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Guest Post: Beyond The False Dawn: Global Crisis 2020-2022
From Charles Hugh Smith from Of Two Minds
Beyond the False Dawn: Global Crisis 2020-2022
Four long-wave cycles will likely intersect around 2020-2022.
Longtime correspondent Ken R. asked me to elaborate on my recent reference to the "real crisis being pushed forward to 2020" ( A 5-Year Scenario: 2011-2016 February 15, 2011). The long answer would fill entire volumes, so I'll attempt a shorthand version.
Let's start with the chart I prepared for the cover of my 2008 book Weblogs & New Media: Marketing in Crisis. (You can read the first chapter on the Marketing in Crisis webpage.)
It seems clear to me that four Grand Cycles will intersect around 2020-2022:
1. Peak oil, or the depletion cycle/end-game of the global economy's complete dependence on inexpensive, readily available petroleum/fossil fuels.
2. The cycle of credit expansion and contraction (approximately 60-70 years), which is now beginning the transition from unsustainable credit expansion (bubble) to renunciation of debt (credit collapse) and global depression.
3. The generational cycle (4 generations or approximately 80 years) of American history which leads to nation-changing social, political and economic upheaval. (The American Revolution: 1781 +80 years = Civil War, 1861 +80 years = 1941, World War II + 80 years = 2021)
4. The 100+ year cycle of price inflation and stagnation of wages' purchasing-power which began around 1901 is now reaching the final stage of widespread turmoil, shortages, famine, war, conflict and crisis.
While industrial society, the Central State and global neoliberal capitalism could probably suppress or adjust to any one of these cyclical climaxes, it seems unlikely the Status Quo will be successful in suppressing/adjusting to all four at once.
There is nothing magical about 2020 or about each crisis.
The book The Fourth Turning describes the 4-generation. 80-year cycle of political and social crisis in the U.S., and it makes sense even if you don't believe in cycles: after 80 years have passed, few humans are left who can recall the previous crisis. That loss of experiential capital, if you will, sets up the next crisis, which isn't a repeat performance of the last one but a variation on the general theme that unfolds in a unique historical setting.
That historical setting is defined by massive ecological overshoot as laid out in Overshoot: The Ecological Basis of Revolutionary Change.
This overshoot--humanity as a species expanding to fill every ecological niche when food and energy supplies are rising--leads to roughly 100-year cycles of rising prices for what I call the FEW essentials (food, energy, water) and resulting political instability--not to mention plagues, war, etc. as the over-abundant humans scramble to secure what's left of dwindling resources. This is ably described in The Great Wave: Price Revolutions and the Rhythm of History.
The credit/debt/speculative bubble that is slowly reaching its endgame has been addressed by The (Mis)behavior of Markets and Financial Armageddon: Protecting Your Future from Four Impending Catastrophes.
The end of cheap, abundant oil is covered in The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century, Beyond Oil: The View from Hubbert's Peak and The Long Descent: A User's Guide to the End of the Industrial Age, to name but three of many books on the subject.
I could have added a fifth crisis, that of demographics, as the financial promises made to the planet's ageing populace will be broken by the sheer number of the elderly: The Coming Generational Storm: What You Need to Know about America's Economic Future.
My own attempted synthesis of the coming intersection is of course Survival+: Structuring Prosperity for Yourself and the Nation.
If you have any doubts remaining about the credit/debt bubble, I invite you to study 10 Economic Charts That Will Blow Your Mind (The Economic Collapse).
I've marked up one chart to show how far we've progressed in the speculative debt cycle:
Here's where we are in a nutshell. Borrowing money creates a virtuous cycle when money is cheap and easy to borrow, as the money flows into consumption and investments which feed that consumption.
Eventually, however, organic demand (that is, people actually needing things and services) is met. But as Marx noted, everyone and his brother/sister ramped up production to meet the seemingly limitless demand, so now there is massive excess capacity/overproduction.
Oops! It turns out the market isn't very good at assessing "steady state" levels of debt, consumption, production or speculation. So everyone overborrowed and over-speculated in both productive capacity and unproductive financial gambling.
