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Page added on February 9, 2013
Economy, Collapse, And The Interconnectedness Of All Things
There’s a lot of startling news coming out from a lot of different sources and we should be paying attention. Here’s what I’m reading and seeing, and, quite frankly, getting more concerned about almost on a daily basis.
While most people are paying attention to Europe’s financial woes—and they are serious—there’s a lot of instability in other places…places you might think don’t matter much, but they do. In a world of global finance, global industry, global climate, and global instability, it all matters, as all of these systems are interconnected and inter-related. It’s been called “a perfect storm of catastrophic confluences.”
Wall Street
According to a CNN article, corporate insiders are now selling nine times more of their own shares than they are buying…
Corporate insiders have one word for investors: sell.
Insiders were nine times more likely to sell shares of their companies than buy new ones last week, according to the Vickers Weekly Insider report by Argus Research.
What makes this so alarming is that corporate insiders have been exceedingly good at “timing the market” in recent years. The following comes from a recent CNBC article entitled “Sucker Alert? Insider Selling Surges After Dow 14,000“…
It begs the question, “What do these inside traders know that we don’t know?
Last week, there was also another extremely large bet (put option) of $11 Million was placed that says the economy will tank within the next 60 days…You would have to be VERY confident in your outlook to risk $11 million on this directional position as the markets are trying to break into new highs.
Instead of listening to the CBO (Congressional Budget Office) telling us everything is improving, and who has an incredibly dismal record of financial predictions, perhaps we should be listening to some of the men who successfully warned us about the last financial crisis:
-”Dr. Doom” Marc Faber recently stated that he “loves the high odds of a ‘big-time’ market crash“.
-Economist Nouriel Roubini says that we should “prepare for a perfect storm“.
-Pimco’s Bill Gross says that we are heading for a “credit supernova“.
-Nomura’s Bob Janjuah believes that the financial markets will experience one more huge spike before collapsing by up to 50%…
Internationally
Earlier this week Argentine President Cristina Kirchner responded to her country’s sky-rocketing inflation rates by freezing prices on food, a move Forbes magazine says will soon lead to widespread corruption in the business community and government.
In Venezuela, where President Hugo Chavez has attempted to control all aspects of his country’s economy, price freezes instituted on essential goods like diapers and cleaning products over a year ago failed to curb soaring inflation which registered at over 22% last year. In response, with their quiver out of arrows, the Venezuelan government announced today that they are devaluing their national currency, the Bolivar, by over a third. The announcement had the immediate impact of increasing the price for a US dollar in Bolivar by nearly 50%.
According to USA Today, by boosting the bolivar value of Venezuela’s dollar-denominated oil sales, the change is expected to help ease a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations. But analysts said the move would not be sufficient to end the government’s budget woes or balance the exchange rate with an overvalued currency. Economists predicted higher inflation and a likely continuation of shortages of some staple foods, such as cornmeal, chicken and sugar.
Chavez, like the brilliant politicians, economists and financial wizards at the helm of U.S. recovery efforts, has tried to control his economy through central governance for ten years. It has failed on all counts. Inflation has continued unabated. Price controls have led to black markets in everything from goods to currencies. Despite promises to the contrary, people continue to suffer without respite.
While Venezuela is a small country, it is a major OPEC nation, and the devaluation of it’s currency will have BIG implications in the global price of oil in about 60 days (note the connection to the 60 day ‘put’ on Wall Street).
Argentina and Venezuela, two of the region’s largest commodity exporters, just went critical. It will spread. As has been noted previously, nationalization efforts were already under way before this week’s developments.
And, in Chile, businesses are already feeling the impact of Argentina’s price freeze.
We haven’t even discussed environmental changes that are already affecting billions of people round the world.
What might we expect from here?
How likely is such a collapse to occur? No civilization can avoid collapse if it fails to feed its population. Historically, we know that when currencies are devalued and someones $100 bill suddenly becomes worth $50 as prices remain the same as in a freeze, things will get very tough for most people. We can get a hint for how things are going to be by taking a look at what is going on over in Europe. Can you imagine what will happen to the elderly on fixed incomes? What will happen as people trample each other for food as is going in Greece right now? Check out this excerpt from a Reuters article…
Hundreds of people jostled for free vegetables handed out by farmers in a symbolic protest earlier on Wednesday, trampling one man and prompting an outcry over the growing desperation created by economic crisis.
Images of people struggling to seize bags of tomatoes and leeks thrown from a truck dominated television, triggering a bout of soul-searching over the new depths of poverty in the debt-laden country.
