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555 It’s Complicated

KMO compares worldviews with Brent Bednarik. KMO is an ex-Doomer who freely admits that he may have swung too far in the other direction, though he certainly does not identify with the techno-utopianism so derided by the Peak Oil faithful. Brent sees the perennially failed predictions of collapse as a sign that the world is more complicated and less predictable than the prophets of doom present it to be.

Feedback from a Friend of the C-Realm:

Hi KMO,
I just finished listening to your recent free episode with Brent Bednarik.  I found this episode, like many of the ones you have put out over the years, to be thought-provoking even if my worldview doesn't quite map with yours (or Brent's for that matter) quite as much as maybe it did in the past.  I had a few thoughts and perspectives on some things you discussed in that episode that I'd like to share.

First, when you referenced Joseph Tainter's work and cited JMG as a kind of counterbalance or different argument I think you may have actually missed Tainter's core thesis, because to be honest it's not very different from JMG's idea of "catabolic collapse," but just looks at the process from a higher viewpoint.  Catabolic collapse is a ground-level view based on the idea that people will start to cannibalize the infrastructure of a declining society to fix the things that can be fixed and cobble together what they need to get through daily life.  Tainter's idea is that civilizations use increasing complexity to solve problems (and this typically involves more complex infrastructure) over time when they are experiencing infusions of energy and capital early on in their development.  However, as time goes on the cost of maintaining the complex infrastructure and social arrangements goes up while the infusions of energy and capital (commonly plunder taken through conquest) starts to decline, thus reducing the rate of return until it turns flat and then even negative.  This process also eats up spare capacity of the civilizations to deal with external shocks such as bad harvests because all that spare capacity is devoted toward maintaining growth rather than kept for when needed (the Anasazi network of sharing food between settlements being the prime example he cites).  Tainter never argued that this would result in a "flash crash" of civilizations -- like Greer he sees collapse as a process that plays out over centuries for most societies affected by it.
This brings me to my second point, which is in regards to the idea of "doomers" vs. "technophiles" (for the purposes of simplification).  Like you, I sometimes feel as if I wasted some opportunities to greatly increase my own financial standing because I adopted "doomer" views around peak oil and the likes.  But while I've moderated my views on many of these subjects, unlike you I've also never really left them entirely.  Do you remember the series that JMG did on his old blog about the world after the dissolution of the United States, chronicling an emissary traveling from the nation that comprised the Northeast and New England to that made up of the former Great Lakes states?  Because I think, personally, that the Atlantic Republic as portrayed in that series gives a pretty good glimpse into a likely trajectory in the US.  That society was one that was starkly divided along class lines, with a small elite that was still able to take advantage of all the most recent technological advances and new gadgets while a massive and impoverished underclass went about their days barely able to make ends meet.  I see the trajectory of technology in the US playing out along similar lines, at least vis-a-vis economic activity (especially combined with a state seemingly devoted to its new mission as propping up high finance by any means necessary while telling everyone else to go scratch).  We will continue to experience technological advancement, but the subset of people who enjoy the benefits of that advancement will shrink until we either have a highly privileged elite and small professional managerial class (PMC) who are integrated into that world with the remaining 80-90% becoming proles who have access only to those features of it meant to distract and entertain.  I think a reason for this is also that we will experience a declining base of surplus energy to support a high tech civilization, because no matter how much shale oil is out there the simple fact of the matter is that a lot more energy is burned up in extracting it than what had to be devoted to light, sweet crude.  And that means that there is less net energy left over for other economic activity.  Yes, we'll continue to go after it, and I would not be at all surprised to see the state move in and essentially guarantee financing to continue that project -- but it will become more and more a case of a dog chasing its own tail as time moves forward.

