I've moved!

I don't plan to update this blog much anymore. Instead my rants and musings will be over at Into the Grey Zone. My son is also throwing up a few screeds there as he works his way through nursing school.

Take care all!

Change we can believe in?

It's February and the market is down almost 25% since Obama was elected. The major financials have lost over 30% of their remaining value since Obama announced his non-plan to "save" the banks two weeks ago. We've got people like Rick Santelli on CNBC Thursday doing a major league rant about government subsidizing 'bad behavior' and calling for a "Chicago Tea Party". Meanwhile GM seems to have written off Saab and thrown it to the wolves/creditors. And today's market is just barely above its 2002 low of 7286. That's before adjusting for inflation. The volume of wealth that is being destroyed around us is monumental and we are not going to be able to pay for everything we think we deserve much longer. In fact, at the pace we're destroying wealth, the United States will be a very backward nation in a few more years.

At the same time, Russia has bought over 90 tonnes of gold so far in the last 2 years and now gold has breached $1000 per ounce again on fears that the only way out of this mess is all of the major governments performing hyperinflation (a suggestion actually made by a Japanese parliament member).

In California they finally have a budget with about $15 billion in spending cuts, $14 billion in tax increases, and $11 billion in bonds (borrowing... IF they can find anyone willing to loan them money at a rate they can afford to pay back). In practical terms for California this means 1 in 5 California Public Workers to be Fired.

Meanwhile unemployment increased again, giving us 4.99 million unemployed, as the government is quick to point out. But the news media aren't buying the decimal point spin baloney - Nearly 5 million are getting unemployment benefits. But that unemployment safety net has big holes in it these days with lots of people falling through the cracks. How many are really unemployed? No one really knows but the BLS does take a stab at a guess in table A-12, line item U-6 of their monthly report. The current guess is 13.9% of the economy, almost double the "official" unemployment figure.

The Big Three in Detroit are still in trouble. GM Bankruptcy Prospects Still Loom and Chrysler is begging or more government handouts while they remove every other lightbulb in their offices and cut the thermostat 4 degrees to try to save a few more pennies. I don't think that's going to save them.

Finally, Texas has joined the club of states telling Washington to shove it.

"WHEREAS, Today, in 2009, the states are demonstrably treated as agents of the federal government; and WHEREAS, Many federal laws are directly in violation of the Tenth Amendment to the Constitution of the United States; and WHEREAS, The Tenth Amendment assures that we, the people of the United States of America and each sovereign state in the Union of States, now have, and have always had, rights the federal government may not usurp; and WHEREAS, Section 4, Article IV, of the Constitution says, "The United States shall guarantee to every State in this Union a Republican Form of Government," and the Ninth Amendment states that "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people"; and WHEREAS, The United States Supreme Court has ruled in New York v. United States, 112 S. Ct. 2408 (1992), that congress may not simply commandeer the legislative and regulatory processes of the states; and WHEREAS, A number of proposals from previous administrations and some now pending from the present administration and from congress may further violate the Constitution of the United States; now, therefore, be it RESOLVED, That the 81st Legislature of the State of Texas hereby claim sovereignty under the Tenth Amendment to the Constitution of the United States over all powers not otherwise enumerated and granted to the federal government by the Constitution of the United States; and, be it further RESOLVED, That this serve as notice and demand to the federal government, as our agent, to cease and desist, effective immediately, mandates that are beyond the scope of these constitutionally delegated powers; and, be it further RESOLVED, That all compulsory federal legislation that directs states to comply under threat of civil or criminal penalties or sanctions or that requires states to pass legislation or lose federal funding be prohibited or repealed; and, be it further RESOLVED, That the Texas secretary of state forward official copies of this resolution to the president of the United States, to the speaker of the house of representatives and the president of the senate of the United States Congress, and to all the members of the Texas delegation to the congress with the request that this resolution be officially entered in the Congressional Record as a memorial to the Congress of the United States of America." Source

Pass the ammunition, boys. This may get interesting.

What Does a Likely Collapse Scenarios Look Like?

The most likely short term collapse scenario that I can envision is similar to what was described in Lessons From Argentina's Economic Collapse (PDF). That would be a financial implosion so drastic that it basically either collapses central government or leaves central government so ineffective that it might as well not exist, at least in terms of providing services. The least likely short term collapse scenario that I can envision is global thermonuclear war. But saying it is the least likely doesn't mean you should ignore it. It simply means that an extraordinary number of conditions would have to line up in the short term for that to occur.