Greece is, by far, not the only debt-laden country in the world. Look at Spain, Ireland, Italy…look at the US. In fact, look at the entire global financial system. The whole thing is a house of cards that is solely predicated on keeping everything and everyone in debt. Debt is slavery, and don’t doubt for a minute that the whole thing was engineered. Its causes are many, including our own willingness to move blindly into the addiction of comfort and ease and failure to wake up.
But we must also take responsibility for the ones who are pathologically addicted to power and control… And just like a drug addict will destroy their entire family and loved ones for their next fix, the global banking system is helpless before their addictions even as they destroy the lives of billions of people, civilization, and maybe even life itself on this small, fragile, finite planet we call home. Still, we are the victims of comfort and we really can’t be bothered.
How Can we mitigate?
- If there’s any way you can, get out of debt as quickly as possible.
- Sell expensive items you don’t need (sell the corvette and get “cheap transportation”. You only need to go from here to there. You’ll still be living better than people did 150 years ago.
- Have what my dad used to call a “go-to-hell” fund. He never knew when he might have to tell an employer to go to hell.
- For what you can’t get out of debt for, try to put cash put away to make several months worth of payments with the worthless cash from a devalued currency (your lender will be obligated to take devalued money for house and car payments).
- Keep the cash for payments in the same bank your mortgage is. Even though the currency may be devalued, and the banking system down, your defense for your payments to them is, “well, it’s in your bank…” Keep other cash safely stored away outside of banks in case of a bank holiday. It’s happened before.
- Have a minimum of 3 months food and water stored. It could bring you returns of 50% or more, plus the benefit of not starving if the fragile just-in-time delivery system were to fail for whatever reason (and there are lots of reasons why it could).
- Try to grow at least some of your own food. Put in a “victory” garden. Support local food.
- Form relationships and community. It will make things much easier on all fronts. Try to educate your friends and family (good luck with that!)
Most of all, develop resilience and sustainability around physical, emotional, and spiritual preparedness. You never know when you might need them and you do not want to be starting from scratch when it happens.
13 Comments on "Economy, Collapse, And The Interconnectedness Of All Things"
Plantagenet on Sat, 9th Feb 2013 11:21 pm
I’m surprised the stock market hasn’t crashed already—the surprise negative data in GDP during Q4 2012 is a bad sign for the economy.
J-Gav on Sat, 9th Feb 2013 11:32 pm
Though much is valid in what you say, Gary, telling people what to do with their cash implies that they actually have some. Less and less the case for everybody who isn’t ‘Somebody’ … everywhere. Ditto for people who have land to plant gardens on.
A Big Crunch is on the way, no doubt about it. Pinning it down to 60 days seems slightly more problematic but who knows? Then they’ll have to declare war on Venezuela I guess.
Not sure how effective the ‘inform people’ mode can be at this stage, it’s probably too late whether it’s 60 days or 600 anyway. I’ve been there and very few want to know.
We’ve disastrously frittered away so many good post cold-war opportunities to build a new form of internationalism that I fear it’s too late now to make up for it. Besides, no historical empire I’m aware of has ever done that before so why should we expect them to start now?
Still, working on whatever sort of resilience is available to develop, where people live, will always be good advice. The name of your site is Collapsing into Consciousness so, on the ‘spiritual’ side there, I suggest getting a $30 7-metal Tibetan singing bowl to twang when it feels like your head is about to explode. Brings you back down to a more basic level of consciousness, at least for a few minutes.
BillT on Sun, 10th Feb 2013 2:44 am
The powers that be know how close to total collapse the whole system is. That’s why they are frantically printing money and committing financial suicide in an effort to keep it BAU for a little while longer. Sooner or later, one of the weak points is going to crash and the dominoes will fall quickly. It almost happened in 2008, and Greece almost fell last year. It will only take one black swan to land on that first domino. Prepare now!
Dmyers on Sun, 10th Feb 2013 3:55 am
The handwriting is on the wall, written by insiders. That’s an untrustworthy sort you can trust on this particular matter. When the dominant morality is “git out whal the gittn’s good,” and you see people gittin’ out, than that must mean the gitten’s good.
The government has been buying up ammo to mow us down in case that becomes necessary. What could make that necessary? Total economic collapse. Seems there is good reason to believe that particular hell is imminent.
MrEnergyCzar on Sun, 10th Feb 2013 4:58 am
This sounds very similar to preparing for Peak Oil…
MrEnergyCzar
poaecdotcom on Sun, 10th Feb 2013 6:29 am
For a more expansive to do list, get your preparedness grade here.
Click my name and go to report card. good luck.
ken nohe on Sun, 10th Feb 2013 7:04 am
Good preparations, then! But sorry the “world” won’t crash and you will be out for eating your endless stock of stale pastas for next couple of years.
Not the the world won’t crash even. We are already in a slow process crash but it will take a long time and by the end very little to see except maybe for a war here and there which will accelerate the process for some and slow it down for others.
