really stems mostly from being an evolutionary ecologist/geneticist.

Sex, is, like, really, really, important. 100% of the time, for everybody, and everything, on the planet. (and if one of you num-nums feels obliged to point out that there are multiple kinds of asexual organisms around- well, duh. I bite my thumb at you.)

One of the things Freud was actually correct about is that humans, all of us, ARE preoccupied with sex. We just lie about it a lot, and pretend otherwise.

Major survival rule, here- lying and pretending to yourself and your supporters will quickly get you killed in any of the worlds we're foreseeing.

Sex for food and shelter is already a booming problem- even the NYT has picked up on it-

http://www.nytimes.com/2009/10/27/us/27runaways.html

A pretty good article for them; and painful. It rarely ends well- and perhaps never does. Those who escape carry the scars forever.

And it's vastly more common than we admit, or want to know. I would bet- seriously- that at least a quarter of us here- and perhaps a half- have had a serious relationship fail because of scars (on either side) of past sexual exploitation/abuse. Real love and the best of intentions all around may just not be enough.

We just don't ever talk about it.

Anyway.

Sex is fun. Beautiful. Important. Expensive. And can be mortally dangerous.

It's one of the most common ways to subjugate and dehumanize the powerless; something we need to keep in mind. A great way to create genuine zombies that will do anything for you- read the NYT. Cheaper than drugs.

So, besides all that, and my totally legitimate interest in the philosophical and biological aspects of sex- by golly, a little titillation is always good clean fun.

:-)

So there.

scandia said...

@ Farmerod...The Oasis Of the Seas is obcene! Why bother going to sea!
I had a terrible dream last night of this montrous ship docking in Haiti only long enough to dump its hold of human excrement onto the island. Or do you think the ship's architects specified compost toilets?
Kind of like a Dubai on water wings!

Greenpa said...

Re: post alpacalypse careers:

Two I haven't noticed being mentioned yet: postman, and itinerant peddler/storyteller.

In many unstable societies, these jobs have a considerable amount of protection, except of course from the worst outlaws/outcasts.

Ilargi said...

Well, I guess Stoneleigh is no longer anonymous. Look for her picture in the article.

Ed_Gorey said...

@ Joseph j7uy5

re: Antibiotic Resistance

I fully agree with you concerning antibiotic resistance.

Discovering novel antibiotics has an element of ponzi dynamics.

Each new bacterial resistance strategy requires larger and larger investments on the part pharmaceutical companies to develop novel antibiotic therapies. For a truly frightening graph, look at what has happened to antibiotic discovery as a function of time. You see a huge spike in the 1950s and 1960s following the groundbreaking discoveries by Alexander Flemming and Selman Waksman, followed by exponentially declining discovery rates in the following decades. Currently the industry produces only a couple of novel antibiotics each year despite spending billions of dollars in R&D, and these new drugs are highly specific to particular bacteria, not the broad-spectrum miracle drugs from the 1950s. The industry hoped the genomic revolution - the sequencing of hundreds of bacterial genomes - would be its savior. With all this bacterial DNA sequence at its fingertips, surely new discoveries would flow like water. Sorry, no. It didn't happen. When the pharmaceutical industry implodes due to withdrawal of state support (in the form of medicare and medicaid expenditures), antibiotic research and development budgets will go the way of the dinosaurs. As a society, we'll have to face the little bacterial monsters we've created and we won't have the money or the infrastructure to innovate our way to safety.

Farmerod said...

Greenpa,

We are debating this arrangement at the moment since land prices here are still ridiculous; sharing the cost of land would allow us to get some faster (i.e. the more land you buy, the less it is per acre.)

As volunteers, we have witnessed similar arrangements and their inherent problems. The pastoral 4 acres we left a couple of months ago has recently exploded with two of the three partnerships virtually dissolving. The other partnership is husband/wife and, while they have been dubbed The Bickersons, they at least have well-defined roles and, as a result, they produce and sell well.

We are coming to the conclusion that being low-paid farm workers, for the moment, is our best strategy. For one thing, even minimum wage probably pays at least as well as the farmers here net, even after getting organic, boutique prices for produce. It's risk free, often tax free cash with the added benefit of lots of great produce. Second, we gain all sorts of experience, from how to grow stuff to the aforementioned experience in farm relationship management. Third, being in this sub-community allows us to network and to determine which relationships might work to our mutual benefit in the future. All this to fill the time while land prices continue their descent.

But I suspect that any future 'partnership' will be very casual. We may very well buy land with someone but only to the extent that we will immediately be able to legally divide it. Working relationships could very well be maintained (e.g. they grow veggies, we make cheese for our shared farm stand, we could share farm equipment) but we would not be so reliant on one another that either party feels compelled to continue with an unviable enterprise.

That's about as close to communal living as I could stand, I'm afraid.

Farmerod said...

My last comment is a response to Greenpa's comment on communes, not to his comment on sex.

...although it's funnier if you think it was a response to the second.

