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  • From: "John D'hondt" <dhondt@eircom.net>
  • To: "Healthy soil and sustainable growing" <livingontheland@lists.ibiblio.org>
  • Subject: Re: [Livingontheland] [Norton AntiSpam]Re: Fw: Dmitry Orlov : Fragility and Collapse: Slowly at first, then all at once
  • Date: Tue, 12 Jun 2012 20:59:23 +0100


Imo it can also be expected to decelerate at some time in the future. I think we are now in free fall and when we hit the bottom below all movement up or down will stop.
Impossible to say when this will happen but if you think of decades I'd say you are a little too "optimistic". Also combined with the fact that our planet is now being slaughtered wholesale and ever faster. The longer this goes on the harder arrival at the bottom will be. If it takes long enough wee will find only a radio active waste land.
john


"This ragged arc of decline is already under way; it can be expected to accelerate in the months, years, and decades to come"

http://www.countercurrents.org/greer070612.htm


paul tradingpost@lobo.net

Beware of all enterprises that require new clothes.
--Henry David Thoreau

*********** REPLY SEPARATOR ***********

On 6/9/2012 at 12:14 AM John D'hondt wrote:

No sooner had I answered "25 years ahead" when this dropped in my mailbox.
john


MUST READ!


"If you wait until that last moment when, in a spasm of horror, you
suddenly think to yourself �Oh shit, Dmitry was right!� then indeed
Doom and Gloom will be your charming new bunkmates. But if you start your
collapse early and get it over with quickly, then your chances of
surviving this are quite likely to substantially exceed zero."




CLUBORLOV
PUBLISHED ON TUESDAYS



TUESDAY, JUNE 05, 2012

Fragility and Collapse: Slowly at first, then all at once


Josh Keyes



This article is based on the notes from one of the talks I gave at the Age
of Limits conference.


I have been predicting collapse for over five years now. My prediction is
that the USA will collapse financially, economically and politically
within the foreseeable future... and this hasn�t happened yet. And so,
inevitably, I am asked the same question over and over again: �When?�
And, inevitably, I answer that I don�t make predictions as to timing.
This leaves my questioners dissatisfied, and so I thought that I should
try to explain why it is that I don�t make predictions as to timing. I
will also try to explain how one might go about creating such predictions,
understanding full well that the result is highly subjective.


You see, predicting that something is going to happen is a lot easier than
predicting when something will happen. Suppose you have an old bridge: the
concrete is cracked, chunks of it are missing with rusty rebar showing
through. An inspector declares it �structurally deficient.� This
bridge is definitely going to collapse at some point, but on what date?
That is something that nobody can tell you. If you push for an answer, you
might hear something like this: If it doesn�t collapse within a year,
then it might stay up for another two. And if it stays up that long, then
it might stay up for another decade. But if it stays up for an entire
decade, then it will probably collapse within a year or two of that,
because, given its rate of deterioration, at that point it will be
entirely unclear what is holding it up.


You see, the timing estimates are inevitably subjective and, if you will,
impressionistic, but there are objective things to pay attention to: how
much structure is left (given that large chunks of concrete are continuing
to fall out of it and into the river below) and the rate at which it is
deteriorating (measurable in chunks per month). Most people have trouble
assessing such risks. There are two problems: the first is that people
often think that they would be able to assess the risk more accurately if
they had more data. It does not occur to them that the information they
are looking for is not available simply because it does not exist. And so
they incorporate more data, hoping that they are relevant, making their
estimate even less accurate.


The second problem is that people assume that they are playing a game of
chance, and that it�s a fair one: something Nassim Nicholas Taleb calls
the �ludic fallacy.� If you drive over a structurally deficient bridge
every day, it could be said that you are gambling with your life; but are
you gambling, exactly? Gambling normally involves games of chance: roll of
the dice, flip of the coin, unless someone is cheating. Fair games form a
tiny, insignificant subset of all possible games, and they can only be
played in contrived, controlled, simplified circumstances, using a
specially designed apparatus that is functioning perfectly. Suppose
someone tells you that he just flipped a coin 10 times and all 10 were
heads? What is the probability that the next flip will be heads too? If
you think 50%, then you are discounting the very high probability that the
game is rigged. And this makes you a sucker.