I also think that Jasper is a lot more on-point with his analysis of China than Brent is.  China is quite literally the world's longest continuous civilization, and they are simply resuming the role that they previously held for 3000+ years -- the center of gravity for Eastern Asia, culturally and economically.  The French demographer Emmanuel Todd published a book titled "After the Empire" around 2004 in which he argued that the unipolar world was coming apart and would soon (within a couple of decades) be replaced by a multipolar world of regional powers with their own spheres of control.  For what it's worth, Todd also predicted the coming dissolution of the USSR based on demographic analysis in the 1970s, a time when many Western conservative intellectuals were portraying it as a great menace only growing in power and influence.

Along those lines, I think that it's far more likely that the United States ceases to exist as a political entity over the next two decades that the current incarnation of China.  About 4-1/2 weeks ago my wife and I binge watched the HBO series Chernobyl, and one of the things featured in it that hit me upside the head like a sledge hammer is the way that the Soviet bureaucracy's concern with appearances to higher-ups drove every step of the response over looking at it objectively and deciding what needed to be done -- until they almost passed the point of no return -- and how that mapped on to the emerging hamhanded "response" to Covid-19 in the US at that time.  And I've only seen the US map onto the Soviet ineptitude exponentially since then.  Given that the US does not have any singular geographical features that link it together nor does it have a long-standing history of political integration and unity between those disparate regions (like China), for the first time in my life I'm seeing the breakup of the US as a very real possibility in the coming decade or two.  Not saying it's a foregone conclusion or even necessarily likely at this point, but I'm saying that it's definitely possible.  Especially as our political class continues to bumble and fumble the response to the pandemic, not to mention the economic carnage that is following close behind.

And regarding that last point -- economic carnage -- I'm not too sanguine on the current political order surviving the present crisis, because it's just past its due date.  If you subscribe to the idea of historical cycles or anacyclosis, established orders last around 80-90 years before they crumble in the face of mounting crises they cannot deal with, and a new order emerges out of that wreckage.  The US has been through this process three times already during its colonial history through to the present.  The first crisis started in 1763 with the end of the Seven Years' War and hit its breaking point in 1775 at Lexington and Concord, with the destruction of the colonial order and the rise of the early republic and its detente between slave societies in the South and burgeoning industrialism in the North.  The second crisis started in 1850 with the Fugitive Slave Act and continued through the sectional crisis of the 1850s, finally bursting apart with the firing on Fort Sumter in 1861.  The model of industrialism driven by corporate entities won the day at that point.  But that model began to fall apart with the deepening inequality and labor unrest of the Gilded Age, papered over for a little while by the reforms of the Progressive Era, but finally done in with the speculative boom of the 1920s and massive bust in 1929 that brought in the Great Depression.  The New Deal and the US's assuming the role of global empire through WWII's outcome ushered in the new era of centralized institutions and global industrial capitalism, but it started to fall apart in the early 2000s with the dot-com bust, and the 2008-09 financial crisis was the equivalent of a patient going terminal and the response of the "doctors" in the political class and the Fed was to hook that patient up to every machine and IV they could think of while telling the family that the patient was perfectly healthy (while he was not).  The Covid-19 pandemic didn't have to be a death blow -- but for a patient as sick as our financial system was, it was like a person with terminal cancer catching a cold that turned into pneumonia and killed them.  The patient has flatlined, but the political class we have, being unaccustomed to anything other than promoting the interests of large corporations and high finance, will spend the next few years trying to restart its heart with the electroshock paddles over and over and over again -- until we have another singular political figure who comes from the fringes of the current system to deal with the crisis at hand and establish a new socio-political order (like Washington, Lincoln, and FDR did).

None of that means that what comes next will be better.  It will just be different.  And it will be preceded by a lot of pain and hardship, I'm sorry to say.