Stoneleigh said...

Well, it's not exactly a recent picture. I haven't dressed up for Halloween in quite a while. I just thought it would be a bit of fun, since it is Halloween and people had been expressing disappointment that I wasn't in the photo at the bottom ;)

switters said...

I will speculate that many hospitals will either close, or contract severely. Many are dependent upon the income from high-ticket or high-volume procedures; for example coronary bypass (expensive), and colonoscopy (common). Why screen for cancer, if you are not going to be able to treat it? Even a small reduction in some of these revenue streams would be very difficult to manage. Medical activities that depend upon exotic equipment/supplies are toast.

I couldn't agree more. As I said in a previous comment, the high-tech, industrialized style of medicine we've become accustomed to will be one of the first things to fail, since it's already barely functional and it's so dependent upon energy and credit.

There will be some upside to this, as the medical establishment is the leading cause of death in the U.S. right now (i.e. properly & improperly prescribed meds, botched surgeries, hospital infections, etc.). However, we'll all miss the very high standard of care we've come to expect with trauma, and that's not easily replicated with traditional medicines.

On the other hand, I would expect to see an increase in orthopedic injuries, as people unaccustomed to manual labor, bicycling, or walking long distances, start to do so. Also expect an increase in farming and carpentry-related injuries, for the same reason (inexperienced workers).

Ancillary health fields, such as physical and occupational therapy, might do OK in that context. If you can get someone to be able to be productive again, they will like you a lot, and ought to be willing to give you a slice of what they make.


Agreed. The ability to help people restore health and normal functioning so they can go on providing for themselves and their families will be at a much higher premium than it is today, because people will have fewer options than they do now. I agree with Stoneleigh that qualifications, or even the modality practiced (acupuncture, chiropractic, voodoo, whatever) won't matter much. All people will care about is 1) does it work, and 2) is it accessible to me. If the answer is yes to both questions, they'll pay for it (with cash or barter).

Antibiotic resistance is going to be a big problem. We've been depending upon pharmaceutical companies to develop new antibiotics. But without capital, and with laboratory supplies being limited, that is going to be very difficult. Development of a new drug typically costs hundred of millions of dollars, often over a time span of a decade, before the first penny of return-on-investment. In this context, I suspect that herbalism will become a valuable skill.

A much bigger problem will be medication withdrawal and all of the problems it will cause. Currently there are 30 million people taking antidepressants in the U.S. Those drugs have been shown to permanently and irreversibly alter brain chemistry in clinical studies (a little known fact, unfortunately). Withdrawing from them can be an arduous and potentially dangerous process. The vast majority of suicides occur just after a patient has started a drug, changed their dosage, or stopped taking it. This is just one category. There are millions upon millions taking synthetic thyroid meds, hormones, etc. all of which have significant withdrawal symptoms.

A colleague of mine used to deliver babies for the Amish. He said that the couples were always young, and did not have any money. But they always paid. It might be five years later, but they always paid. I doubt that hospital-based birth will be very common, but people who are good a facilitating homebirth will have a role to play.

Yes, my friend decided to become a midwife when she learned about what the future holds. A very wise decision, I think. We're talking about teaming up and starting a fertility and birth clinic. I think that's something that will always be necessary, and in demand.

Though, personally, I am not at all certain I want to devote my career to increasing the number of people on this planet.

thethirdcoast said...

Quoting Greenpa's contact for truth:

"The biggest problem," he said, "is that the competent people leave."

I'd argue that this is applicable in the corporate world as well, and that some corps deal with turnover far better than others. The firm I am currently with is not one that treats many of its people well.

As far as doomstead employment, I'm available anywhere someone needs wood split, coverage of modest electrical tasks, and shadetree mechanic jobs up to the brakes/engine top end level.

That's quite the picture. I only regret that I guessed incorrectly when I envisioned Stoneleigh with purple hair...although I suppose blue is a component of purple when you're mixing pigments...:D

Happy Halloween everyone, and may you receive more far more treats than tricks this fine eve!

Farmerod said...

I had a terrible dream last night of this montrous ship docking in Haiti only long enough to dump its hold of human excrement onto the island

Dream or premonition?

The Haitians will have to be extra careful making dinner.

Haiti’s poor resort to eating mud as prices rise

.

I. M. Nobody said...

Stoneleigh,

I'm sure glad I did a refresh before posting.

Because, I was about to say, NOOOO, el g said White Robes!

And there is no longer any doubt that you will present quite well in them. BTW, I'm still pulling for Empress of North America. .)

Ilargi said...

Joseph

You can't tell a story about the past and future of antibiotics without relating what they have been used for. Which is, some two-thirds of all antibiotics are fed to livestock. Cows which are force fed high grain diets for which their intestines are not prepared would otherwise get too sick too soon.

I think antibiotics are a perfect example to illustrate why and how mankind is a tragically doomed animal. We found the closest thing to the fountain of youth we will ever see and managed to use it against ourselves by applying it in morally completely repulsive ways.

