1.
Hello, everyone! The talk you are about to hear is the result of a lengthy process on my part. My specialty is in thinking about and, unfortunately, predicting collapse. My method is based on comparison: I watched the Soviet Union collapse, and, since I am also familiar with the details of the situation in the United States, I can make comparisons between these two failed superpowers.
I was born and grew up in Russia, and I traveled back to Russia repeatedly between the late 80s and mid-90s. This allowed me to gain a solid understanding of the dynamics of the collapse process as it unfolded there. By the mid-90s it was quite clear to me that the US was headed in the same general direction. But I couldn't yet tell how long the process would take, so I sat back and watched.
I am an engineer, and so I naturally tended to look for physical explanations for this process, as opposed to economic, political, or cultural ones. It turns out that one could come up with a very good explanation for the Soviet collapse by following energy flows. What happened in the late 80s is that Russian oil production hit an all-time peak. This coincided with new oil provinces coming on stream in the West - the North Sea in the UK and Norway, and Prudhoe Bay in Alaska - and this suddenly made oil very cheap on the world markets. Soviet revenues plummeted, but their appetite for imported goods remained unchanged, and so they sank deeper and deeper into debt. What doomed them in the end was not even so much the level of debt, but their inability to take on further debt even faster. Once international lenders balked at making further loans, it was game over.
What is happening to the United States now is broadly similar, with certain polarities reversed. The US is an oil importer, burning up 25% of the world's production, and importing over two-thirds of that. Back in mid-90s, when I first started trying to guess the timing of the US collapse, the arrival of the global peak in oil production was scheduled for around the turn of the century. It turned out that the estimate was off by almost a decade, but that is actually fairly accurate as far as such big predictions go. So here it is the high price of oil that is putting the brakes on further debt expansion. As higher oil prices trigger a recession, the economy starts shrinking, and a shrinking economy cannot sustain an ever-expanding level of debt. At some point the ability to finance oil imports will be lost, and that will be the tipping point, after which nothing will ever be the same.
This is not to say that I am a believer in some sort of energy determinism. If the US were to cut its energy consumption by an order of magnitude, it would still be consuming a staggeringly huge amount, but an energy crisis would be averted. But then this country, as we are used to thinking of it, would no longer exist. Oil is what powers this economy. In turn, it is this oil-based economy that makes it possible to maintain and expand an extravagant level of debt. So, a drastic cut in oil consumption would cause a financial collapse (as opposed to the other way around). A few more stages of collapse would follow, which we will discuss next. So, you could see this outlandish appetite for imported oil as a cultural failing, but it is not one that can be undone without causing a great deal of damage. If you like, you can call it "ontological determinism": it has to be what it is, until it is no more.
I don't mean to imply that every part of the country will suddenly undergo a spontaneous existence failure, reverting to an uninhabited wilderness. I agree with John-Michael Greer that the myth of the Apocalypse is not the least bit helpful in coming to terms with the situation. The Soviet experience is very helpful here, because it shows us not only that life goes on, but exactly how it goes on. But I am quite certain that no amount of cultural transformation will help us save various key aspects of this culture: car society, suburban living, big box stores, corporate-run government, global empire, or runaway finance.
On the other hand, I am quite convinced that nothing short of a profound cultural transformation will allow any significant number of us to keep roofs over our heads, and food on our tables. I also believe that the sooner we start letting go of our maladaptive cultural baggage, the more of a chance we will stand. A few years ago, my attitude was to just keep watching events unfold, and keep this collapse thing as some sort of macabre hobby. But the course of events is certainly speeding up, and now my feeling is that the worst we can do is pretend that everything will be fine and simply run out the clock on our current living arrangement, with nothing to replace it once it all starts shutting down.
Now, getting back to my own personal progress in working through these questions, in 2005 I wrote an article called "Post-Soviet Lessons for a Post-American Century". Initially, I wanted to publish it on a web site run by Dale Alan Pfeiffer, but, to my surprise, it ended up on From The Wilderness, a much more popular site run by Michael Ruppert, and, to my further astonishment, Mike even paid me for it.