So let's talk about that financial implosion, which may be what is rolling around us right now. What would it look like? It would look like a long term deflationary or inflationary spiral, where wealth is sucked out of the middle class, and where financial ruin causes basic services to slowly fail. Infrastructure failures would not be immediate but would become progressively worse over time. Regions closest to the seats of power would most likely be the last to experience degradation of services, simply due to those in power opting to preserve those services closest to themselves. Regions furthest would experience degradation and eventual loss of services sooner.

Along the way you would see a collapse of the current economy. Part of that collapse would entail bankruptcies and foreclosures for many people, basically creating an entire new class of refugees inside the United States. What people are unwilling to face is that real unemployment levels in the United States could go beyond 20%. The real levels (recorded in Table A-12, column U-6 of the monthly employment report from the BLS) are already well into the teens. As of December 2008 the official number through the end of November was 7.2% but the real number (before "adjustments") was 13.5%. When the January numbers are announced, it will likely be even worse with no end in sight. So what you can count on in an economic collapse would be increasing numbers of the homeless. Update: The January numbers which now stand at 7.6% "adjusted" and 13.9% unadjusted.

However, one thing we can guess about the majority of homeless, is that they will congregate in shantytowns near urban areas. That's a historical trend that you can see over the last 100 years very clearly. Take a look at the shantytown photos of Central Park during the Great Depression or of other cities around the United States. Or examine shanty towns in third world nations. There is tremendous drive to be in or near cities since cities offer the highest probabilities of support services for the unemployed and homeless.

Another thing we can guess about a serious financial collapse scenario, based upon looking at recent financial collapses in other nations around the world, is at least a partial reversion to barter as a means of exchange. In a barter economy, money may hold less value than actual goods or services. This will be particularly true once serious inflation or hyperinflation kicks in but during a deflationary period, such as the current one, holding cash and dealing in cash (not credit) may be the best option. Another thing you will see arise is more black market activity, in order to escape heavy taxation. Barter, although it is supposed to be reported for taxation purposes, appears to rarely actually be reported. And cash transactions are also rarely reported, precisely because they are in cash and cannot easily be traced.

Also, because of the disruption of trade, you would likely find the availability of various goods and services to vary widely throughout the year. Facing high prices is one thing but facing a total inability to get certain goods when you need them could be life threatening.

A final key element you are likely to see in a financial collapse is a general increase in violence. This will come in three primary forms - increased random local violence, increased robbery and theft, and the possibility of very organized violence. An example of the latter is the level of organized violence taking place in Mexico's northern states due to its ongoing drug war. More Mexican police and soldiers have died in that war against criminal gangs than the US has lost in Iraq. Note that as of the date of my writing this article, the US has lost 4343 lives in Iraq, while Mexico lost 5612 lives in 2008 alone to its current drug war. Approximately 1 in 19000 Mexican citizens will die to the current drug war there, but since the drug war is mostly confined to the northern border states, the actual danger to citizens of the northern states is far higher than that national number implies.

This same sort of problem is likely to occur in the United States. Certain regions could become hotbeds of violence, either through the actions of organized crime or the actions of disgruntled citizens who choose to act against an unsupportive state.


Thus, my view of a "most likely" short term collapse scenario entails financial dislocation of possibly increasing levels,
economic instability, shortages of goods and services, and increasing levels of sporadic violence. Such a situation, like the one that Argentina faced, has a surreal quality to it - for much of the time things appear semi-normal, punctuated by serious breaks in which some other factor makes it clear that the situation is anything other than normal.

So what can someone do in response to this? I'll consider that question in another post, looking both at the ideal response and a minimal response.

What's Wrong with "Coming Chaos? Maybe Not"

Preface: I recently decided to write about collapse scenarios in response to a really bad article over at TOD. But as I began working through how to present this problem, I realized that it was far too large for one article and might need several of its own. So watch for more articles on the general topic of collapse scenarios over the next few months. This first article addresses the flaws in the article that I recently read over at TOD.

One of the problems with the recent Coming Chaos? Maybe Not article at TOD began with horrendous assumptions. Among those assumptions is the time worn cliche that "doomers" are preparing for "Mad Max" and nobody can survive "Mad Max". Here's the opening statement from that article: "A sizable subset of what some on this site call “doomers” are convinced that the demise of the petroleum economy will bring social breakdown and a violent struggle of all against all." Such a blatant strawman should never have been put in any article by anyone seriously researching the "doomer" community, yet the Coming Chaos? Maybe Not article began with that assumption then attempted to disprove it when it wasn't even valid!