It's like the entire history of mankind in one sentence.


.

Farmerod said...

Well, it's not exactly a recent picture

Or is it? To me, it looks like the Witch of Woebegone casting spells on the Dow.

.

Greenpa said...

Ed Gorey: " antibiotic research and development budgets will go the way of the dinosaurs."

Which may be a good thing. It would take the discovery process out of the hands of the fame/money-whores, who are universally 2nd rate intellects, and leave it to the 1st raters, and 3rd raters, who are both infinitely more likely to have new ideas, and succeed.

Greenpa said...

Ilargi: "Which is, some two-thirds of all antibiotics are fed to livestock."

And keep in mind, "livestock" now includes yeast. The thing they make fuel ethanol with. And soon to include algae, in big vats for subsidized biodiesel.

This is a growing threat the fuel industries try to keep quiet- but the corn ethanol people are already using huge amounts of antibiotics to keep their business profitable. And eventually feeding the solids to animals...

What a good idea.

DIYer said...

Haha, Stoneleigh takes her rightful place among the wily wild womyn of the internets. (note the shelves full of nerdy books in the background) <3

... check really is in the mail this time ...

Starcade, now from Siren said...

getyourselfconnected: Now, the bond market is far more powerful than governments. Because it's clear that governments are going to continue this "extend and pretend", but they only physically can until the bond markets stop them.

It's clear what you are saying: You believe governments can _infinitely_ print and be able to somehow enforce that what they print has value. Again, all the stuff has to be based on _something_, and, with the shadow derivatives discredited, they're moving it onto the Treasuries and the like...

So what IF the bond market dislocates?

IM Nobody just below: I think that's his point -- what he's saying is that the bond market is, for all intent and purpose, irrelevant...

snuffy: For many of us, there will be no "better days" -- the entire system is far too oversubscribed for that to be true.

Dan W: But understand that that's also the end of everyone and everything reliant on same system. Let me ask you all a question: Does anyone else now believe that the entire explosion of population in the First World has a lot to do with the money-as-debt situation and the free use and giving of credit?

Linda said...

Hello there,

I recently discovered this site via Chris Martenson's site (have been there awhile), remember that thread from a week or 2 ago? Love both sites but am finding this one very very informative, to say the least! Thanks for another great article!

I don't want to be a reactionary "doomer" but the more I study this, the more I am convinced things are dire and are gonna get worse any time now.

I've already pulled the trigger on the stocks and the paper gold. Now plan to pull the trigger on everything else (commodity ETFs, mostly energy) upside down or no!

It's an IRA but I think it's time to head for the hills & pay off the mortgage as tax rates are bound to rise. Be damned the 10% penalty (better than a 70% tax rate later!).

Here's to hope that I'm not wrong!
~lb

Erasmus said...

Ilargi & Stoneleigh what do you think will happen to the Canadian Federation (you both live there)? Quebec, for example, exhibits a great deal of political instability.

Markytom said...

@ Stoneliegh

Your analysis is very similar to Karl Denninger's (http://market-ticker.denninger.net/)

Do you read/trade ideas with him? He has been warning people on the credit collapse and deflation for quite a while. He has also been warning people that gold probably won't shoot to $2,3,10K any time soon - instead it could easily fall rapidly in a crash scenario similar to what you propose. Not too many people out there saying these things.

Excellent and informative interview. Scary conclusion though, but hard to refute your argument. Do you have any ideas on how the US government could stop/lessen the collapse at this point? Or are we too far gone and the US government is essentially powerless at this point?

Ed_Gorey said...

@ Linda,

In terms of early withdrawal of your IRA savings, you had better act quickly.

Senator Herb Kohl of Wisconsin introduced legislation in Congress this week to block early withdrawal. Just in time for the stock market crash!

Ilargi said...

Markytom

No contact with Karl after one too many of his toddler tantrums throwing fits. These make him an unreliable source. Karl is wrong too often, and shouts (or pisses) into the wind on a far too regular basis. If he could grow up emotionally, he might be useful, but what are the chances of that happening?

"Do you have any ideas on how the US government could stop/lessen the collapse at this point? Or are we too far gone and the US government is essentially powerless at this point?"

Excuse me? The US government is the no.1 force driving the country towards collapse. They're not powerless, they just don't have your best interest at heart.



.

memphis said...

RE: antibiotic use in animals.

Faster, better, cheaper; that pretty much sums it up. Small farmers and ranchers--until the recent public entrallment with natural and organic foods--had difficulty making a living trying to compete with the corporates, who were liberally feeding antibiotics to herds (of any species) to improve productivity and subsequently, profitability. Animals get to market quicker, which ultimately is cheaper for the consumer. Producer and consumer win--until resistance develops or unusual sexual characteristics present in the population from contamination of the runoff water. THEN, the public is outraged.

Until recently I worked at a small, for-profit ER. It is unbelieveable how little people understand about their own bodies, let alone the physiology of animals that make up our food chain.

