[permaculture] The US is no longer food self-reliant?

Toby Hemenway toby at patternliteracy.com
Fri Aug 17 12:25:41 EDT 2012


On Aug 16, 2012, at 7:28 PM, venaurafarm wrote:
> 
>> My bet is on a brief, extreme currency collapse 

> Could you comment further on what seems to be a pretty extreme 
> statement, Toby?

You're right, this is the sort of stuff, like all doomerism, that brings out the crazies. I will hedge a bit and say I don't think an abrupt currency collapse is inevitable, but medium likely. A slower one, very likely. There's a huge amount of stuff on this all over the web, with some of the more rational commentators at 
http://theautomaticearth.com --see their "primer" pages. They are deflationists; others are not.
http://www.peakprosperity.com
and the economic posts on theoildrum.com . Nate Hagens is particularly good.
Mish Shedlock  http://globaleconomicanalysis.blogspot.com
All of these people are Peak Oil savvy, pretty gloomy but not Doomers. But take your Halcyon before reading.

I learned a lot from the professional economists and traders  at Matt Savinar's old LATOC (life after the oil crash) site before it shut down. It's still archived somewhere; there was a long thread on Inflation vs deflation that gave all possible sides of that issue. But what made one thing very clear  to me was John Michael Greer's post
http://thearchdruidreport.blogspot.com/2012/07/the-upside-of-default.html
where he pointed out that the "true" annual GDP of humanity, what people actually make in tangible stuff each year is about 3 trillion dollars worth, while financial instruments like derivatives comprise roughly 1 quadrillion dollars per year. That means there is about 30 times as much debt money out there as real stuff to base it on. Historically people have been comfortable with about 10/1, but in scary times, like the Depression, that can drop to 3/1 or worse. What that means is that  2/3 to 9/10 of the world's money could disappear--the way 10-15% of it did in 2008. Put another way, there are $30 of claims being made on each $1 of real goods, so at some point, $29 of those claims could be unredeemable and would evaporate. It's hard to print money fast enough to counter that kind of crash, so inflation may not even be possible, though I'm not sure of that. 

In that kind of deflation, a dollar buys more and prices fall each succeeding day, which sounds good, but its real effect is to shut down all money movement--manufacturing, investing, sales, because everyone believes things will cost even less in the future, so they won't spend or buy now. Massive unemployment, few goods for sale, no money to buy things. Prices do come down, but much slower than currency value. That was how people experienced the Depression. Add to that, today, increasing resource costs forced by scarce oil, and you have high prices and very hard-to-get money. That's why I foresee high prices of the stuff we need, and low valuations on things like houses that take debt. Equity disappears, but prices of food are high. Nasty.

If I were to make my worst case prediction, though less likely than straight deflation, it's for short term inflation, and maybe hyperinflation, followed by deflation. Since the economy is so sluggish (because it can't grow without abundant oil) gov'ts will print money--they in effect have with Quantitative Easing, the stimulus, the bailouts, etc--and print more and more to reflate the economy. So, inflation. But that won't work because growth takes cheap oil,  people will lose faith in money, and we'll see a currency collapse. If it's very abrupt, like that in Argentina and many other cases, there will be a period where the dollar is essentially worthless, followed by creation of a new currency (Gov'ts take very harsh steps in collapses--they don't just sit there, and that's why money collapses are short). A huge amount of real wealth--real goods--will change hands very cheaply, the way it did in Russia when a horde of new oligarchs got rich (in Greece, most of the airports, highways, railroads, two energy giants, and the national lottery are for sale right now).  It's a great way for powerful people to grab a lot more of the commons. Oops--there I go into pessimism. 

The point is, if you own real stuff--land, house, tools, inventory, maybe gold and silver--you weather the brief spike better, whether it be inflation or deflation. Cash is good in deflation, not in inflation. And a strong local community economy where people know and trust each other's skills, so that they continue to do business with each other even when the dollar is worthless, is, I think, the real key, on a host of levels: goods continue to be exchanged, and people don't kill each other because they need each other. The less we participate in the dollar economy, and the more we create local, resilient ones, the safer we all are. Community is everything.

Toby
http://patternliteracy.com



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