Instead the article tried to focus on "peace" as if peace were some natural condition of the red fanged ape known as homo sapiens. Peace is not at all a normal condition amongst humans but cooperation is, amongst subsets of humans. The average human being in industrial society today does not have a personal friends list much larger than that of his hunter gatherer ancestors. Tribes ranged in size from as low as a dozen to as high as several hundred. These tribes functioned as a unit and the evidence is very strong that there was usually "peace" within the tribe. But between tribes? Not at all! The murder rate amongst the hunter-gatherers was much higher than our current murder rate. So much for the idyllic neo-Romantic myths about primitive people!

Both homo sapiens and our ancestors before that have been competitors for resources in their local environments. Homo sapiens nearly died out, dropping perhaps as low as a few thousand members about 170,000 years ago before growing again. Along the way, homo sapiens drove homo neanderthalenthis into extinction as well as assisting in the extinction of other large mammalian species. During this time, both as hunter-gatherers societies and later as agrarian civilizations, we have engaged in larger scale violence. Amongst hunter gatherers this tends to be brief and decisive because the basic day-to-day needs tend to curtail professional soldiering. But as our agrarian civilizations grew, our propensity for violence crystallized in the form of professional armies that would then wage war against other agrarian societies.

So there is no basis for believing that homo sapiens is an inherently peaceful species. We cooperate when we believe it suits us and we fight when we believe it suits us. Those who think otherwise can go research the anthropology science themselves but that is the basic conclusion that they will find.

And this is born out by further examination of the historical record, clear to the present day. Any claim that we are suddenly different is a raw unsupported assertion that attempts to ignore evolution. Evolutiuon would not produce that large a change in human behavior in that short of a time. And further, one needs only look at Somalia, Yugoslavia, Argentina, Cambodia, and many other nations in just the last 50 years to see that we are what we have always been - violent primates, red in tooth and claw.

Thus, knowing this as a fact, one must incorporate this fact into any plans one makes to survive various collapse scenarios. If one fails to incorporate this fact into survival plans, then the plans are worthless from the moment of conception.

So knowing that the "Mad Max" scenarios are pure myth used as strawmen by people who should know better, and knowing that homo sapiens is completely capable of violence at a level that produces atrocities, what are the likely collapse scenarios? I'll discuss those another time.


P.S. For those of you looking for an interesting read from inside one recent short term collapse event, try reading Lessons From Argentina's Economic Collapse (PDF) and Despair In Once Proud Argentina. These are both first hand accounts of life in a nation experiencing a partial societal collapse. Argentina is a western nation, once prosperous, with values not so different from our own in the United States. These reports both chronicle very recent events in that nation. While we can all hope that the United States does not experience this sort of thing, failure to plan for it is flatly irresponsible and could even be categorized as suicidal and deranged.

Where is Texas Going

Living in Texas and occasionally commenting about it, I get some Texas related responses now and then. Recently Speedy asked what I thought was in store for Texas over the next several years. I don't have a single scenario but rather look at a range of scenarios for Texas (or any other location for that matter).

My optimistic scenario says that the US will get its financial house in order, slowly but painfully, learn to live within its means, and stop acting like a global empire. Those changes would produce dramatic changes here at home, not the least of which would be a more local focus and stronger control of the US/Mexican border. Stronger control could work out well if Mexico gets its own house in order as well by allowing both nations to create a fully operational guest worker program that avoids the illegals problem while providing access to jobs in the US (and Mexico).

But my pessimistic scenario is far closer to what is currently unfolding around us. Mexico is sliding into collapse as the government loses more and more control of anything other than Mexico City, as oil revenues plunge, and as dollars from the US dry up. Meanwhile the US seems hellbent on finding the worst of all possible solutions to its own fiscal crisis. Downstream this will result in one of two options occurring. Either the US will become a fully fascist state (instead of a simply proto-fascist state) or the US will collapse entirely. A fully fascist US would be a bad thing for Mexico regardless. Either Mexico would get absorbed into a greater political entity to be controlled from Washington, or the border would be sealed and illegal immigrants rounded up and dealt with, one way or another. Neither of those are desirable outcomes but they are what might happen if things implode badly.

On the other hand, a collapse by the US might be the best thing to happen to Mexico. There is a high probability that Texas would form the nucleus of a new nation and that nation would have extensive ties to Mexico, in all probability. That nation could consist of any part of Texas, the states immediately surrounding Texas, plus possibly Alabama and Georgia.

In any event, the ongoing events thus far simply indicate that we're all going for a ride that no one in the US has ever been on before. Either we're going to find fiscal sanity, social insanity, or we're all going to part ways. None of those scenarios is "business as usual" for Mexico by dumping its social issues over the border, so Mexico ought to begin facing those problems right now. Of course, they won't do that, which will make the ensuing nightmare all the worse.