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Page added on February 4, 2016
The Opaque Process Of Collapse
The ultimate cost of protecting the privileges of the few at the expense of the many is the dissolution of the social order that enabled the rule of the privileged few.
When I write about the demise of unsustainable systems, readers often ask me to describe the collapse I see as inevitable. This is a tough assignment, as there are as many kinds of collapse as there are systems: fragile ones can collapse suddenly, and resilient ones can decay for years or even decades before finally imploding or withering away.
Another way of describing collapse is: complex systems become much less complex.
Certain features of modern life could collapse without affecting everyday life much–for example, the derivatives markets could stop working and the impact would be enormous on those playing financial games and those who entrusted money to the gamblers, but the consequences would be extremely concentrated in the gambler/speculator class. Despite the usual cries that financial losses in the gambler/speculator class will destroy civilization, the disruptions and losses would be widely dispersed for the economy as a whole.
Other collapses–in food or energy distribution, digital communications, etc.–would have immediate and severe impacts on daily life.
My three primary models of decay and collapse are:
1. Historian David Hackett Fischer’s masterwork The Great Wave: Price Revolutions and the Rhythm of History (given to me by longtime correspondent Cheryl A.)
2. Thomas Homer-Dixon’s The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization
3. The decline of the Western Roman Empire (the process, not Edward Gibbon’s epic 6-volume history). My recommended book on the topic (a short read): The Fall of the Roman Empire
Fischer’s primary thesis is that society and the economy expand in times of plentiful resources and credit, and this increased demand eventually consumes all available resources. When demand exceeds supply and excesses of credit reach extremes, inflation and social disorder arise together.
Though we have yet to see inflation on a global scale, it is inescapable that demand will soon outstrip supply of essential resources and that the global credit bubble will pop, depriving the economy of the means to buy resources regardless of cost.
The Upside of Down describes the process of increasing complexity adding fixed costs to the system, and the way in which this diminishes returns: more and more labor, capital and resources must be devoted to maintain production. At some point, the yield is negative–costs are higher than the output.
At that point, systems start unraveling, and people simply abandon costly complex systems because the means to support them no are no longer readily available.
This is similar to John Michael Greer’s process of catabolic collapse, in which costly complex systems go through a re-set to a much lower energy consumption and less complexity. The system stabilizes at that level for a time, and then as costs rise and resources dwindle, it goes through another downsizing.
The Western Roman Empire (along with the Tang Dynasty in China) is the premier historical template for slow decline/decay leading to an eventual collapse. (Recall that the Eastern Roman Empire, the Byzantine Empire, endured for another 1,000 years.)
Depending on how you slice it, Western Rome’s Imperial decline took a few hundred years to play out. Unusually competent and energetic leaders arose at critical junctures in the early stages, and these leaders managed to stem the encroachment of other empires and “barbarian” forces and effectively re-order Rome’s dwindling resources.
By the end, The Western Roman Empire was still issuing a flood of edicts to the various regions, but there was no one left to follow the edicts or enforce them: the Roman legions existed only on parchment. The legion had a name and a structure, but there were no longer any soldiers in the field.
A number of real-world examples of decline/collapse are playing out in real time. Venezuela is one; Greece is another. Both demonstrate the opacity of the process of collapse; it is not as clear as we might imagine. A recent first-hand account of a sympathetic visitor to Venzuela captures the flavor and despair of slow-moving, uneven collapse:
Venezuela: Is There A Driver At The Wheel? (via Arshad A.)
“A dollar traded in the bank officially, or pulled out of an ATM machine, however, is worth about six bolivars only. This is how big the gap is between the black market rate (600-700 to the USD) and the official rate.
Despite the fact that the price of petrol is incredibly cheap, the government has not raised the prices even a slight amount, although this would create revenue for the state and despite the health risks of pollution.This suggests that the government is engaging in populism by refusing to take a step demanded by common sense due to its need to get reelected in December when parliamentary elections will take place.
One can easily get assassinated, as Venezuela has one of the highest homicide rates in Latin America and there are enough people who would not mind killing someone for the fee of $200.
However, when there is massive violence in the streets and many in the government seem to be corrupt, while a sense of anarchy prevails and it seems that the government turns a blind eye to violence when it takes place by local bandits, preferring to continuously blame outsiders, then there is indeed a source for concern.”