Two bad things happen in this financial overshoot. One is that all that debt must be serviced, i.e. the interest and some modest attempt to pay down principal must be paid. In the virtuous upcycle, rising profits and asset prices make borrowing more to pay the seemingly trivial interest easy--no burden at all.
But once the overcapacity, over-leveraged, over-indebted cycle breaks, then assets and profits both plummet, leaving the borrowers unable to leverage more debt to pay the interest on their current debt.
As income streams and assets both decline, the interest suddenly gains the force of gravity: what was once lighter than air is leaden and increasingly burdensome.
The Grand Partnership of the Central State and the Financial Plutocracy (parasitic global cartel Capitalism writ large) have suppressed this natural implosion of speculative debt by printing and distributing trillions of dollars in "free" money. The only way to make servicing a trillion dollars bearable is to lower the interest rate to zero. At zero, even you and I can borrow a trillion dollars, and once again we can easily borrow enough to service our mountain of existing debt.
As a special bonus to the Plutocracy, the "free money" enables them to ramp up their favorite pastime, carefree financial speculations based on fraud, collusion and misrepresentation of risk. As any profits will be theirs to keep (private) while any losses (and all the risk) willbe backstopped by their partner, the Central State and its tax-donkeys, the taxpayers, it's a return to fun days at the races for the Financial Elites.
But a funny fork in the road appears after a massive dose of free money: the free money flows into speculative bets on actual tangible resources, creating massive inflation and newly reflated asset bubbles.
As a result, the system is now facing the same old problem--asset bubbles held aloft by "free money" and rampant financial fraud--and a new problem: inflation in resources that sustain the real economy.
The Central State/Financial Elites are thus faced with an impossible choice: if they let the speculative free money flow, then their populations starve as prices of tangible goods such as food and energy skyrocket. Recall that the masses aren't provided with a trillion dollars at zero interest; that privilege is reserved for the Financial Elites who fund the Central State politicos.
The capitalist answer to this vast financial overshoot is simple: interest rates will rise once the unlimited free money stops flowing. Once interest rates rise, then the debt--which has now doubled or tripled in the frenzied flow of free money-- quickly becomes burdensome in the extreme.
In other words, the status quo is now addicted to unlimited flows of free money. If the flow continues, then inflation will destabilize it; if it's cut off, then rising interest payments will destabilize it.
That's why it's easy to predict a financial collapse in the next few years. But there are still enough resources around to restabilize things after the impending financial liquidation; societies and economies have a way of finding a new equilibrium, a process described in The Onset of Catabolic Collapse (The Archdruid Report)
It’s not quite as straightforward as it sounds, because each burst of catabolism on the way down does lower maintenance costs significantly, and can also free up resources for other uses. The usual result is the stairstep sequence of decline that’s traced by the history of so many declining civilizations—half a century of crisis and disintegration, say, followed by several decades of relative stability and partial recovery, and then a return to crisis; rinse and repeat, and you’ve got the process that turned the Forum of imperial Rome into an early medieval sheep pasture.
But a financial re-set won't address any of the other looming crises. As I have often proposed, energy will remain too cheap for alternatives to make financial sense until it doesn't, and then it will be too late.
Such thoughts do leak out of the status quo every now and again, but they are generally viewed as some sort of parlor game: ooh, how deliciously awful it will all be! THE GLOBAL ECONOMY WON'T RECOVER, NOW OR EVER.
Here is an excellent summary of energy realities: A physicist models the city:
West illustrates the problem by translating human life into watts. “A human being at rest runs on 90 watts,” he says. “That’s how much power you need just to lie down. And if you’re a hunter-gatherer and you live in the Amazon, you’ll need about 250 watts. That’s how much energy it takes to run about and find food. So how much energy does our lifestyle [in America] require? Well, when you add up all our calories and then you add up the energy needed to run the computer and the air-conditioner, you get an incredibly large number, somewhere around 11,000 watts. Now you can ask yourself: What kind of animal requires 11,000 watts to live? And what you find is that we have created a lifestyle where we need more watts than a blue whale. We require more energy than the biggest animal that has ever existed. That is why our lifestyle is unsustainable. We can’t have seven billion blue whales on this planet. It’s not even clear that we can afford to have 300 million blue whales.”