And ever since then, I've been asked the same question, repeatedly: "When? When is the collapse going to occur?" Being a little bit clever, I always decline to give a specific answer, because, you see, as soon as you get one specific prediction wrong, there goes your entire reputation. One reasonable way of thinking about the timing is to say that collapse can occur at different times for different people. You may never quite know that collapse has happened, but you will know that it has happened to you personally, or to your family, or to your town. The big picture may not come together until much later, thanks to the efforts of historians. Individually, we may never know what hit us, and, as a group, we may never agree on any one answer. Look at the collapse of the USSR: some people are still arguing over why exactly it happened.
But sometimes the picture is clearer than we would like. In January of 2008, I published an article on "The Five Stages of Collapse," in which I defined the five stages, and then bravely stated that we are in the midst of a financial collapse. And ten months later it doesn't seem that I went too far out on a limb this time. If the US government has to lend banks over 200 billion dollars a day just to keep the whole system from imploding, then the term "crisis" probably doesn't do justice to the situation. To keep this game going, the US government has to be able to sell the debt it is taking on, and what do you think the chances are that the world at large will be snapping up trillions of dollars of new debt, knowing that it is being used to prop up a shrinking economy? And if the debt can't be sold, then it has to be monetized, by printing money. And that will trigger hyperinflation. So, let's not quibble, and let us call what's happening what it looks like: "financial collapse".
2.
So here are the five stages as I defined them almost a year ago. The little check-mark next to "financial collapse" is there to remind us that we are not here to quibble or equivocate, because Stage 1 is pretty far along. Stages 2 and 3 - commercial and political collapse, are driven by financial collapse, and will overlap each other. Right now, it is unclear which one is farther along. On the one hand, there are signs that global shipping is grinding to a halt, and that big box retailers are in for a very bad time, with many stores likely to close following a disastrous Christmas season. On the other hand, states are already experiencing massive budget shortfalls, laying off state workers, cutting back on programs, and are starting to beg the federal government for bail-out money.
Even though the various stages of collapse drive each other in a variety of ways, I think that it makes sense to keep them apart conceptually. This is because their effects on our daily life are quite different. Whatever constructive ways we may find of dodging these effects are also going to be different. Lastly, some stages of collapse seem unavoidable, while others may be avoided if we put up enough of a fight.
Financial collapse seems to be particularly painful if you happen to have a lot of money. On the other hand, I run across people all the time, who feel that "Nothing's happened yet." These are mostly younger, relatively successful people, who have little or no savings, and still have good paying jobs, or unemployment insurance that hasn't run out yet. Their daily lives aren't much affected by the turmoil on the financial markets, and they don't believe that anything different is happening beyond the usual economic ups and downs.
Commercial collapse is much more obvious, and observing it doesn't entail opening envelopes and examining columns of figures. It is painful to most people, and life-threatening to some. When store shelves are stripped bare of necessities and remain that way for weeks at a time, panic sets in. In most places, this requires some sort of emergency response, to make sure that people are not deprived of food, shelter, medicine, and that some measure of security and public order is maintained. People who know what's coming can prepare to sit out the worst of it.
Political collapse is more painful yet, because it is directly life-threatening to many people. The breakdown of public order would be particularly dangerous in the US, because of the large number of social problems that have been swept under the carpet over the years. Americans, more than most other people, need to be defended from each other at all times. I think that I would prefer martial law over complete and utter mayhem and lawlessness, though I admit that both are very poor choices.
Social and cultural collapse seem to have already occurred in many parts of the country to a large extent. What social activity remains seems to be anchored to transitory activities like work, shopping, and sports. Religion is perhaps the largest exception, and many communities are organized around churches. But in places where society and culture remain intact, I believe that social and cultural collapse is avoidable, and that this is where we must really dig in our heels. Also, I think it is very important that we learn to see our surroundings for what they have become. In many places, it feels as if there just isn't that much left that's worth trying to save. If all the culture we see is commercial culture, and all the society we see is consumer society, then the best we can do is walk away from it, and look for other people who are ready to do the same.