Reports out of Greece demonstrate the dynamics of decline and collapse: medicines are unavailable, pensions have been slashed and many households are now below the EU poverty level in income.
But we also hear that life goes on; the social order does not appear to have broken down into anarchy.
Clearly, the Greek economy has contracted, and millions of households have less income than they did before. But has daily life broken down? Have the institutions of public order collapsed?
Perhaps not, but what is collapsing is public trust in these institutions’ ability and willingness to manage the financial crisis and the political disorder that follows.
There is no good solution to the multiple crises in Greece, and the small circle of financial and political elites that benefited from Greece’s entry into the Eurozone remains largely untouched by the crisis. When the status quo is rigid and unbending, the odds of sudden collapse rise: what doesn’t bend will snap.
The process of collapse is thus heavily dependent on how the financial and political elites respond to the decline of resources and credit. If they manage the contraction skillfully and absorb their share of the inevitable losses, then the re-set will likely be successful and the pain short-lived.
If however the ruling elites cling to every scrap of their power and wealth, and begin fighting over the spoils while forcing the underclasses to absorb the losses of the re-set, then the fragility of the system rises in direct proportion to the policy extremes being pursued by vested interests focused on protecting their privileges regardless of cost.
The ultimate cost of protecting the privileges of the few at the expense of the many is the dissolution of the social order that enabled the rule of the privileged few.
Charles Hugh-Smith of OfTwoMinds blog
22 Comments on "The Opaque Process Of Collapse"
jjhman on Thu, 4th Feb 2016 5:26 pm
This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper
Apneaman on Thu, 4th Feb 2016 6:18 pm
Baltic index slips below 300 points to record new low
http://uk.reuters.com/article/baltic-index-idUKL8N15J4GL
Davy on Thu, 4th Feb 2016 7:13 pm
“the fragility of the system rises in direct proportion to the policy extremes being pursued by vested interests focused on protecting their privileges regardless of cost.”
Unfortunately, it is too late for any kind of management of this coming global crisis. The priveledged can do little and what they can do is make the situation worse. Those of you who want to eliminate the privileged will gain satisfaction but little else. We are beyond options and locked into a descent. Equity is gone and with worse extremes to come.
Locally it is a different story. The privileged can be reduced for the health of all. Why is there a difference? The difference is related to the disconnect between the global and local. Globally the system is brittle and incapable of change. It will break not evolve. Locally we have a micro habitat that can evolve and adapt.
The global does matter because most all locals have been delocalized to a significant degree. This delocalization consists of all those support systems and resources that keep us alive in our local. The global cannot be changed from its trajectory hence the position of the privileged will remain. It is the nature of the beast.
The privileged are going to pay a big price in many local. It is the enlightened ones who make changes now by investing in their community that will have the best chance of survival. Those in the gated communities will face the wrath of the disenfranchised.
makati1 on Thu, 4th Feb 2016 8:11 pm
And when the 1% are taken to the guillotines. the reset will be complete. So be it.
That is what scares the 1% shitless. The 250,000,000+ guns in the hands of the 99%. They are trying every means to get those guns out of the hands of the 99% before the SHTF big time. But, they will fail. And any 1%er who does not get out of the country beforehand will die in their expensive shelters. So be it.
Apneaman on Thu, 4th Feb 2016 8:35 pm
mak, we don’t have any guillotines in N America and there won’t be any electricity to do them in the electric chair and bullets will be at a premium, so we will have to go biblical and stone them to death. I think it’s a fitting segway into the neo stone age. Added bonus of acting as a meat tenderizer.