The general public seems unaware with the hand-in-glove resistance of parasites. Some parasites are now resistant to existing anthelmintics. Big pharma is slow to develop new ones d/t low ROI. After all, with such a small percentage of Americans engaged in livestock production, why bother? Rather than practice good management and testing techniques, it's so much easier to look at the calendar and routinely give the meds.

But then, the recent fascination with the photo of chimpanzees mourning one of their own, in which people seem incredulous that animals "understand and grieve" passing of one of their own...where DO these people have their heads? Except for those who already have some appreciation and understanding of animals and their behaviors, good luck to anyone who thinks production and sustainability will be easy.

gregfb said...

Stoneleigh

Being that concentrated wealth such as gold is a double edged sword, what would you do with it at this point? Covert to cash?

Thanks for all you do!

Starcade, now from Siren said...

Ed_Gorey: It'd have to be a totalitarian Russia.

Stoneleigh: The problem I have with gold is simple: Confiscations, much like the US did. I can't see much private holdings of gold being allowed when TSHTF.

And, if they are, it'll be with those with the biggest guns...

Linda said...

Thanks for the reply Ed Gorey.

I guess it should not be a big surprise that tptb want to lock up the retirement accounts. otoh, they could certainly use the tax revenue from early withdrawal plus the penalty (drop in the bucket I know).

I looked for detail on that legislation but could not find. Do you have a link or bill # by chance?

~lb

MrCarlSpackler said...

There used to be a common old saying,

"what is the world coming to ?"

Its like scratching your head or scratching your ass. Does either one make you smarter.

While I watch the grass grow and plan my varmit strategy in the privacy of my shack at night. I hear the voices in my head telling me that Ilargi in his photos is speaking of turmoil between brothers and I mean real brothers.

The worse of all outcomes, yet if the fast crash is the fate, then it boggles my brain as to what will be on the news soon.

I;ve figured on Doom since Nixon, but what SL sees on the horizon is gut wrenching. Hard to fathom, like to catch that first glimpse of Godzilla, splashing and thrashing out in the harbor mists. Punctuated by reptile screeches.

You hear it, and feel it, but can't see it. You can't move either, even though you should. The perverse choice of waiting to watch the monster that wants to eat you.

I was thinking that SL is like Galadriel. Pouring out the future in the reflective pool..Images of the futures that the viewer processes in their life cycle.

Though i doubt Galadriel would ever be caught in black ;)

LOTR's trivia.

JRR was a spy. He was asked to work during WWII. He didn't except their offer to go full Time. He worked on breaking Enigma. Notes on his work said that "he was quite keen".

Understatement if their was one.

Coy Ote said...

Stonelady and Ilargi - Now that a lot of folks have been knocked on their can by your studied and sensible analysis of our predicament, maybe a post on the positives that might come from the fall of this worldwide capitalist monstrosity. (At least for those who survive)

Simplicity has it's own rewards, though you can't "go shopping" for them. Some of us who lived in the rustic, rural country in the 40's and 50's were uncomfortable at times but there is much that is fondly remembered worth going back to--if that is possible.

Ilargi said...

"... maybe a post on the positives that might come from the fall of this worldwide capitalist monstrosity..."

There'll be a lot more space per capita.

But that doesn't really fill an entire post, does it?

Erasmus said...

Ilargi said,

No contact with Karl after one too many of his toddler tantrums throwing fits. These make him an unreliable source. Karl is wrong too often, and shouts (or pisses) into the wind on a far too regular basis. If he could grow up emotionally, he might be useful, but what are the chances of that happening?

Normally I do not like to engage in character assassination, but Ilargi is 100% correct here.

Coy Ote said...

Ilargi - Come to think of it perhaps that's more the task of S. Astyk, C. H. Smith, or the evolving permaculture community.

Not that I will benefit anyway, I won't likely be around by the time the dust settles.

I read Denninger because he drags a lot of economic conniving and corruption to the forefront--which I would otherwise miss--but sometimes he spits out some phrases that would be more expected coming from a Beck or a Limbaugh. I just cringe and scratch my head in wonder!

Ilargi said...

Coy Ote,

I don't think they really understand either. Just like I miss growing food as the no.1 occupation in all lists but Farmerod's here, I miss all the time what I think is the no1 theme for overall preparation, the mental one. I don't know how I will react when people around me start dying like flies, and I don't see how they will not. There's far too much fairy tale material around in the preparedness and transition cultures. Then again, I admit, it's very hard to prepare people for that; not something to get popular with.

ccpo said...

@Greenpa and Farmerrod:

The numbers I've seen on this are on the order of 95%. My theory is that they try to create a community that is **too** close. When I've visited some places it was a bit too like the very homogeneous, even now, Korea: everyone acting and speaking eerily the same.

There is one place that uses a different model with communities within the wider community, but the above still applies.