I highly recommend this excellent analysis of energy consumption and production which was forwarded to me by knowledgeable correspondent Nathan P.
The author analyzes his own annual energy use and leads us to the conclusion that our 10,000 watts a day lifestyles must be trimmed to around 2,000 watts a day to be sustainable with current technologies.
He then goes on to extrapolate how many windmills, solar arrays and nuclear power plants we as a species will have to install over the next 20 years to replace current consumption of fossil fuels.
As I recall, it will require one new nuclear power plant a week for the next 20 years, plus thousands of new solar and wind arrays.
A significant amount of this planetary project is possible, but not likely, for the reason noted above: energy will remain too cheap for alternatives to make financial sense until it doesn't, and then it will be too late.
I am not a doom and gloomer, however, because history offers us abundant examples of civilizations which prospered on 2,000 watts a day or less, long before civilization became dependent on fossil fuels.
There will be a massive transformation of the status quo, however, and the outcome is in our collective hands.
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We are at least as corrupt, if not more; that means your "fortress America" is more like the "prison America" we are all seeing develop, right before our eyes. Maybe you are one of the elites who thinks he and his familiy will be let into the "fortress" part?
i am not advocating this change only predicting it. a mean spirited nation, like a mean spirited person can live to a very old age.
Sounds nice, on papaer. But, where do you suppose to get 2/3 of the current oil consumption that is needed to run US? The country where you must move everywhere by car and move goods by trucks! "Re-configuring" the infrastructure will take years (at least 5 by my rosy estimates), and has it been started?
Knowing political reality, I would say that current course will be run to the bitter end until maintaining military control over oil fields will become utterly worthless (military will consume more than controlled fields will provide). Very little will be done in terms of re-configuring infrastructure, and mostly along "useless", but "sound-bite" type projects (ethanol, bio-diesel, renewable energy [relatively useful]) that are ridden with pilfering of funds. In the background "elite" will try to built bunkers for themselves sort of "Noah's Ark Project", which is unlikely to work (unlikely to include enough of critical mass population in size and "quality" to restart society at industrial technology).
Unless a venture company successfully harness mass production of either fusion or thorium nuclear power, despite all regulation/red-tape/"environmentalism mania" surrounding the issue, we, all (the whole world), are totally screwed, i.e. we will fall right back to early medieval level of technology by the end of 21st century.
have you noticed how dirt cheap natural gas is? do you suppose there is some sort of plan to save this NatGas, in the event we go off imported fossil fuel? we have the best energy technology in the world, the arabs will be broke without our money, and we will get by without their oil.
I am not an expert on natural gas or energy production, but I do know that it is cheap, and I am also aware why. The reason it is cheap is that there is not much demand due to lack of infrastructure to use natural gas. Another problem with nat. gas is that in terms of total BTU available for extraction there are little of it especially if it needs to substitute oil. The easy nat. gas is gone (burnt during oil extraction), it was a nuisance for oil extracting companies. What left requires chemical fracking (nasty process), and I am not sure how energy efficient such process (energy efficiency is paramount).
So, no magic bullet is here. Every bit counts, so this venue also needs to be developed, but it is very temporary and local/circumstantial fix.
You assume that current oil consumption levels are necessary. You can transport goods by train rather than truck, at 1/10 the energy consumption.
You assume people NEED to drive everywhere. Without jobs producing useless goods and providing unneeded services, just where will everyone need to drive TO?
I am certain that if the oil supply situation changes, there will be societal changes along with it.
Catabolic Collapse, bitchez.
the spice must flow.
from the book Dune
This overview of US energy needs puts things in perspective.
www.energysolution.us
There are some who say:
in the event of a global collapse we have everything, including the best political system, educational system, and (most creative) financial institutions.
Are you insane? Massive doses of decentralization would bring freedom and entrepreneurial zest to this country. The educational system? You jest, surely. Creative financial institutions? You mean that toxic casino they call derivatives responsible for the penury of millions of Americans? The one created by the same banksters who gutted the middle class in their quest for empire? That's the one these people defend?