makati1 on Thu, 4th Feb 2016 8:56 pm
Ap. maybe we will just go back to hanging? After all the noose is reusable, and cheap. All it takes is a nice sturdy limb or similar horizontal support about 10 feet off the ground. And, if the drop does not break the neck, you can just leave them hang until…
makati1 on Thu, 4th Feb 2016 9:40 pm
Collapse:
“The Worst Case Scenario Is Already A Reality”: Minnesota’s Mining Country Is “Melting”
“Obama Proposes $10/Barrell Oil Tax To Fund Government Transportation Spending”
“Congress Wants To Turn The US Postal Service… Into A Bank”
“Pictures From Obama’s First Mosque Trip: “Islam Has Always Been A Part Of America”
“Jimmy Carter: “Legal Bribery” Is Prevailing In The US Political System”
“A Distracted Society Keeps The Police State In Power”
“Welcome To The Recovery: 1 In 7 Americans (45.5 Million) Remain On Food Stamps”
“Mass Layoffs To Return With A Vengeance”
Today on: http://www.zerohedge.com/
onlooker on Fri, 5th Feb 2016 12:25 am
Yes we are at the point whereby the policy and decisions of the elite make any difference. Global collapse as has been said will be an uneven process both in time and space. But it is inevitable. Pity those places with a high population to resource base ratio. For those interested in an academic perspective on collapse read Joseph Tainter ” The collapse of complex societies” The costs of civilization now are far outweighing the benefits. We grew way too much both economically and in numbers
twocats on Fri, 5th Feb 2016 12:55 am
“pity those places with a high population to resource base ratio” [onlooker]
well, there’s always botswana
http://www.kalaharilionresearch.org/2015/01/16/human-vs-livestock-vs-wild-mammal-biomass-earth/
Davy on Fri, 5th Feb 2016 1:12 am
Kyle Bass Asks If China Is Fine, Why Are They So Worried About “Some Hedge Fund Manager In Texas”
http://www.zerohedge.com/news/2016-02-04/kyle-bass-asks-if-china-fine-why-are-they-worried-about-some-hedge-fund-manager-texa
China’s banking system, Bass told CNBC on Wednesday, is a $34 trillion ticking time bomb, and when it explodes, Beijing will need to plug the holes. $3.3 trillion in FX reserves will be woefully inadequate, he contends.
“Very few people have looked at what the cause of the problem is,” Bass begins. “They’ve let their banking system grow 1000% in 10 years. It’s now $34.5 trillion.”
Bass then goes on to note that special mention loans (which we’ve discussed on any number of occasions) are around 3% of total assets. “If they lose 3%, that’s a trillion dollars,” Bass exclaims. Ultimately, Bass’s argument is that when China is forced to rescue the banking system by expanding the PBoC’s balance sheet, the yuan will for all intents and purposes collapse. This is of course exacerbated by persistent capital flight.
From Kyle Bass:
“The IMF says they need $2.7 trillion in FX reserves to operate the economy. They’ll hit that number in the next five months. Those who think they can burn it to zero and they have a few years ahead of them, they really only have a few months ahead of them.”
“When they lose money in their banks they’re going to have to recap their banks. They’ll have to expand the PBoC balance sheet by trillions and trillions of dollars.”
“No one’s focused on the banking system. Focus will swing to it this year.”
“A Chinese devaluation of 10% is a pipe dream. It will be 30-40% by the end.”
Davy on Fri, 5th Feb 2016 1:14 am
missed some quotations above, my bad
Davy on Fri, 5th Feb 2016 1:23 am
More Chinese Ponzeezes
“More “P”onzi-2-“P”onzi Blowups “Just A Matter Of Time” In China, Experts Warn”
http://www.zerohedge.com/news/2016-02-04/more-ponzi-2-ponzi-blowups-just-matter-time-china-experts-warn
“this was just the type of event that could serve as the straw that breaks the camel’s back for a populace that’s already on edge thanks to a horrendous equity market meltdown and worries about the prospects for China’s currency and economy.”
“China’s plan in allowing online lenders to flourish was to allow additional ways for small business to get financing rather than turn to back-alley shadow bankers — a shady world that was flourishing outside of government control when P2P lending began taking off in China in 2012 and only 3 percent of China’s 42 million small business owners could get bank loans,” Bloomberg wrote on Wednesday. “Online lending was a way for the government to encourage further economic stimulus in an economy growing at the slowest rate in a quarter century,”
“I think the government allowed this all to happen because it was desperate to pump money into the private economy as all the other slowdowns started to happen,”
“And that means it’s “just a matter of time” before it happens again. Indeed, out of the 3,600 P2P operations in China, around 1,000 of them are deemed “problematic,” the China Banking Regulatory Commission says.”
“The harm is obvious. It’s going to damage financial reforms, cause social unrest and destabilize the regime to some extent,” Yang Dong, vice-dean at Renmin Law School and an expert on finance and securities law told Reuters this week.”