What I think might work is more of a village under a land trust so that people are free to do as they wish with strictures limited primarily to affects on the commons, but with an undergird of a commitment to the safety and security of the community and cooperative behavior an expectation. That is, being a good neighbor would be an assumed reality. My barn burns, you'll all come help.

Perhaps that loose would work. Maybe not.

It does seem some of the societal ills we suffer today are a direct result of there being a lack of accountability to the wider community and a fear of stepping in where a good nieghbor might have once done so.

Cheers

Greenpa said...

MrCarlSpackler said..."There used to be a common old saying,

"what is the world coming to ?""

I've already told my family what I want for my epitaph:

"How do these things happen?"

Farmerod said...

There's far too much fairy tale material around in the preparedness and transition cultures. Then again, I admit, it's very hard to prepare people for that; not something to get popular with.

Agreed (although since when are you concerned about being popular?) This whole unwinding thing is not about outrunning the bear, but outrunning its closest meal. Isn't that the purpose of TAE? If not, what exactly are you spending half of your waking life doing?

.

Greenpa said...

Ilargi: " I don't know how I will react when people around me start dying like flies, and I don't see how they will not. There's far too much fairy tale material around in the preparedness and transition cultures."

Märchen macht Wahnsinn.

Ganz Wahr. Schade.

Perhaps another post alpacalypse trade:

http://www.literaturecollection.com/a/o_henry/249/

And I'm not sure if I'm kidding.

Coy Ote said...

Farmerod - He only went there as a response to my ramblings.

It's hard to some of older folks, who grew up without even locks on doors, and in a time when everything wasn't draped in plastic, to fathom the tragic playing out of the predicament in front of us.

Greenpa said...

Incidentally, if you are interested in comprehending the depths to which our general level of education has plummeted, there is no better eye-opener than reading about forty O. Henry stories straight.

And realizing- the common folk of his era went to great lengths to find, and waited feverishly for, his next story. They comprehended his words, allusions, and figures of speech just fine.

All of his many thousands of readers, I do assure you, would not have to look up "pellucid". (No, I'm not intimating you're dumb if you did- it's just a fact today.)

I love his stuff- lots of Dickensian material.

"the looper" said...

I spent last night on a college campus. I kept thinking about what the future appears to hold for them. With SL's narrative bouncing around my grey matter, I kept thinking..

I See Poor People.

The question I kept asking myself as I moved among them was how are they going to react when they perceive a future that is not of their past or what they presumed to be their fantastic future.

I hope humanity will remain civil.

Then I wonder what the odds of that are. Spoiled children generally throw a tantrum at some point. Fake or real, how each of us has to deal with that will be take on a world of its own.

VK said...

I think antibiotics are a perfect example to illustrate why and how mankind is a tragically doomed animal. We found the closest thing to the fountain of youth we will ever see and managed to use it against ourselves by applying it in morally completely repulsive ways.

It's like the entire history of mankind in one sentence.


Isn't that two sentences? :P

Gravity said...

And the Lord did say, I will send outlanders among you, a man and a woman, and these unbelievers will be profaners and defilers of the equities. Then shall your faith be tested as it was in the days of the blue woman. Yea, the blue woman!

He is a god of favor, but He
is a god of sacrifice as well,
of sacrifice as well.

Last night He who walks behind the Markets spoke to me in a dream. And I did fall down upon my knees in fright and hide my eyes lest the terror of his countenance strike me dead. He is much displeased with this sacrifice.

And the Lord did say: Have I not given you this marketplace of killing so that you might make sacrifice here, have I not shown you favor?

And so now the equity of favor
has been heightened from four dollars to five.
Each and every one of you will deposit five dollars into the tip-jar, and walk into the markets at dusk with your remaining equity, and He who walks behind the Markets will find you, and you shall walk with Him. It is good that we do this, yea, verily.

Bigelow said...

http://www.amazon.com/Deep-Survival-Who-Lives-Dies/dp/0393326152/ref=pd_sim_b_3

Gravity said...

"You would make a market sail against the winds and currents by lighting a bonfire under her deck?
I have no time for such nonsense."

"Spock, is there any hope to save the ship? Can anything be done to prevent catastrophe?"
"It'll be life, but not as we have known it."

el gallinazo said...

I imagine that Monday will be a very interesting day in the world equities markets. If the indices around the world lose over 2% respectively, I think the crash soon come.

Since Stoneleigh claims it's all psychological, I wonder how Halloween factors in to socionomics? Will Monday be a Nightmare on Wall Street with chain saws (sawzalls) and hockey masks?

umaperegrina said...

Linda said:
"I looked for detail on that legislation but could not find. Do you have a link or bill # by chance?"

Don't know if this is what Ed Gorey was referring to, but it does discuss the proposed legislation.

http://www.ft.com/cms/s/0/3c9894f2-c42c-11de-8de6-00144feab49a.html

Ed_Gorey said...

