[permaculture] The Five Stages of Financial Collapse

Toby Hemenway toby at patternliteracy.com
Sat Mar 1 15:57:45 EST 2008

Harmon Seaver wrote:
> http://cluborlov.blogspot.com/2008/02/five-stages-of-collapse.html
Interesting speculations on the nature of collapse, and I think Orlov is 
right in that collapse is not a straight drop to the sub-basement of 
total chaos, but a progression that can stop at any one of his 5 steps.  
That's why I'm not a doomer--there are too many other stable states for 
collapse to rest at besides "we're all gonna die."

Orlov describes his work as "conjecture" and it certainly is. It's about 
as data-free an essay as I've seen in a long time. He gives no support 
for his ideas, no examples except the USSR's collapse, and only 
speculation there about the causes. I disagree with him: he says the 
command-and-control structure of the USSR allowed it to survive better 
than the market economy of the US will. But centralized control 
structures are notoriously poor at dealing with rapid change (e.g. FEMA 
and Katrina), and I think the USSR merely shows how difficult it is for 
an industrial state to collapse fully.

A far better system to deal with rapid change than a centralized one is 
a highly distributed network of independent agents, like our economy. 
Look at ecosystems; they deal with energy descent all the time. Western 
economies are like ecosystems and thus more resilient to chaos than 
centralized ones. Look what Russia ended up with when the gov't 
collapsed: independent mafia warlords who stabilized it at a high 
(though unpleasant) level until the gov't could function again.

I don't think the gubment will bail us out; I think local action and 
shifting networks of responsive people will.

Orlov also gets the housing bubble wrong, saying that we're going to 
have immense numbers of empty homes. Banks are already letting people 
miss long strings of payments on sub-prime mortgages without 
foreclosure, since they know getting some eventual mortgage payment is 
better than millions of empty houses causing further drop in home prices 
as well as a surge in homelessness. In fact, it's homeowners who are now 
walking away from their houses into cheaper ones (Thursday's Wall St 
Journal, page 1), leaving the banks unhappily stuck with houses worth 
less than what is owed. Banks know that in wholesale foreclosure, they 
are the big losers.


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