Games played directly against nature are never fair. You could say that
nature always cheats: just as you are about to win the jackpot, the casino
gets hit by an asteroid. You might think that such unlikely events are not
significant, but it turns out that they are: Taleb�s black swans rule
the world. Really, nature doesn�t so much cheat as not give a damn about
your rules. But these rules are all you have go by: a bridge is sound if
it corresponds to the picture in the head of its designer. The
correspondence is almost perfect when it�s new, but as it ages a
noticeable divergence takes place: cracks appear and the structure decays.
At some more or less arbitrary point it is declared unsafe. But there is
no picture in anyone�s head of it collapsing, because, you see, it
wasn�t designed to collapse; it was designed to stay up. The information
as to when it will collapse does not exist. There is a trick, however: you
can observe the rate of divergence; when it goes from linear to
exponential (that is, it begins to double) then collapse is not far, and
you might even be able to set an upper limit on how long it will take. If
the number of cement chunks falling out of your bridge keeps doubling, you
can compute the moment when every last piece of the bridge will be in the
river, and that is your upper bound.


Still, your forecast will be subjective (or, if you like, based on your
luck as a forecaster) because you are still just playing the odds. If you
measure that the deterioration in your bridge is linear (say one chunk
falls out per month) then you extrapolate that it will remain linear; if
it is exponential (2x chunks from the previous month) then you extrapolate
that it will remain exponential, and, if you are lucky, it will. But the
odds of it remaining one or the other are strictly in your own mind: they
are not predictable but subjective. Calling them �random� or
�chaotic� doesn�t add much: the information you are looking for
simply does not exist.


To summarize: it is possible to predict that something will happen with
uncanny accuracy. For example, all empires eventually collapse, with no
exceptions; therefore, the USA will collapse. There, I did it. But it is
not possible to predict when something will happen because of the problem
of missing information: we have a have mental model of how something
continues to exist, not of how it unexpectedly ceases to exist. However,
by watching the rate of deterioration, or divergence from our mental
model, we can sometimes tell when the date is drawing near. The first type
of prediction�that something will collapse�is extremely useful,
because it tells you how to avoid putting at risk that which you cannot
afford to lose. But there are situations when you have no choice; for
instance, you were born into an empire that�s about to collapse. And
that is where the second type of prediction�that something will collapse
real soon�comes in very handy, because it tells you that it�s time to
pull your bacon out of the fire.


Let me stress again: the process of coming up with such predictions is
subjective. You might reason it out, or you might base it on a certain
tingling sensation in the back of your neck. Still, people like to
theorize: some declare that the events in question are random, or chaotic,
and then go on to formulate mathematical models of randomness and of
chaos. But the timing of large-scale, �improbable� events is not
random or chaotic, it is unknown. With regular, small-scale events
statisticians can cheat by averaging over them. That is useful if you are
selling insurance�against events you can foresee. Of course, a
large-scale event can still wipe you out by putting your
reinsurer/underwriter out of business. There is fire insurance, flood
insurance (not so much any more; in the US it is now underwritten directly
by taxpayers), but there is no collapse insurance, because there is no way
to objectively estimate the risk.


Plugging in everyone�s favorite Yogi Berra quote: �Making predictions
is hard, especially if they are about the future.� Well, I beg to
differ: making predictions about the past is just as difficult. The USSR
collapsed unexpectedly in 1991, taking the �experts� by surprise. The
root cause of the collapse remains veiled in mystery; the reason for the
exact timing remains a complete mystery. Expert Kremlinologists were
geared up to bet on minor power shifts within the Politburo, expert
economists were entirely convinced about the superiority of free market
capitalism over a planned socialist economy, expert military strategists
could debate the merits of the Strategic Defense Initiative (there
aren�t any) but they were all blindsided when the whole Soviet thing
just folded up and blew away. Similarly, most political experts in the US
are confident in their estimation of the odds that Obama will or will not
be reelected in November 2012; what they can�t give you is the odds that
the elections won�t be held, and that nobody will get to be president.
Mind you, these odds are not zero, and we can be sure that such a day will
come; we just don�t know when.