@ Linda

Here is the link concering Kohl's proposal to restrict early withdrawal from retirement plans like IRAs and 401(K)s. It appeared in the Financial Times. I just reread it and a should perhaps recalibrate some of my statements. It seems he didn't introduce the legislation this week, but he is close to doing so. Also, while it seems as though his legislation would not completely block early withdrawal, it's clearly making early withdrawal much more difficult and punitive. This is obviously laying the groundwork for a total block at some point in the future. Don't you love how Kohl frames the issue as though he's doing people a favor?


Proposal aims to curb raids on 401(k)s

Nelson said...

Confiscating gold in the US would be problematic, since many of those who invest in it also buy lots of lead. Lots and lots of lead.

It would also trigger an already inflamed populace to react - it's exactly what TBTP don't want: a seminal moment when the government is perceived to turn against us all in an act of blatant fascism. Better to be subtle, like the Russian saying goes, "Keep the barrel of your pistol below the tabletop at all times."

I'm still harvesting eggplant and green tomatoes by the bucket, even in this chilly rain. It's remarkable that these plants are still bearing in the short, dark days of autumn, but so long as it doesn't freeze, they'll still produce. We fried up a mess of greens yesterday, and gawd were they bitter! But sufficient olive oil and salt can make anything from the garden palatable.

Ilargi said...

"We found the closest thing to the fountain of youth we will ever see and managed to use it against ourselves by applying it in morally completely repulsive ways.

It's like the entire history of mankind in one sentence.

VK: "Isn't that two sentences? :P"


What was the question again, smartypants?

snuffy said...

A lot of talk is being made about "tribing up"or forming groups to deal with the coming "Nightmare on Main street,parts 1 thru 27".

mmmm... I think it will happen real fast when it becomes obvious that its all over.Think of how americans have been trained to react now,at least the ones with more than 2 brain cells working in harmony.

Everyone remembers Katrina/Rita

Everyone has read"some"history.

[Remember Gra'mas stories of Great Depression ver.1.0

Everyone is "The Hero" in their own fantasy of what to do when the world ends...

6 months to 2 years of utter chaos ranging from "Barely noticed" to "Mad Max"...

Then we will be living in a new world,with new realities we only have nightmares about now.

El G may be on the money now...we have seen the first spasm....and I trust most in the market now are on a hair-trigger.

I have a funky 66x14 mobile on property that could be made habitable easily,as well as barns and sheds...and several rooms that may be shelter quickly if need be,as well as food ,fuel ect. for a crew...plans already made with family,and several friends if it gets to weird where they are.

If it happens "fast",I guess a month or 6 from now I may be fighting my way to use the computer to post...and have lots of help in the garden...

Or not...only fate know how the story goes from here...

G"night

snuffy

Greyzone said...

Coy Ote,

Please get it out of your head that we're going "back" in any way, shape, or form.

Homo sapiens is about to go somewhere it's never been before, at least not as an entire species.

It's a brave new world, indeed.

Mary said...

Wonderful article Stoneleigh. I am amazed at your clear picture of what is happening when so many "professionals" just don't get it.

You nailed the deflation right from the beginning.

Thank you for sharing all of this with us. And thanks to Ilargi too.

FB said...

Hello,

@ Greenpa
About pellucid, I would imagine that one century ago, it was among the 10 000 most frequently used words in English. But today? Do you think it would make the first 40 000?

On another topic, I often misread names at the heads of comments. For example, I misread "Greenpa", then read "And the Lord did say, I will send outlanders among you, a man and a woman, and these unbelievers will be profaners and defilers of the equities."
At that point, I backed up and correctly read "Gravity". Bizarrely, I know the world is still an orderly and somewhat understandable place when it is Gravity who writes such things, but I would find it disconcerting if Greenpa were the author. Yea, verily.

Ciao,
FB

Dr J said...

"But sufficient olive oil and salt can make anything from the garden palatable."

Exactly! Now consider where your salt and olive oil is going to come from after TEOTWAWKI.

el gallinazo said...

The easiest way to win a war of aggression is to dumb down the victim to the point that they don't even know that there is a war going on. The oligarchs are doing that with the American peasant very successfully. One of their favorite ways is to label any Eureka moment of the peasants as a conspiracy theory, and consequently beyond the bounds of acceptable thought despite mounds of clear evidence to any rational analysis. The other way is to get the peasants to hate themselves so thoroughly that their energies are put into self-destructive aggression as opposed to fighting back against the oligarchy.

In this second mode, of all people, Mish abstracts a brilliant paper on how the entire oligarchical machinery is slowing forclosure through induced self-hatred. Don't leave home without it :-)

"Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves"

Gravity,

I loved your "He who walks behind the Markets" shtick. I still don't understand how you can write this stuff with English being your second language. As I mentioned to FB, I have to struggle to put a sentence together in Spanish to get a shop owner to sell me a piece of cheese.

Huge sign on the wall of a building in my new small city translated as "General Electric - We Loan to Everybody"

Re antibiotics

The bacteria are trading resistance through swapping plasmids like ten year olds swap baseball cards. Even cocci can swap with staph - no KKK anti-miscegenation strictures here. The only good news is that when the pharma industry collapses, the resistance strains will be at a slight disadvantage and will eventually sink back into obscurity.

el gallinazo said...

