For the last few days, we’ve been having an important discussion about the magnitude of the economic challenges in the west; if you didn’t read yesterday’s letter, I really encourage you to do so before proceeding because it’s important to understand why the west has truly passed the point of no return.
For those wanting to follow news of what is happening in Greece today (in English):
Is the home of the birthplace of civilisation going to be the home of the start of the destruction of civilisation?
The same article was posted at ZH yesterday. While the topic itself isn't exactly new, the article was valuable in that it starkly laid out the very few choices that we have as a society in the near future...and the consequences of those choices are sobering, to say the least.
FWIW, I don' t think that the spoiled members of the FSA are going to take austerity very well and, for that reason, I think that TPTB will try to kick the can down the road as far as possible. That's what's been done for decades, so why wouldn't it continue? Naturally, this will continue to make things worse in the medium to long term rather than helping to solve any problems.
We really have 2 choices, in my opinion: inflate to pay off the debt and avoid deflation, or don't inflate and have a deflationary depression that will include default. Either way, the dollar will cease to be the world's reserve currency and that will mean a much lower standard of living for us. The only good thing about that is that a lot of manufacturing will come here as our currency becomes less and less valuable - assuming that society actually holds together. That is the big question - do we survive a catastrophic economic event with civilization intact, or do we end up with a scenario like James Rawles postulated in "Patriots - Surviving the Coming Collapse" in which the dollar collapses, making it hideously expensive to import oil, which leads to a breakdown of power production and food distribution, which causes mass starvation, etc. - the Mad Max scenario. Given how interdependent we are, and given how most businesses and most individuals operate on a Just In Time inventory system, such a scenario is not too far-fetched. Grocery stores have about 3 days of food available in normal times, and we all know what happens before a hurricane or a snow storm - they empty out in hours. Multiply that by 10 or 100 in a financial panic, combined with people maybe having a week or 10 days worth of food at home (less if they lose power to their frig/freezer), and you have a recipe for Mad Max in a very short time. Further, when a panic situation develops, many essential personnel will stay home to protect their families and homes - witness the behavior of the New Orleans PD during Katrina. Acutely ill people will die within hours due to lack of power and care, and those on life-saving medications will die within weeks as their supply of pills runs out - and all of the dead bodies from those deaths and rioting deaths will lead to the spread of disease. That scares the crap out of me - because while I know that the government has plans and some reserves of food, water and medications, those plans depend on a crisis being localized and help being brought in from other parts of the country. NO ONE is prepared for a national emergency.
The next question is: so what do we do about it? Individually, we have to prepare with extra supplies of the proverbial bullets, beans and band-aids, and encourage others to do the same. That, at least, will give us more time for the various critical infrastructures to recover, assuming that they can.
I think most people have not come close to thinking of the detailed effects of the foreclosure and financial crisis. Some include:
Massive numbers of people directly affected quit paying and some very large number of people who were making payments quit.
Banks and other holders of the debt instruments either go under or are bailed out with inflationary fiat money.
If bailouts, more and more of the "good" people who are still paying begin to feel like suckers and stop paying.
Eventually, enough people get the idea that paying taxes is no longer a moral virtue. If 100k quit, they are in trouble. If 10 million or more quit, the government is in trouble--if it is still in business by that time.
Cumulative effects of the above lead to more and more goods and services systems shutting down.
And then we get general system collapse.
I have long been thinking about general system collapse. There are a lot of ways we can get there but once we are there it looks pretty much the same regardless of the path that got us there.
As the collapse progresses and the helplessness of governments to deal with it become apparent, domestic petty criminals (you are already see this) and foreign terrorists will increasingly take advantage of the power vacuum. There efforts will serve to accelerate the spiral into collapse and chaos. The fact that at least 95% of the population is totally unprepared and has few to no coping skills will further accelerate and increase the magnitude of the collapse and chaos.
This collapse will go deeper than the Great Depression and last longer because the initial conditions and coping ability of the people are far worse. We are the first large scale society in history in which the masses of the people are almost wholly dependent for their very survival on water, food, shelter, waste, energy, and security systems that they neither, understand, control or have alternatives to. We will have general lawlessness, rioting, revolution, war, and massive death tolls.
The reason people overwhelmingly do not see this coming is because their subconscious knowledge of their own inability to cope forces their mind into denial as a self-defeating, but nevertheless natural, response to the terror reality would impose upon them.
The only people who can get it this early on and have the moral courage to stare into the abyss are those who have useful moral and physical coping skills and M1s.
....we have the largest military force the world has ever seen, and they've been getting lots of experience at controlling civilian population centers lately (think that's a coincidence?). There's plenty of laws on the books that lets the government move the National Guard or Army in to "nationalize" energy production (I believe FDR broke a coal strike this way), food production, and keep a tight lid on potential riots. So even if the economics go to hell, I don't think we will revert to barbarism, it will more likely be a military "protectorate" (oddly enough, the military does have some loyalty to the constitution, and so at least the outward forms would persist).
I think we'd have enforced rationing, incredibly low standards of living, and I think a lot of the "feel good" laws (environmental, workplace safety, diversity) would simply be ignored and unenforced by local government.
So I think having good neighbors and close access to food, water and energy sources could be the difference between a reduced but OK life and really suffering. Think about how you would get along in Cuba, I think that's how we will be.
Just my .02
Kiwi wrote: ....we have the largest military force the world has ever seen, and they've been getting lots of experience at controlling civilian population centers lately
My question is, what happens to that military force when there's nothing to pay them with (i.e., hyperinflation)?
Watch carefully the news reports from Greece. This is the movie trailer for a feature coming to a city near you.
I don't think the military will be effective at controlling the US population for several reasons. They are primarily from rural and small towns and I cannot see them firing on fellow citizens. If things are really bad, many may desert to help their own families. We have something like 7 million former military in the population that I don't think will side with the government against the people. Unlike many countries, our citizens are armed. There was a reason that Obama said he wanted a civilian police force with the size and funding of the military. He does not believe the military will side with the government against the people either.
They will probably be forced to accept hardtack and tobacco instead of $ long before hyperinflation hits.