That brings me to my personal point, since you asked how (and what) people are currently doing.  I myself am taking on the project of doing a deep dive into my local community, mainly because I believe that under the current political order unless we are part of the top 5%-10% we will largely be on our own, and the only way we'll make it through that situation is by learning to trust one another, work together, and have each other's backs when needed.  Toward that end I am initiating a "homesteader's grange" to take advantage of the wealth of knowledge my community has around topics of household economy, an informal network of sharing information, skills, and even eventually labor to help each other out in real and tangible ways in addition to providing real assistance to "the least among us" who are in danger of falling through the cracks.  It may not presently be possible to meet in groups, but my vision for this organization is that it will NOT be an online thing, but rather one that meets primarily in the flesh.  I have already gotten an enthusiastic response from many people in the community around this effort, and I have gotten the Episcopal church we attend on board with it as well.  In the next months I will also be leaving my F/T employment as a public works construction engineer to concentrate on these community building efforts as well as dive into a regenerative farming enterprise as longer agricultural supply chains are already showing signs of stressing and breaking.  It may seem counterintuitive to give up a good paying and relatively secure job during what is likely to be a severe economic downturn, but this is a calling I have felt for some time, one which was only hardened a thousand times over after reading David Holmgren's book "Retrosuburbia: The Downshifter's Guide to a Resilient Future," and increasingly feels like being pulled toward something where I'm really needed instead of where I can necessarily feel the most safe personally.

So I hope this message finds you well, KMO.  I do sincerely miss being able to interact with you on FB, and I should have reached out to you earlier as your voice has been one that has accompanied me during my commute and workdays for many years now.  And email does offer the opportunity for deeper and more substantive exchanges than the ephemerality of social media.  So until next time....

Warmest regards,Chris HarrisonWarwick, NY

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1 Comments

  1. Chad Hill on April 10, 2020 at 6:03 pm

    Good call on inflation.

    If I print up a trillion dollars and give it to, say, ten people, that’s not going to cause inflation. Inflation is a general rise in all prices across the economy. Ten people cannot spend enough money by themselves to create inflation even if they wanted to.

    Now, the money that is being currently issued is being given to a lot more than ten people, of course. But it’s certainly a very narrow swath of the population, and primarily for financial/debt instruments. The idea that “Fed money printing” is going to cause hyperinflation and turn the United States into Venezuela or Zimbabwe any day now is an idea that deserves to die.

    You are correct that deflation is a bigger problem. Massive amounts of both money and demand are currently disappearing. That’s not inflationary. For inflation to become widespread, the average citizen needs to have money to spend. They do not. Wages have been stagnant for a generation.

    A lot of people’s brains have been eaten by Ron Paul/goldbuggery/”End the Fed” nonsense.

    The problem is that the people’s money is being given in unlimited amounts to private financial and business interests, while workers are left to fend for themselves. Socialism for the rich and rugged individualism for the poor and everyone else. That’s not a problem of the money system–it’s a problem of the political system.

    There’s a good paper by Michael Hudson et. al. explaining this. The distinction Hudson makes is between the productive economy and the financialized/debt service/rentier/money extraction economy:

    The asset-price inflation effect of money creation by banks [exerts] a downward impact on commodity prices, to the extent that the carrying cost on bank credit reduces the net purchasing power of debtors to buy goods and services. This deflationary effect of bank money ends in a bad-debt crash, to which the government responds by bailing out the financial sector with a combination of money creation and central bank swaps (which do not appear as money creation) … The Federal Reserve’s $4.6 trillion in Quantitative Easing did not show up as money creation, because it was technically a swap of assets – like Aladdin’s “new lamps for old, in this case “good credit for junk.” The effect of this swap was much like a deposit inflow. It enabled banks to ride out the downturn while making a killing in the stock and bond markets, and to lend for takeover loans and related financial speculation … both the old monetary formulae and the frequent MMT contrast between public and private sectors neglect the need to distinguish the FIRE sector’s “wealth and debt” transactions from how wages and profits are spent in the production-and-consumption economy.

    The commercial banking system’s “endogenous” money creation takes the form of credit at interest. The volume of this interest-bearing debt grows exponentially, absorbing and extracting more and more income from industry and labor. The effect on the overall economy is debt deflation.

    https://www.nakedcapitalism.com/2020/04/the-use-and-abuse-of-mmt.html

    This provides a good explanation as to why housing and stock prices are going through the roof, while inflation is nowhere to be found.

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