Dr J said...

"Exactly! Now consider where your salt and olive oil is going to come from after TEOTWAWKI."

Well, the salt will come from rendering dead North American peasants who, for the first time in a century, will be worth their salt.

As to olives, I don't understand why olive agriculture isn't larger in the USA. I don't think the trees can withstand freezing easily, so Dr. J's Inuit buddies will probably not be pressing out the oil with their mukluks.

FB said...

Hello,

Someone wrote:
"But sufficient olive oil and salt can make anything from the garden palatable."

Funny, my wife just said exactly the same thing on presenting lunch a few minutes ago.

Then Dr. J wrote:
"Exactly! Now consider where your salt and olive oil is going to come from after TEOTWAWKI."

In fact, we have both just down the road and they have been there for well over 2000 years. We will have lots of problems, but salt and olive oil should not be among them.

Ciao,
FB

Coy Ote said...

Greyzone - "Coy Ote, Please get it out of your head that we're going "back" in any way, shape, or form."

My reference to things gone by was more about fond rememberances than it was about our ever going back.
However, I think there could emerge, after the horror and tragedy of the potential dieoff, a new norm that would be more sane, earth friendly and sustainable than this harried "civilization" that now exists.

This would not be in the short term of course--and I will likely be gone by then anyway. But I would be interested in more input on why, or if, you think this is not possible?

Coy Ote said...

El G - "Well, the salt will come from rendering dead North American peasants who, for the first time in a century, will be worth their salt."

Well, it's good to know I will serve some purpose! ;-)

el gallinazo said...

To add to the friendly nutritional discussion of Dr. J and Ahimsa

Rating the five essential food groups in Costa Rica:

Coffee - excellent

Beer - acceptable if you exclude Kaiser

Fruits and vegetables - super

Fish - very good

Meat - good

The mercado central is the first I have visited in Latin America where the meat and fish are actually refrigerated. The carniceria area in Oaxaca's mercado stank so badly that I would go out to the street to detour around it.

Gravity said...

@ Vulture

You've asked about my misleading profiency before. Actually, I'm mostly a native speaker, my mother hails from liverpool, she regularly spoke english to me at home, mixed with dutch, then we began conversing in english when I had attained sufficient grammatical skill and vocabulary at seven years old. Also, many years of americanised television and movies helped. So my skills are not special at all. In fact, they could stand to be improved considerably.

We should appreciate the convenience of a favorable entity such as HwwbtM from Children of the Currencies, make a quick sacrifice of lazy adults and good harvests are guaranteed. Its also a decent way to keep the local population in check; after reaching the age of favor you get shoved off into the corn as a form of early retirement, similar to logan's run, but without the stupid carrousel.

The dead could be utilised for phosphorus recovery at least, for fertiliser, as we're running low on viable deposits to mine. This will ensure an excellent harvest providing that we also appease HwwbtM with a grand banquet of bankers, properly seasoned.

I. M. Nobody said...

Coy Ote said...

However, I think there could emerge, after the horror and tragedy of the potential dieoff, a new norm that would be more sane, earth friendly and sustainable than this harried "civilization" that now exists.

Coy, I too fondly remember those days. I also agree that they couldn't come back. Not even after the die off.

The earth friendly sustainable culture, provided we don't go extinct, will probably more closely resemble something like the Kalihari Bushmen or some of the pre-Columbian Native American peoples.

Dr J said...

" ... Dr. J's Inuit buddies will probably not be pressing out the oil with their mukluks."

Interesting that you should bring that up. In fact, on the west coast, the native people from the Aleutians to northern California extracted the oil from the oolichan fish (also spelled eulichon). It was the central pillar of the traditional diet and was highly valued everywhere. There was an ancient trade inland to the extent that there were numerous "oolichan trails" through the coastal mountains for this purpose. When Alexander MacKenzie crossed the continent in 1792, he followed an oolichan trail for the last 350 kms to the Pacific. I became curious as to why they went to so much trouble to collect that one fat so I had it analyzed. It turns out it is very much like olive oil. We published a paper on this last year. It is still used widely in areas where the oolichan still run. Fascinating story of ancient dietary wisdom.

There is a more involved explanation of why but it would offend both Ilargi and Ahimsa and probably revoke my probationary status to get into it much further here.

M said...

Taking a second glance at the dour demeanors of those chaps sitting on that freezing Rocky Mountain park bench and I am left to wonder if they just experienced a Stoneleigh palm-reading.

Or I could be mistaken, maybe that’s how they look on Christmas morning, just before unwrapping gifts.

At any rate, and to ponder Greenpa’s contention, I am certainly under no illusions regarding the long-term prospects of divergent personalities and harmonious communal living. Considering my own anti-social malcontent tendencies--most of those I dearly treasure annoy the hell out of me 90% of the time--the prospect of chaotic pandemonium is terrifying indeed, if for nothing else, the loss of a quiet environment.