3.
There is nothing particularly deep or magical about the five stages I chose, except that they seem convenient. They correspond to the commonly distinguished aspects of everyday reality. Each stage of collapse also corresponds to a certain set of beliefs in the status quo, that is about to go by the wayside.
It is always an impressive thing to observe when reality shifts. One moment, a certain idea is seen as preposterous, and the next moment it's being treated as conventional wisdom. There seems to be a psychological mechanism involved, where nobody wants to be seen as the last fool to finally get the picture. Everybody starts pretending that they've thought that way all along, or at least for a little while, for fear of appearing foolish. It is always awkward to ask people what caused them to suddenly change their minds, because with the fear of looking foolish comes a certain loss of dignity.
The most compelling example of lots of minds suddenly going "snap" is, to my mind, the sudden demise of the USSR. It happened with Boris Yeltsin standing atop a tank, and being asked the question: "But what will become of the Soviet Union?" And his answer, pronounced with maximum gravitas was: "Henceforth I shall only refer to it as the FORMER Soviet Union." And that was that. After that, whoever still believed in the Soviet Union appeared as not just foolish, but actually crazy. For a while, there were a lot of crazy old people parading around with portraits of Lenin and Stalin. Their minds were too old to go "snap".
Here in the US, we are yet to experience any of the really major, earth-shattering realizations, the ones that look preposterous immediately before and completely obvious immediately after they occur. We have had minor tremors, mostly relating to financial assumptions. Is real estate a good investment. Will private retirement allow you to retire? Will the government bail us all out? All the major realizations are yet to come, or, as my die-hard Yuppie friends keep telling me, "Nothing's happened yet."
But by the time something does happen, it will have been too late for us to start planning for it happening. It doesn't seem all that worthwhile for us to sit around waiting for the happy event of everybody else feeling foolish all at the same time. Arrogant though that may seem, we may be better off accepting their foolishness before they do, and keeping a safe distance ahead of the prevailing opinion.
Because if we do that, we may yet succeed in finding ways to cope. We may learn to dodge financial collapse by learning to live without needing much money. We may create alternative living arrangements and informal production and distribution networks for all the necessities before commercial collapse occurs. We may organize into self-governing communities that can provide for their own security during political collapse. And all of these steps put together may put us in a position to safeguard society and culture.
Or we can just wait until everyone starts agreeing with us, because we wouldn't want them to look foolish.
4.
The important dynamic, when it comes to financial collapse, is obvious by now. It's the collapse of credit pyramids, "the whole house of cards" as President Bush put it. The technical term is "deleveraging," and the response is the bailout. The federal government will be bailing out the banks and the insurance companies, the auto companies, and state governments. Call it the bail-out treadmill: we are borrowing faster and faster just to keep from falling down. The treadmill is actually a good metaphor. Imagine what would happen if you went to a gym, got on a treadmill machine, and just kept punching up the speed, as high as it will go. What happens is you trip and fall, and find yourself flying backwards.
It is instructive to ask the question, Who are we borrowing this bail-out money from? People will tell you that we are borrowing it from "the taxpayer." But it's not as if federal tax receipts have automatically shot up by a few trillion over the past couple of months, and so this begs the question, Who is "the taxpayer" going to borrow this money from in the meantime? From other Americans? No, because our savings rate has been abysmally low for quite some time now, and what little we have saved is in housing equity, which is dwindling, and in stocks and bonds, through mutual funds and 401ks and such, which are down by a third or so. The value of these investments is crashing, and if we dumped these investments to raise the cash to fund this new debt, that would just make them crash even faster. In effect, we'd only be moving money from one pocket to another. So, really, the bailouts have to be financed by foreigners. And what if these foreigners decide not to trust us with any more of their savings? Then our only recourse is to "monetize" the debt: to print money.
And so the next question is, how much money would we have to print? The purpose of the bailouts is to provide liquidity to insolvent companies, to avoid deleveraging. To understand what that means, we have to understand that for every actual dollar within the economy, in the sense of it not being borrowed, there are over 13 dollars of borrowed money, which only exists while the debt can be rolled over. If our credit is maxed out while the economy is growing, that's bad enough, but the US economy is shrinking because of the recent oil shock. A smaller economy cannot carry as much debt, and this is part of the reason why we have deleveraging. Once the process of debt going sour gets started, it is hard to stop, and if deleveraging were to run its course, we would be down over 1300%. To monetize that much debt would require over 1300% inflation. And once that gets started, it becomes very hard to stop.
And, that, believe it or not, is actually the good news. Because most of our debt is denominated in our own currency - the US dollar - the US will not have to declare sovereign default, like Russia was forced to do in the 1990s. Instead, we can inflate our way out of national bankruptcy, by printing a lot of dollars. We will repay our national debt, but we will do so in worthless paper money, bankrupting our international creditors in the process. There is sure to be plenty of pain for everyone, especially everyone who is used to having plenty of money, because their money will no longer make the world go around. Once the US has to start earning foreign currency in order to pay for imports, you can be sure that imports will become quite scarce.
5.
Here are before and after snapshots of the most salient characteristics of financial collapse, as they will affect the vast majority of the population. Here, I am assuming that commercial and political collapse are slower in arriving, and that government is still there to step in with emergency aid of various sorts, and that a market economy of some sort continues to function. It could come down to everyone walking around with their little food stamps debit cards, and the only place they can use them that's within walking distance is McDonalds, but I am assuming some semi-stable period during which other adjustments can occur before other stages run their course.
The adjustments would have to do with major aspects of the living arrangement, from where we live to how we grow food to how we relate to each other. With money scarce and not particularly potent, other ways of winning the cooperation of others would need to be evolved in a hurry. The financial realm can be seen as a complex system of fences: your bank account is fenced off from my bank account. This arrangement allows you and me to not worry too much about each other, provided each of us has enough to live on. Though this is largely a fiction, we can fancy ourselves to be independent economic players on a level playing field. But once these conceptual fences become irrelevant, because there is nothing behind them, we become each others' burden, in an immediate sort of way, that would come as a shock to most people. The indignity of such physical interdependence would be psychologically devastating to many people, raising the human toll from financial collapse beyond what you'd expect from a problem that really only exists on paper. This is going to be particularly hard for a nation brought up on the myth of rugged individualism.
6.
Commercial collapse, when it arrives, will again cause much more of a psychological crack-up than you'd expect from a purely organizational problem. The quantities of immediately available goods and services right before and right after the collapse would remain about the same, but because market psychology is so ingrained in the population, no other ways of coping would be considered. Hoarding would become widespread, with looting as the obvious antidote. There would be an instant, huge black market for all sorts of necessities, from shampoo to vials of insulin.
The market mechanism works well in some cases, but it doesn't work at all when key commodities become scarce. It leads to profiteering, hoarding, looting, and other pernicious effects. There is usually a knee-jerk reaction to regulate the markets, by imposing price controls, or by introducing rationing. I found it quite funny that the recent clamoring for re-regulating the financial markets was greeted with cries of "Socialists!" Failing at capitalism doesn't make you a socialist, any more than getting a divorce automatically make you gay.
If by the time commercial collapse is upon us, there is still enough of the political system left intact to implement rationing and price controls and emergency distribution schemes, then we should count these among our blessings. Such heavy-handed governance is certainly not a crowd-pleaser during times of plenty, when it's also unnecessary, but it can be quite a life-saver during times of scarcity. The Soviet food distribution system, which was plagued with chronic underperformance during normal times, proved to be paradoxically resilient during collapse, allowing people to survive the transition.
7.
If prior to commercial collapse the challenge is finding enough money to afford the necessities, afterward the challenge is getting people to accept money as payment for these same necessities. Many of the would-be sellers will prefer to be paid in something more valuable than mere cash. Customer service comes to mean that customers must provide a service. Given that most people won't have much to offer, other than their now worthless money, should they still have any, most purveyors of goods and services decide to take a holiday.
With the disappearance of the free and open market, even the items that still are available for sale come to be offered in a way that is neither free nor open, but only at certain times and to certain people. Whatever wealth still exists is hidden, because flaunting it or exposing it just increases the security risk, and the amount of effort required to guard it.
In an economy where the vast majority of manufactured items is imported, and designed with planned obsolescence in mind, it will be difficult to keep things running as imports dry up, especially imports of spare parts for foreign-made machinery. The pool of available equipment will shrink over time, as more and more pieces of equipment become used as "organ donors." In an effort to keep things running, entire cottage industries devoted to refurbishing old stuff might suddenly come together.
8.
It is sometimes hard to discern political collapse, because politicians tend to be quite good at maintaining the pretense of power and authority even as it dwindles. But there are some telltale signs of political collapse. One is when politicians start moonlighting because their day job is no longer sufficiently gainful. Another is when regional politicians start to openly defy orders from the political center. Russia experienced plenty of each of these symptoms.
One thing that makes political collapse particularly hard to spot is that the worse things get, the more noise the politicians emit. The substance to noise ratio in political discourse is pretty low even in good times, making it har d to spot the transition when it actually drops to zero. The variable that's easier to monitor is the level of political embarrassment. For instance, when Mr. Nazdratenko, the governor of the far-east Russian region of Primorye, stole large amounts of coal, made strides in the direction of establishing an independent foreign policy toward China, and yet Moscow could do nothing to reign him in, you could be sure that Russia's political system was pretty much defunct.
Another telltale sign of political collapse is actual disintegration, where regions declare independence. In Russia, that was the case with Chechnya, and it led to a prolonged bloody conflict. Here, we might have a "Reconquista" where former Mexican territories become ever more Mexican, the South might rise again. New England, California, and the Pacific Northwest might decide to go their separate ways. Once the interstate highway system is no longer viable and the remaining domestic airlines are extinct, there is not much to keep the two coasts together. What once united the country was the construction of the continental railroad, but railroads have been too neglected to hold it together now. A country consisting of two halves tied together via Panama Canal is de facto at least two countries.
Yet another thing to watch for is foreign incursions into domestic politics. When foreign political consultants start stage-managing elections, as happened with Yeltsin's reelection campaign, you can be sure that the country is no longer in charge of its own political system. In the US, there is a gradual surrender of sovereignty, as sovereign wealth funds buy up more and more US assets. That sort of thing used to be considered akin to an act of war, but these are desperate times, and they are allowed to do so without so much as a nasty comment. Eventually, they may start making political demands, to extract the most value out of their investments. For instance, they could start vetting candidates for public office, to make sure that we remain friendly to their interests.
Lastly, the power vacuum created by the collapse of legitimate authority tends to be more or less automatically filled by criminal syndicates. These often try to commandeer the political establishment by getting their heads elected or appointed to political offices. Examples include Russian oligarchs, such as Boris Berezovsky, who got himself elected to Duma, the Russian parliament, and Mikhail Khodorkovsky, who thought he could use his oil wealth to buy his way into the political establishment. Luckily for Russia, Berezovsky is in exile in England, and Khodorkovsky is in jail.
9.
A great many people in the US insist that they do not need government help, and that they would do just fine if only the government would leave them alone. But this is really just a pose; there is a great deal that that government does to make their lives possible. In the United States, the federal government keeps many people alive through programs such as Medicaid, Social Security, and food stamps. Local governments provide for trash removal and water and sewer line maintenance, road and bridge repair, and so on. Police departments try to defend people from each other.
When all of that starts to unravel, it is likely to do so from the bottom, not from the top. Local officials are more accessible than remote Washington bureaucrats, and so they will be the first to be overwhelmed by the anger and confusion of their constituents, while Washington remains unresponsive. One likely exception may have to do with the use of federal troops. It seems almost a given that troops repatriated from the more than 1000 foreign military bases will see action right here at home. They will be reassigned to domestic peacekeeping duties.
10.
Aside from the big government programs, there is little available in the US to help those in need. