So Exactly WHAT Are We Preparing For... And Why? Predictions Supported By Analysis Welcome

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Subotai
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So Exactly WHAT Are We Preparing For... And Why? Predictions Supported By Analysis Welcome

Like a lot of the regular visitors to this forum, I spend some time thinking about emergency/survival preparedness and stacking physical metal.  Occasionally, though, I wonder - am I preparing for the wrong event?  Does it logically follow that civil society collapses as the "Great Keynesian Experiment" reaches its denouement?  Let's put our skeptic's hat on in this thread and apply some serious analysis to the situation.  I'm not necessarily advocating any particular view on this, I just want to create a marketplace of ideas, supported by realistic assumptions or credible evidence.  

I will get the ball rolling:

1.  The Worldwide Debt Crisis.  If this is the cause of the End, policy reactions are well documented:  an orgy of money-printing to monetize all debt worldwide (a/k/a a currency war) or explicit default/contagion that brings down our global financial system.  Leaving aside for the moment which endgame is preferable for the average American (default, definitely), what results follow from each outcome?

    A.  Monetization.  Hyperinflation.  Prices skyrocket.  Panic, but for how long?  I have a friend that lived through hyperinflation in Ukraine, and she lived to tell the tale.  What hyperinflation will do, primarily, is spread the pain of debt default among all citizens rather than simply creditors.  They will be paid back in nearly worthless dollars, but we will all be paid in nearly worthless dollars by our employers too, if we have one.  It could happen, but I think total lawlessness would be unlikely for the following reasons:

   a.  Law and Order.  Government could still pay police, fire and other vital service providers, albeit with inflated dollars.  Even in Greece, where austerity has led to significant budget cuts (not necessarily required in a hyperinflation scenario) law and order hasn't collapsed.  Times will be tough, for sure, but I don't see a collapse of basic law and order in the cards.  It will be impaired, sure.  Crime will skyrocket.  But I don't see governments, local, state or federal, in structural danger.

  b.  Power and Water.  Worst case scenario, the government could seize power plants and transmission facilities if utility companies refused to provide service.  Occasional interruptions would be likely, but massive outages would be avoided at all costs.  There is no reason to believe the government couldn't run these facilities with the help of employees, which would be more than happy to pitch in.. for a fee. 

  c.  Economy.  There will certainly be businesses that won't adapt to a hyperinflationary environment, but there's no reason to assume it would cause economic freefall that would fatally wound the government.  Other countries experiencing hyperinflation did not become failed states, just very uncomfortable ones - (Weimar, Zimbabwe).  I think it's safe to say that people selling goods will be less likely to part with them, which will lead to some market dislocations, at least until prices stabilize, or a generally accepted alternate method of payment develops, probably a mixture of barter and precious metals.  While there could be scarcity of some resources for some period of time, it is a bit longer of a stretch, in my opinion, to assume the collapse of law and order.  The government will move heaven and earth to get everyone fed, and will still have the resources to do it.  We still possess the world's reserve currency, and no one can force our government to pay back loans/interest it doesn't have, let alone in a more stable currency.

  d.  Political.  Real danger here.  Idle hands are the tools of the devil.  Enough people unemployed, waiting in line for food could cause some real problems, especially if the police (as they inevitably will) mishandle the situation.  If a political movement coalesces around some radical solution, it could spread rather quickly and displace the politicians we know and love.  Little problem there... history suggests it might be even worse that what we've got. 

  e.  Psychological.  The most severe danger.  Panic begets panic, violence begets violence.  However, the ordinary American simply has no appetite for violence, real violence.  People tend to mind their own business as long as they aren't starving.  Until someone explains to me how we suddenly can't feed each other, I don't see how a major panic develops.  What will happen is everyone trying to convert cash into hard assets, all at the same time, which will cause some tension, to be sure.  I could see things getting out of hand, but someone will have to explain to me why it is likely, much less guaranteed, that this will occur.

Edited by admin on 11/08/2014 - 06:06
Subotai
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Default - Why Would This Mean The End Of Civilization?

I am not just unafraid of a worldwide, universal debt default (the ultimate contagion), I'm actually in favor of it, as long as it is accompanied by universal debt forgiveness for all citizens of the world.  I think it offers us the cleanest path into what's next... whatever that is.  Aside from some isolated, non-systemic tragedies (Jamie Dimon will lose his job!), I don't see how this isn't to the benefit of the overwhelming majority of us.

So folks - tell me why it would lead not to explosive economic growth and prosperity (as I tend to think it would) but instead will lead to the end of Western Civilization necessitating the need for each of us to resort to subsistence farming.  

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Debt Jubilee

I do not know if you are familiar with the concept of Debt Jubilee, but it comes from the Bible where the idea is that every 7 years all debts are forgiven.  No person would lend more than that which could not be repaid with interest in less than 7 years.  This is the idea behind our current bankruptcy laws and being able to file only every 7 years.  Student loans are the first departure from this avoidance of life enslavement that the founders of the country were all too aware of.  

I agree that a Jubilee would not be a bad Idea.

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It doesn't come from the

It doesn't come from the bible, it happens to also be discussed in the bible.

What I didn't understand about Keenes version of the jubilee as discussed on BBC Hardtalk, is will he give the same amount of money to all people, and only force debtors to pay off their debt? Or will he only give money to debtors and force debtors to pay off their debt?

Returning to the topic, I think we'll get somekind of slow grinding action for a decade. Especially in the rich areas/countries. Society will not collapse but turn into more of a police state with more controll. A trend that predates the crisis.