Davy on Fri, 5th Feb 2016 1:38 am
“Hyperinflating Venezuela Used 36 Boeing 747 Cargo Planes To Deliver Its Worthless Bank Notes”
http://www.zerohedge.com/news/2016-02-04/hyperinflating-venezuela-used-36-boeing-747-cargo-planes-deliver-its-worthless-bank-
“Millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela’s crippled economy.” But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela’s currency, the bolivar. The shipments were part of the import of at least five billion bank notes that President Nicolás Maduro’s administration authorized over the latter half of 2015 as the government boosts the supply of the country’s increasingly worthless currency, according to seven people familiar with the deals.”
steveo on Fri, 5th Feb 2016 8:48 am
“for example, the derivatives markets could stop working and the impact would be enormous on those playing financial games and those who entrusted money to the gamblers, but the consequences would be extremely concentrated in the gambler/speculator class.”
I wish that were so. The crash in 2007 demonstrated that a collapse in the derivatives markets causes the global credit system to lock up. In the US, most food production is by agrobusiness and is highly capital (read credit) intensive. Therefore a collapse in the derivatives markets would cascade into the food distribution system.
Apneaman on Fri, 5th Feb 2016 5:09 pm
Don’t cha just love the NYT’s. The single biggest paper to promote globalization going back to day 1. Thomas Friedman (The World Is Flat) et al. Now it’s all coming back to bite them (America) in the ass and it’s blame game time. Hey the Chinese are just another cancer culture now, but you got what you wanted – now choke on that chicken assholes.
What You Get When You Mix Chickens, China and Climate Change
http://www.nytimes.com/2016/02/07/opinion/sunday/what-you-get-when-you-mix-chickens-china-and-climate-change.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-right-region®ion=opinion-c-col-right-region&WT.nav=opinion-c-col-right-region&_r=1
onlooker on Fri, 5th Feb 2016 5:22 pm
You said it AP, all the Globalization enablers got exactly what they wanted a unruly beast that is China devouring the portion of the world the US could not as their economy fizzles out. Welcome to the Madhouse Earth circa 2016
onlooker on Fri, 5th Feb 2016 5:23 pm
Oh by the way nothing opaque about collapse it is a nasty brutish survival of the fittest ordeal.
Apneaman on Fri, 5th Feb 2016 5:39 pm
onlooker, yabut it’s all the systems fault – boat said so. No humans were involved and thus no humans are responsible. The system made me do it, your honor. Corporations are people too, so they are innocent as well.
Michigan officials warned of water, Legionnaires’ link
http://www.detroitnews.com/story/news/michigan/flint-water-crisis/2016/02/04/flint-water-crisis-legionnaires/79828822/
Boat on Fri, 5th Feb 2016 6:15 pm
apeman,
You might be twisting words again? Eh?
makati1 on Fri, 5th Feb 2016 8:57 pm
Guy, American’s are famous for blaming the other guy/country/system. It distracts from the fact that most of the world’s problems started in, and are supported by, the Empire of Chaos, America. No place on earth will escape the coming pain and death. Np place. It will especially be concentrated in the ‘indispensable/exceptional” country because they have the farthest to fall and are the least prepared.
Apneaman on Sat, 6th Feb 2016 1:09 am
Unusually warm Arctic winter stuns scientists with record low ice extent for January
http://mashable.com/2016/02/05/arctic-sea-ice-hits-record-low-for-january/#RWpH2uzQ8iqn
For the rest of the sheeple, stunned is the default operating mode, so the finding are meaningless. Super Bowl, now that’s what really matters. Arctic blue ocean coming and maybe as early as this september. Gomma kick the pain into high gear real fast.
Apneaman on Sat, 6th Feb 2016 2:17 pm
Record Missouri flooding was manmade calamity, scientist says
“Why was the flooding so bad? Most news reports blamed it on the heavy rain, but Robert Criss, PhD, professor of earth and planetary sciences in Arts & Sciences at Washington University in St. Louis, said there was more to the flood than the rain.”
“It was essentially a winter flash flood on a continental-scale river,” Criss said. “The Mississippi has been so channelized and leveed close to St. Louis that it now responds like a much smaller river.”
“Flooding is becoming more chaotic and unpredictable, more frequent and more severe,” Criss said. “Additional changes to this overbuilt river system will only aggravate flooding.”
http://phys.org/news/2016-02-missouri-manmade-calamity-scientist.html