The point is we have spread ourselves too thin, waiting for the american model to take hold.
Don't make me laugh. People don't want your model. Your model is violence 24/7 on TV and in the real world and false values passing themselves off as decency. The #1 financier of violence worldwide is the black market the fascist banksters created with the so-called "war on drugs". Look at Mexico, Central America, Colombia, Afghanistan, Venezuela and all so the CIA could, by creating and controlling the drug trade, finance their dirty wars. The US government is the epicenter of death and destruction. A focal point of death generating scum who need to face their maker's judgment.
The poor bastards in China are never going to get anything, until we go in there and open their markets, like we did in Japan.
I would love to see the US armed forces on the Asian continent against a billion nuclear armed Chinese.
in financial collapse we can outlast everyone, including europe, which mistakenly took on several million muslim refugees.
lulz... show us the gold, bitches. Those dirty, dirty Mooslims... heil Hitler!
america is going to be tough, closed, fortress america.
I can hear the goose-stepping now.
What we have here are the captive and willing slaves of this fascist and outlaw FRN enterprise.
One thing about America many Americans may not realise is that most other countries either outright hate, or at best secretly resent the U S of A, because of the last 40 years of history. We liked you when you had a Kennedy in the White House. We hated Nixon, Vietnam, Reagan, and both Bushes. We thought Obama was going to make it all OK again but that doesn't really seem to have happened. Either way, we still dislike the bullying US approach to international law (failure to sign the international treaty against landmines is a good example).
This stuff doesn't matter too much for now, the US has a lot of very strong economic ties with other countries (especially US-China) and political/military ties too, Japan, Saudi Arabia, and many other countries depend on US military support. But it will come to matter if there is ever a real crisis in the USA, or even just growing protectionism, trade wars etc. I don't remember which recent absurdity of a movie it was which had the whole US population seeking sanctuary from environmental cataclysm in Mexico, and receiving food and shelter from the Mexican government in a magnificent gesture of inter-American solidarity (was it The Day After Tomorrow?). I do remember at the time thinking that was astonishingly unlikely!
When the other countries start to think about it, they will realise their current problems were exported by the USA. The Lehman Brothers and Bear Stearns financial crisis in 2008 led to several European countries having to provide emergency finance for their banks. That is the root cause of the current woes in Ireland, of course a bust is also the natural end of a boom cycle, but it didn't have to be so bad. More recently, as is probably well-known here on ZH, the free money policies in the USA have resulted in food price inflation in all or most countries around the world, hence the current turmoil.
So it's all very well making plans to hide out in your cabins in the backwoods of Virginia and preparing several thousand rounds of exotic ammunition to shoot each other with. But it might be more sensible to spend resources making a few friends in other countries, as everyone in this world is going to need all the friends they can get in the years ahead.
NB Every single individual American I have ever met has been courteous, charming, generous and warm-hearted. It's the US government, the financial elite, and the upper echelons of the military that I have a problem with...
China didn't sign the landmine treaty either. Do you like China?
They have bullied their neighbors too. That's why their neighbors are cozying up to the USA. I'm not sure that we are the most hated or feared nation in that region.
Those other countries that have food inflation could end that food inflation by conducting a monetary policy better fitting to their circumstances. Those third world countries don't have much of an output gap or huge deflationary pressures. Of course they will have inflation if they continue to try to imitate our monetary policy and keep their currencies from rising.
There is plenty of blame to go around for the financial crisis. If it were simply a result of the USA and Europe were so virtuous then the Europeans shouldn't be having so much trouble right now.
As it is even European investors trust USA bonds a lot more than they trust portugues bonds. If you look at any basic charts on total debt to gdp (google Forbes debt to gdp ratio Switzerland for a list) you wil find that the USA is number 11 after many European countries and Japan. Europe was going to have a problem anyway. To blame it all on the USA is a little disingenious. I suppose Greece is USA problem too.