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Looking at mini disasters

Looking at mini disasters like Greece, or Zimbawae, or even Argentina don't compare to what could happen in a large scale collapse in the US.

Law and order ?  It's barely holding it's own right now.  When the economy truly hits the skids, it will be virtually nonexistent.  All you have to do is look at the clusterfvk at New Orleans/Katrina a few years back to see how the govt will react.....local LEO's will be taking care of their own families, and without some other State to import help from, ( which there won't be if it's a national situation ), then there simply won't be any law and order.

What I am prepared for, and am continuing to prepare for, is to be able to live a more self sustainable lifestyle.  Unless some really cheap, and easy to use (for transport) type of energy comes along, I think we've reached "peak civilization".....the whole climb from less than a billion folks on this planet to nearly 7 billion has come on the back of cheap energy (oil).  It's fairly clear to me that the cheap oil is gone, and the expensive oil is what is left, and that is going to mean a far different life in this country going forward.

Debt was fairly sustainable as long as you could grow your way out of it, but I think those days are over.  Every period of growth as been associated with an increase in the use of energy.  So, without an increasing supply of it, growth won't happen.....and then compound interest on debt comes in to bite us on the azz.

The folks best able to ride out the coming decline are those position to do as much as possible for themselves....grow their own food, control their own water source, produce their own energy, and so on.....AND ( this is a biggie ), have actually gone thru the learning curve of doing it, versus thinking "yeah, I can do this or that if I have to"......which is a great way to starve to death if the supermarket is no longer there to back you up.

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Subotai wrote: So folks -

Subotai wrote:

So folks - tell me why it would lead not to explosive economic growth and prosperity (as I tend to think it would) but instead will lead to the end of Western Civilization necessitating the need for each of us to resort to subsistence farming.  

Hyperinflation in the US (which I think is coming), means we will see the dollar's value decline at an ever-increasing rate (i.e., inflation following an exponential growth curve).  Throughout this time, income will not come close to keeping up with this decay, and production will eventually stop.   

Think about this.  The average city only has 2-3 days' worth of food on had at any given point.  We depend on producers and logistics (i.e., trucks, trains, etc.) for our daily survival.  If hyperinflation were to set in, and that pipeline were to be cut off, how long would "civilization" last in Chicago or New York?

Maybe it gets that bad.  Maybe it doesn't.  Regardless, my plan is to hope for the best--but prepare for the worst.

__________________

"For you did not receive the spirit of bondage again to fear, but you received the Spirit of adoption by whom we cry out, 'Abba, Father.'" -- Romans 8:15

Subotai
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I agree, hyperinflation is the worst case scenario

Hyperinflation could cause serious economic paralysis, I agree with that.  And don't get me wrong, I'm not saying that our civilization can't collapse, I'm just looking for peoples vision of the A to B... how it happens that hyperinflation and/or mass defaults lead to societal collapse.

Things got pretty bad in Argentina, from all I've read.  But they survived.  And they didn't have many of the advantages we have - a constitutional government with over 200 years of legitimacy behind it, the world's reserve currency, and a debt no other nation could ever hope to collect from us.  Not to mention we're the creative engine that keeps the world economy moving - we may not build anything anymore, but we dream up most of the products.  And we have tons and tons of wealth - and not all of it is paper.

I don't agree that law and order is on its last legs.  Crime statistics are stable.  New Orleans was an outlier, in my opinion, because 1) It has always been an inordinately corrupt city; and 2) people with any means and a brain in their head got the hell out of there, so the police weren't really protecting their community anymore.  And as bad as things got, they only stayed bad for a few days in terms of L&O.  Certainly the suffering there is not to be minimized, but law and order was restored in pretty short order.

I fear the effect of long-term, systemic unemployment more than currency debasement or default.  We simply can't hold on as a nation built on consumption when 20% of our workers are on the sidelines.  We don't have the social safety net (a hammock, really) that Europe has, people will not just stand by forever without shelter and enough to eat.  How long before one of these tent cities outside our major metro areas spawns a leader that loots a grocery store?  Or what happens if a group materializes that targets bankers or financial institutions out of sheer frustration?  We are an armed people.  Combine that with unemployment and a clear sense of who the enemy is and things could get very, very ugly.

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I am preparing for all of

I am preparing for all of those events to some degree, but not going all in on any one TEOTWAWKI scenario.   I think the FERFAL blog provides the best balanced approach to modern suburban preps.  On top of our doomsday preps, our big focus right now is preparing to put 3 children through college over the next five years!

If I had to prioritize.

Eliminate debt.  Diversify your assets.  Have a plan for the most likely or most devastating possibilities and accumulate the associated resources, materials, supplies, skills, relationships, etc.  Then have a Plan B, and a Plan C...

I find it somewhat amusing that what we now consider doomsday prep was just plain common sense a few generations ago!

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The main issue for me

The main issue for me is world monetary system collapse, and elimination of the $US as world reserve currency.  As a result I expect to see supply disruptions, with dramatically increasing costs on many necessary (and not so necessary) items.  Besides wealth preservation, our focus is on extending our earthquake preparations for an extra few months of supply disruptions, increasing our food production capabilities, and purchasing some items that we normally would have delayed purchasing for a year or two longer.  I'm not expecting a Mad Max world here in the States, but do expect cities that are prone to mob violence to experience a lot more as things deteriorate.   I do think the next election is the United States' last chance to avoid catastrophe though.  If America doesn't wake up and hand out pink slips to at least 95% of the rodents in DC, then I will have to conclude there are not enough functioning brain cells left in the population to avoid total catastrophe (and will at least double my preps).

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