Which brings me back full circle to the Government as mediator, and the voting process itself as the only real solution, however compromised and imperfect it appears to be at times. Bearing that in mind, The DailyKos crowd might just be the true pragmatists--fighting within the system one vote and candidate at a time.

Ahimsa said...

El G,

Have you seen sale of produce labeled as "organic"? I've heard certified (and probably non-certified as well) organic farms are numerous in Costa Rica.

Chaos said...

Well, after perusing the comments on The Oil Drum following this interview, I have to say that they are why I have largely left that site and rarely visit anymore. The same people making the same arguments, (I love you Jeffery Brown, but your repetition wears one out), people sniping at each other constantly, extreme thread hijacks and offtopic tangents, it all just gets to be a bit much. Part of the semi-irrelevancy of peak oil to the current situation, I suppose.

Submit your advice said...

I live in MI and it's November now, but I just went out and harvested a large amount of vegetables and the greens will not be bitter. I recommend putting on a big pot of boiling water at the same time you put some oil in a skillet with a sliced onion. While the water is coming to a boil and the onion is softening, smash a clove or two of garlic and set aside, and then wash the greens. When the water is boiling, put the greens in at high boil for a couple of minutes. While doing that, chop the garlic and add to the oil. Then take the greens out and add to the oil, to stir and cook for 5 to 10 minutes. If you like, boil some pasta in that boiling water till one minute under done, then add to the skillet with the greens plus about 1/3 cup of the pasta cooking water (to thicken the sauce). Turn off the heat and let sit for one minute, drizzle on a little olive oil and maybe some parmesan and there ya go. Can also be made with bacon or pancetta at the beginning or salt pork or even a can of anchovies with the oil that it's packed in.

Oh, what I harvested in Nov in MI? That would be lettuce, cabbage, kale, mustard, gai lan, spinach, arugula, radicchio, turnip, radish, carrot, jerusalem artichoke, mizuna, michli cabbage, chard, kohlrabi, sage, parsley, rosemary, sorrel, chives, green onion, green garlic, mache (kornsalat), and fava greens.

Greenpa said...

Snuffy: "6 months to 2 years of utter chaos ranging from "Barely noticed" to "Mad Max"..."

I think you may be optimistic.

For those of you who think my continuing inability to exclude the possibility of The Big Bammer being a submerged Gorbachev means I must be a pollyanna in the woods:

I am also unable, using what intellect, education, and experience I have, to exclude the possibility that we are not looking at a Lost Decade coming up- but The Fall Of Rome. Centuries of Dark Ages.

And my personal probability assignments:

Obama is Gorbachev: 4.2%

New and Improved Dark Ages: 45.0%

I hope your estimate is better than mine, Snuff.

Greenpa said...

FB- " FB said...
"About pellucid, I would imagine that one century ago, it was among the 10 000 most frequently used words in English. But today? Do you think it would make the first 40 000?"

I doubt it would make the first 100K, in fact, which saddens me greatly. Such richness of language we've lost.

"On another topic, I often misread names at the heads of comments. For example, I misread "Greenpa" "

:-) So do I! And titles and signs. I cannot pass the local Taekwando palace without reading "MARITAL ARTS!" - although I've been misreading it for years.

Fun- and perhaps useful, as it forces me to continuously be on guard, and to re-examine the inputs meticulously-

And it does lead to interesting cross pollinations-

:-)

Quel fromage!

Greenpa said...

And regarding our future societies, laws, and use of resources, here, alas, is a very clear picture of what will go on widely; available today as reality:

http://www.nytimes.com/2009/11/01/world/middleeast/01yemen.html

Which is not to say all places must go this route.

Taizui said...

Ilargi said,

I miss all the time what I think is the no1 theme for overall preparation, the mental one. I don't know how I will react when people around me start dying like flies...

My meager preparations have seemed futile since your message finally penetrated and I envision the possibility of starving, freezing parents and children queuing at the doors of those few who “prepared.” Perhaps Starcade is an optimist :=)

I claim no progress on mental preparation. Any recommendations?
.

Ric said...

Snuffy says: "Everyone is "The Hero" in their own fantasy of what to do when the world ends..."

Very true. Going through this transition reminds me a little of the transition out of middle age. One becomes forced to consider realities one would prefer not to. Little that is true appeals to the sensibilities of a younger person. The other day I was compelled to say this to a younger friend regarding the coming transition:

While we all have choice, we don't necessarily have freedom. We answer to responsibilities and our code. Something that's clear to me, but hard to express is that the fall of civilization--and even starvation, pain, and death--is not necessarily a bad or terrible thing. There is such a thing as transformative suffering. The issue is always how well we care for what's around us--and this means unconditional giving.

As I consider the battles I've lost over the years, it becomes clearer that my own foolishness blinded me to this truth, which I thought I already knew.

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