Yes we are too military oriented. We are controlled by the Zionists and that certainly harms our interests in the world. We have supported dictators and we have not followed our traditions of individual liberty and non interventionism. We have a hundred or so bases in germany we need to shut down. However I believe ultimately we are going to pull out of this and do better than europe if we can get our military budget under control.
You guys have enough problems to worry about. Maybe there is some equivalent of zero hedge where europeans can be self critical and self reflect about their own problems. Or perhaps europeans and europe are so perfect that they don't have anything else to do, other than criticise other countries?
Mostly I don't care what a Eurosnob thinks about the USA. Europe has been criticising the USA and feeling superior for the last two hundred years or so. We pretty much ignore it now.
we're all charming and courteous until we start blogging politics.
variant:
so you are saying that the Frogs and Brits are good with each other? How about the Bulgarians and <<fill in the blank>>. Countries hate each other for any number of reasons, c'est la vie.
Regarding your nonsense on the land-mine treaty, obviously you have no idea what a 'pistol perimeter' is all about. At least U.S. doggies and misguided children recover the bastards (economical, y'know) for future use. Please advise about the Serbs and mines.
I'm reminded of Powell's comment with respect to U.S. Imperial Ambitions and seizing land: "all our guys asked for is a 6 foot by 3 foot plot where they could be buried."
- Ned
so you hate every republican but love all the democrats?
that is because you people are idiots, simply put.
The ongoing two-day summit on February 18 and 19 comes a week after the International Monetary Fund (IMF) ramped up the debate over the future of the US dollar.
Host Christine Lagarde, the French finance minister, has the task to picking up the pieces of the group of 20 summit last November. The primary goal of this weekend's Group of 20 Summit, she said, is "how to get help without appearing helpless. To (cope with) the world's financial meltdown -- is the primary goal of this conference."
The reform of the postwar international monetary and finance system is another key point of the conference, noted Christine Lagarde, and France wants new global finance system as the nation hopes that the present monetary system will transit step by step to the "internationalization of new currency" through the means to strengthening the role of special drawing right (SDR) system, the wholesale funding and international capital flow, which could help ensure the future financial stability.
French President Nicolas Sarkozy said the advancement of the international monetary system reform has manifested the trend of the new global economic growth and is aimed precisely to reduce the excessive dependence on the US dollar and enable the currencies of emerging economies to pay a more important role.
http://english.peopledaily.com.cn/90001/90780/91421/7292688.html
Time to pay the piper, little fascists.
While I generally agree with Charles Hugh Smith in principal, he too often quotes Marx to support his arguments...
Please, for fuck's sake, stop allowing posts from Charles Hugh Smith.
http://blogs.reuters.com/great-debate-uk/2011/02/15/china-will-not-stop-...
Enjoy!
– Dirk Jan van den Berg is president of Delft University of Technology, former president of the IDEA League of European Universities, and former Dutch ambassador to China and the UN. The opinions expressed are his own. —
This week’s official confirmation that China is now the second largest economy in the world, as measured by GDP in dollars, symbolises the Middle Kingdom’s rise to global economic power in the past several decades.
Curiously, however, while this economic ascendancy has prompted a sea-change in international perceptions of China, many across the world nonetheless continue to regard the country as being primarily a ‘backward’ agricultural and manufacturing powerhouse. The truth is much more impressive: China has also rapidly emerged as the world’s second largest producer of scientific knowledge, as measured by number of research publications.
It is this remarkable rise to scientific leadership which should, in truth, be at the forefront of the world’s attention right now. For it will have profound implications for all of us, and very likely propel China to eclipsing the United States as the world’s largest economy within the next couple of decades.
The remarkable speed with which China is rising to scientific superpower status has been achieved, in large part, because of its massive manpower (the world’s largest scientific workforce), improvement in its regulatory framework of intellectual property and corporate law, and strong government support in targeted programmes, especially its phenomenal research and development (R&D) investment. Between 1995 and 2006, for instance, China’s gross expenditure on R&D (GERD) grew at a phenomenal annual rate of 18 percent.
China is a centrally planned economy, a police state, and zero culture gradient.In short its like the false front back lot movie set. Wall Street has been trying to sell us Russian gangster capitalism for years. They have succeeded with China simply because their prison labor overwhelmed our free markets. After that the similarities between China and the US end, including military.