An advance society is like a place: It cannot fall off the sky. But they are ways, usually complicated where it can go down and mostly they are well known. In each phase you go down one step until you are ready for the ultimate plunge. Greece is a very good example of a society which cannot reform itself. Egypt at a lower level is a good one of a society overwhelm by population and the lack of resources, mostly land and energy. Lower still you have Afghanistan, a tribal country which cannot consolidate and at the bottom you have Somalia, with no country or institutions left at all.
It would take a long time for the US to go down to the level of Greece, decades probably. From there the road to Egypt is even longer and Afghanistan is not possible because people would find ways to organize themselves better long before. This said, the US is a large and complex place. Parts of Appalachia could revert to the stone age and consultants in Washington DC would not notice or care. In this way, the core will shrink, but it can shrink for a long time and there will still be enough left for the elite to live comfortably. No need to stock up on dry food for them!
Arthur on Sun, 10th Feb 2013 10:11 am
“It would take a long time for the US to go down to the level of Greece, decades probably”
That would be true if US’ economic partners will accept the dollar as reserve currency for decades to come, ignoring for a moment resource depletion issues. If however the ‘partners’ dump the dollar, it will become clear for all to see that the US will be even worse off than Greece. Greece is a real nation, with a lot of hidden solidarity capital, now coming to the surface. There is now a parallel ‘for Greeks only’ society emerging, a bit like the muslim brotherhood, with grass roots structures, that could evolve into a sort of national socialist model that will replace the liberals and socdems in Athens. The US however has a much lower solidarity capital (diversity) and the devastation will be accordingly larger. I do not think the ‘partners’ will be so kind to wait for decades to pull the plug.
Veggie Man on Sun, 10th Feb 2013 12:26 pm
I am not an economist and I know nothing about the stock market or World currencies.
However, from a common sense angle:
1)We are talking first and foremost about a World currency collapse of the dollar and the USA.
2)World currency financial assistance can be given to a small country suffering insolvency.
3)Unfortunately the USA IS the World currency provider.
4)If the dollar World currency providers currency continues to be gradually sidelined by: China,India ,Japan,Brazil,Russia for example (notwithstanding the huge risk these countries take in loss of exports to the American people) a stock market crash would be possible and this could happen in 24 hours of trading.
BillT on Sun, 10th Feb 2013 3:49 pm
Veggie, you are correct, but the Us does NOT import enough anymore to make a big dent in their exports. The Us will still need things, but they will be paid for in gold or silver or other barter items, not dollars.
ken nohe on Mon, 11th Feb 2013 2:29 am
Yes, this is exactly my point: When a society crashes, it goes down to a slightly lower level of organization, not through the floors down to the basement and yes, Greece is a good example.
The US is a far more complex country and the result would be more messy. Some areas would fall into lawlessness, but this is already the case in places like Detroit. Not much lower to fall there, I guess. But the Amish would probably notice little changes. In-between is of course the interesting part. More precisely, what would happen to suburbia? Kunstler is to my opinion right but too extreme. There are arguments for a re-concentration in old downtown areas but these movements take decades, not years. E-commerce is already devastating the big box “environment” and lack of public money will insure that low density infrastructure declines faster than urban lifelines. But these geo-demographic changes are slow. (From a human point of view of course. From a geological one, it is the blink of an eye.)
What could change everything is a war. The US has no real adversary for now but tensions between Japan and China or on the Korean peninsula are frightening. The rhetoric ratchet up with no obvious brake available. Contrary to what most people believe, I do not think that a major war is likely to destroy the world but it would bring 50 years of misery to some parts of the world… and prosperity to others. Such is the fate of complex systems.
poaecdotcom on Mon, 11th Feb 2013 4:05 am
My problem with gradual collapse is the big question….
The big question is of course: What is the minimum EROEI needed to support our current complexity?
Professor Charles A.S. Hall, father of the EROEI concept, estimates the Hierarchy of “Energetic Needs” for Society below :
Hierarchy of “Energetic Needs” for Society
Activity Minimum EROEI required
Extract Energy 1.1
Refine Energy 1.3
Transportation 3
Grow Food 5
Support Family 7
Education 9
Health Care 12
Arts 14
Unfortunately, it is appears likely that the EROEI of unconventional oil and its ilk is insufficient to support a complex enough society to enable its extraction. There is less and less net energy available to support the necessary complexity of our society.
its all about energy and in our trade based society, its all about oil
ken nohe on Mon, 11th Feb 2013 5:24 am
Good point but pre-oil societies did enjoy art so it must be more complicated. I believe the answer is the % of people having access to these services. As EROEI goes down, this percentage does too, but this does not imply social collapse, just a less rich and less equal society.