Experts can make predictions only within their area of expertise. They are
constitutionally incapable of predicting when their area of expertise will
undergo a spontaneous existence failure. Not being an expert in any of
these disciplines, I knew that the USSR was going to collapse a year or so
before it did. How did I know? By watching carefully, and by realizing
that things can�t go on much longer in the same direction. I am doing
the same with the USA now. So, let�s watch together.


* * *


The US Federal government is currently spending about $300 billion per
month. To do so, it �borrows� around $100 billion per month. The word
�borrows� is in quotes, because most of that new debt is created by
the Treasury and bought up by the Federal Reserve, so in essence the
government just writes itself a check for $100 billion dollars every
month. If this continues forever, then the US Dollar will become
worthless, so a push is on to get foreign central banks to take on some of
this debt as well. They can do that, of course, but, seeing as the US
Dollar is on track to become worthless, they have been decreasing their
holdings of US Treasuries rather than increasing them. Nobody can tell how
long such a scenario can continue to unfold, so what one looks for in a
situation like this is signs of desperation.


Recently there was a flurry of activity around China: Secretary of State
Hillary Clinton and Secretary of the Treasury Timothy Geithner, each with
a large retinue, went to China on a high-level visit, during which the
news coverage in the US was dominated by reports about a blind Chinese
activist who was kept under house arrest, from which he escaped to the US
embassy, and was eventually allowed to leave the country and come to the
US. Hardly anyone in China knows who this person is, and the Chinese
official reaction to demands that he be released were, pretty much,
�Okey-dokey.� (The fact that Hillary seems to have given up on wearing
makeup was considered newsworthy as well.)


Why such a powerful smokescreen? What were they hiding? Well, a couple of
items of interest. First, it turns out that China can now monetize US debt
directly. That�s right, the ability to print US currency is now
distributed between the US and China. There is a special private line
between Beijing and the US Treasury, and China can buy US Treasuries
without going through any market mechanisms or making the price public.
Secondly, China can now directly buy US banks. Back in the good old days
attempts by foreign powers to use US Treasuries to buy equity in
enterprises in the US was considered as akin to an act of war;
nowadays�not so much. Basically, Hillary and Timmy went to China and
said: �Take our financial system, please!� What they got is the
financial equivalent of a subcutaneous morphine pump: something they give
to terminal cancer patients, for continuous pain control. But what if it
runs dry before the patient expires? That would be painful, wouldn�t it?


The US is bleeding money in other ways: wealthy individuals are moving
abroad and renouncing their US citizenship in increasing numbers, like so
many rats fleeing a sinking ship. A high-profile example is Eduardo
Saverin, one of the founders of Facebook, who renounced his US citizenship
prior to the ridiculous fiasco that was the Facebook IPO. Congress is busy
drafting legislation to stop this sort of thing from happening, or at
least make it a huge boondoggle from a tax perspective. There is also a
provision in the works to take away people�s passports if the IRS
decides that they owe more than $50k. Somebody ought to do something! Is
it not possible to renounce your citizenship and buy votes in Congress at
the same time? It should be... In any case, we can be sure that what is
now still a trickle will turn into a flood. That is what I saw in Russia
after the Soviet collapse: the former Soviet elite lost all faith in the
system and tried to grab a chunk and run away with it. This pattern
continues to this day: once something collapses, it tends to stay
collapsed for a long time.


And why wouldn�t you want to flee like a rat, if you happen to be one of
the many temporary millionaires who made a fortune in the US economy and
do not wish to lose it? The US financial system is broken, and by now it
is clear that it is not going to be fixed. Case in point: Jon Corzine,
former Senator, former Governor of New Jersey, former head of MF Global,
made some bad bets, then dipped into his customers� accounts to cover
his losses. Is he in jail? No, he is still at large and has nothing to
fear. Furthermore, he is high on Obama�s campaign donor list. JP Morgan
just reported a $2 billion trading loss (actually more like $8 billion).
Is anything going to be done about it? Of course not! JP Morgan has a long
and proud history of mismanaging risk, be it by using preposterous
mathematical models (Value at Risk) or by having traders with nicknames
like �the Whale� spontaneously decide that they are God and go hugely
�naked long.� Since this was all done with taxpayer-backstopped funds
(like other big US banks, JP Morgan is on government life support) there
was some discussion as to whether the Whale was hedging, or betting, or
gambling (with public funds). But nobody even knows the difference any
more, and you can be sure that nobody will go to jail over this either.


And that brings us to the political system. Are the politicians even
vaguely interested in reforming the financial system? No, they are too
afraid of it. The financial reform legislation, such as it is, was drafted
by the financial companies themselves and by their lobbyists. The
politicians would be afraid to go near it, for fear of endangering their
electoral campaign contributions. As long as campaign funds are flowing
into their coffers, and as long as none of their banker friends ever goes
to jail, they will remain unconcerned about finance. What they are
increasingly paranoid about is their own physical safety. Both parties
have repeatedly exhibited an unseemly amount of bipartisanship when it
came to passing legislation to compromise civil liberties, to increase
social controls and surveillance, and to take away their citizens�
rights. The 2013 national security budget promises to top $1 trillion.
Again, the parallel with pre- and post-collapse USSR is striking: the
political system there too was unreformable, hollowed out, and used for
personal advantage, as a private service to the wealthy and the powerful.
Criminals, such as Boris Berezovsky, ran for public office simply in order
to gain the immunity from prosecution that came with it. This pattern
continues to this day, especially in Ukraine: lose an election�go to
jail. Get reelected�and you can use the voters who didn�t vote for you
for target practice. Once a political system collapses, everyone
strenuously denies that it has, but then it tends to stay collapsed for a
long time.


What does tend to change rather suddenly is commerce. If you have enough
financial and political shenanigans, high-level corruption and rule of law
going by the wayside, daily life goes on just like before, for a
while�until suddenly it doesn�t. In St. Petersburg, Russia, the
difference between the summers of 1989 and 1990 was quite striking,
because by the summer of 1990 commerce ground to a halt. There were empty
shelves in shops, many of which were closed. People were refusing to
accept money as payment. Imports dried up, and the only way to procure
sought-after items like shampoo was from somebody who had traveled abroad,
in exchange for jewelry or other items of value. And that occurred in
spite of the fact that the USSR had a better overall business plan: theirs
was: �Sell oil and gas, buy everything.� Whereas the business plan of
the US has come down to: �Print money, use it to buy everything� (most
consumer products, plus � of the oil used for moving them and everything
else around).


The imported oil is, of course, the Achilles� heel of US commerce. The
US economy was built around the principle that transportation costs
don�t matter. Everything travels large distances all the time, mostly on
rubber wheels, fueled by gasoline or diesel: people commute to work, drive
to go shopping, taxi their children to and from various activities; goods
move to stores in trucks; and the end product of all this
activity�trash�gets trucked long distances as well. All of these
transportation costs are no longer negligible; rather, they are fast
becoming a major constraint on economic activity. The recurring pattern of
the recent years is an oil price spike, followed by another round of
recession. You might think that this pattern could continue ad infinitum,
but then you�d just be extrapolating. More importantly, there is a
reason to think that this pattern comes to a rather sudden end.


* * *


It is something of a general property of things that things build up
slowly and collapse quickly. Examples of this sort abound (buildings,
bridges, dams, military empires, economies, supernovae...)
Counterexamples�things that appear suddenly and then slowly decay�are
harder to find (mushrooms and cucumbers come to mind, but these are
manifestations of an associated process of slow growth and sudden
collapse, the collapse normally occurring right after the first frost).
Some time ago it occurred to me that the symmetrical bell curve which is
commonly used to model global oil depletion, known as the Hubbert Curve of
Peak Oil theory, should actually be lopsided, like almost everything else,
but I lacked the math to illustrate this point.


Eventually Prof. Ugo Bardi came through with a wonderfully simple and
clear model, which he called the Seneca Effect. Unlike other models, such
as the original Limits to Growth model, which, although vindicated, is too
complex for most people to grasp at a sitting, the Seneca Effect is
simplicity itself. This model initially includes two elements: a resource
base and an economy. The rate of development of the resource base is
proportional to both the size of the resource base and the size of the
economy. Also, the economy decays over time at a rate proportional to its
size. Set up the initial conditions, run the simulation, and you get a
symmetrical bell curve. Now add a third element, which can be variously
named �bureaucracy� or �pollution� or �overhead�: all the
inescapable requirements or inevitable side-effects of having an economy.
This element does not contribute to the rate at which the resource base is
developed. It also decays at a rate proportional to its size. Divert some
fraction of the resource flow to this element, run the model, and out pops
a lopsided curve: rising slowly, falling swiftly: the Seneca Cliff. The
larger the fraction being diverted, the more lopsided the curve:






There is one problem with this model: we don�t really know which
elements of the economy are productive (in terms of contributing to the
rate at which the resource base is converted into capital) and which ones
are non-productive and belong in the bureaucracy/pollution/overhead
bucket. When we look at the world, we see the two summed together and
can�t tease them apart. With this detail hidden from view, collapse
becomes hard to see in the aggregate: the people may be starving, but
there is also a lot of fat bureaucrats carving up, roasting and eating
each others� ample buttocks, so it all averages out for a while longer.
But you can still tease it apart based on the fact that certain things
simply stop happening. The progression to watch for is: things get bigger
and bigger, then suddenly stop.


An associated problem is that the fraction of resources going to
bureaucracy/pollution/overhead usually starts out being reasonable (a
quarter or a third or so) but the closer the economy comes to collapse,
the higher this fraction becomes. We can observe this in the US: more and
more resources have been allocated to bailouts, make-work �economic
stimulus� projects and national security; more and more pollution (and
associated costs) from offshore oil spills and from the development of
marginal, dirty energy resources such as shale oil and tar sands. As the
productive part of the economy begins to fail, the bureaucrats grow
desperate but, being bureaucrats, all they can do is endlessly increase
the bureaucratic burden, accelerating the downward slide. Most people have
heard of Gorbachev�s glasnost' and perestro�ka, but there was a third
initiative, acceleration (uskorenie): the doomed attempt to get the
moribund Soviet economy to perform better. It sent it into shock instead.


Things get bigger and bigger, then suddenly stop. Let us look at the
example of US retail. Once upon a time there was local industry, which
sold products through small shops. Over the course of a few decades, the
industry moved to other countries, mostly to China, and the small shops
were put out of business by department stores, then by malls, culminating
with Walmart, which practices �slash and burn retail�: since most of
what it sells is imported, it empties the local economy of money, and is
then forced to close, leaving devastation in its wake. Walmart is now
expanding in China, having finally realized that it doesn�t work to sell
stuff in a country that doesn�t make stuff once that country is fresh
out of money. In places where retail has ceased to exist, the remaining
recourse is Internet shopping, thanks to UPS and FedEx. And once UPS and
FedEx services become unaffordable because of rising energy prices or
unavailable because of unmaintained, impassable roads and bridges, local
access to imported goods is lost.


Similarly with US banking. Once upon a time there were small neighborhood
banks that took in the people�s savings and then lent it out to
individuals and businesses, helping the local economy grow. Over the
course of a few decades, these small neighborhood banks were replaced with
a few huge megabanks, which, after 2008, became, in effect,
government-owned. Once the megabanks close their local branches, local
access to money is lost.


Similarly with global shipping. Once upon a time there were many small
ships, called tramp steamers, which were loaded and unloaded by
longshoremen at local ports, using block and tackle and cargo nets. Then
shipping became containerized, and moving cargo required a container port.
Then the container ships became staggeringly huge. Then, as oil prices
went up, they had to resort to �slow steaming� by pulling pistons out
of their engines and going slower than the sailing ships of yore. Instead
of point-to-point trade, these giant container ships can only operate
within hub-and-spoke networks, with the spokes provided by somewhat less
energy-efficient trains and far less energy-efficient long-distance
trucking. These ships are now at the limit of �slow steaming.� The
next step is, obviously �no steaming� at all.


Similarly with medicine. Once upon a time there were family
doctors�general practitioners who made house calls, and neighborhood
clinics. Eventually these were replaced by megahospitals and giant medical
centers staffed with specialists, which, over time, became unaffordable
for the general population. The US is currently spending over 17% of its
GDP on medical care�an amount that is exorbitant and unsustainable. Once
this spending is curtailed, many of the megahospitals will be forced to
close. The population will, for a time, still have access to WebMD and to
mail-order drugs, and, in case of serious illness or emergency, medical
evacuation will remain an option for those still be able to afford it.


The state of the communications infrastructure in the US makes a
particularly interesting case. The US is now behind most developed nations
in access to the Internet. Many people in rural parts of the US must rely
on their cell phones for Internet access, putting the US on par with such
countries as Cambodia, Vietnam, Indonesia and the Philippines. However,
cell phone service is far more expensive in the US than in any of these
countries. Given that most products and services are now available mainly
through the Internet, and that the Internet requires a steady supply of
electricity, the state of the electrical grid in the US presents an even
more interesting case. It is a severely overworked network of aging
transmission lines and transformer farms, some dating back to the 1950s.


There is over 100 nuclear power plants, which are growing old and
dangerous, but their service lives are being artificially extended through
re-licensing. There are no plans, and no money, to dismantle them and to
sequester the high-level radioactive waste at a geologically stable
underground location. If deprived of both grid power and diesel fuel for
an extended period of time, these plants melt down � la Fukushima
Daiichi. It bears mentioning that a nuclear disaster, such as Chernobyl,
is a particularly potent ingredient in precipitating a political collapse.
Since what is keeping a series of such disasters from happening is the
electric grid, followed by diesel, let us examine each of these in turn.








With regard to the electric grid, the incidence of major power outages has
recently been seen doubling every year. Yes, we are committing the
inductive fallacy by simply extrapolating this trend into the future, but,
given what is at stake, dare we not extrapolate? At the very least, we
would need to hear a very good reason why we shouldn�t. The incidence of
major power outages can only double so many times before it�s time to
start handing out potassium iodide tablets and before wig prices shoot
through the roof.


Unless, of course, the diesel generators can be kept running continuously
for the 15-20 years it would take to shut down, de-fuel and decommission
all the nuclear reactors and empty the nuclear waste storage ponds.
Countries that lack a reliable electric grid tend to rely on diesel
generators. There is currently a lot of pressure on diesel supplies,
especially since Japan took all of their nuclear generation capacity
off-line following the Fukushima Daiichi disaster, with high diesel prices
and spot shortages in many countries. Observing the increased incidence of
power outages and price spikes, many companies in the US have installed
emergency diesel generators, and are now finding that they run them even
when grid power is available, whenever requested to do so by the power
company.


Not much of anything continues to operate in the US once the electric grid
is down. Earlier this year a central part of Boston where I was working at
the time (Back Bay) went dark because of a transformer fire. For almost an
entire week every business in the area was shut down. Without power, there
is no heat or hot water, there is no pumped water, or, more frighteningly,
no pumped sewage, there is no air conditioning (which is fatal, through
heat stroke, in places such as Atlanta, Georgia, which often have 100%
humidity coupled with above-body-temperature summer ambient temperatures).
Security systems and point of sale systems stop functioning. Cell phones
and laptops cannot be charged. Highway and subway tunnels flood and
bridges do not open to let shipping traffic through�such as barges
loaded with diesel. Can we be sure that diesel will continue to be
supplied to all active nuclear power plants even as everything else falls
apart?


This is usually the point in my talks when somebody in the audience pipes
up to say: �This is all doom and gloom, isn�t it?� To which I say,
�For you, maybe, if you don�t have any other plan except to wait for
everything to somehow magically fix itself.� You see, building something
that works takes a lot of time and effort. Things stop working in a hurry,
but making a replacement takes time, resources, and, most importantly,
stability. This can only be done ahead of time, and doing so takes
practice (by which I mean learning from one�s own plentiful mistakes).
If you wait until that last moment when, in a spasm of horror, you
suddenly think to yourself �Oh shit, Dmitry was right!� then indeed
Doom and Gloom will be your charming new bunkmates. But if you start your
collapse early and get it over with quickly, then your chances of
surviving this are quite likely to substantially exceed zero.


And so, please don�t ask me �When?��do your own thinking! I�ve
given you the tools you need to come to your own conclusions, based on
which you may be able to start your collapse early and get it over with
quickly.












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