Probably should include industrial espionage, theft of intellectual property, trade agreements and contracts requiring the transfer of technology; I mean, if were being honest.
Having read journal articles out of Chinese research institutes, I'd say less than 1/3rd of them are even remotely accecptable. Of course, if your job (as a scientist) was to publish 5-10 papers a year or lose your job, your quality of work would go down as well.
ROFL so the d-bags who write sophistry about a 'stable' market and get it wrong.
Now say that the market will then 'stabilize' afterwards.
Bullshit. We've been on a 40 year binge. When this fucker goes, it's lights out...probably until like the song says....in the year...2525....(and even if it was 300-450 years less than that, and after a few billion deaths, should we conclude that this was the right approach? No)
Glass-Steagall and you don't need to pin your hopes on this fool being right. It's like saying well at least we got those couple of pieces of hair as backup to my mountain climbing rope. So if the mountain climbing rope breaks, no worries, the few hair strands we're tied to will stop the fall and resume equilbrium. No, they won't.
Avert the disaster or feel the crunch of the steel against your face as the plane crashes. Also good luck getting the fucker to fly again.
Sure upwards of 90 percent of jobs and production of things will be gone, but we can bounce right back....just a few decades or a century.
Or we can Glass-Steagall
Don't believe some 'turning' sophistry to accurately guage things. 2020? My ass.
What this guy preaches is about as prophetic as a piece of shit outside a church.
Just another snake oil salesman pitching sophistry.
Oh he's pegged correctly that the fed cannot stop printing, because of collapse, and if it prints there will be hyperinflation. But then it goes as crazy as Blakenfein would no doubt if he were to do an interview with the 700 club.
There is no 'timeline'. What the fuck is this guy, selling the economic horoscope?
It's a pattern, between generations, about completely different things.
No, it's a guy who pointed out something random, but based on timelines, it fits nicely. But anyone can go around and find patterns based off a certain timeframe.
This new age, scientology, horoscope, sophistry is flat out bunk. There is no fucking pattern, and while it's always easy to pick out historical data to fit the 'model', it's alot harder having that 'model' fit reality. 2020? No way in fucking hell can they keep this fascist, imperial, monetary system afloat for that long.
Even his numbers are off. 1781 was the END of war. 1861, 1941 was the beginning. So here he is saying....2021 is the start?
Why not the end? How come he is so sure it's the start? Oh yeah, because this sophistry ranks right up there with 'housing prices never decline'.
Anybody that believes this bullshit is past due to be suckered.
isnt it revolting when rationality is jettisioned? Men and their emotions....sigh!
YOu think the ladies could do a better job? Explain your proposal if we disenfranchised men and made them put away their war toys.
and btw who cares about 2020 when the money flows cant see beyond the next quarter. get a grip.
This is the best part of the article for me --
No way out, it's a matter of time.
Oh yeah, how about No 5 - the planetary cycles. Let's throw those in too. My astrologer mate reckons the number of stressful angles to our earth by the other planets in the solar system will be far greater around 2020-2023 than in any decade for yonks. Apparently every ten years there is a Jupiter-Saturn opposition that seems to coincide with the onset of recessions. At the end of this decade there will be many oppositions and squares between other planets and earth as well as the normal Jupiter/Saturn opposition and something to do with fixed signs.....
We don't have that long to go. Next Jupiter-Saturn opposition is 28 Mar 2011, not 2020, and it will be about twenty years till the next one not ten. Supposedly, per the astrobabel, we enter a recession then (like this isn't one now), can't hardly wait!
Couldn't agree more.
http://www.market-innovations.com/GT2021/GT2021.html
(A bit of shameless self-promotion)
The nice thing about this rebalancing or catabolic collapse we are going through is that it doesnt have to go too low, if we have the right policies to incentivize productivity and disincentivize non productivity
Most of our problems right now are quite solvable without a collapse or worsening financial crises, but there is great resistance to taking the nasty tasting medicine.
The longer we wait to make the necessary sacrifices the worse it potentially gets.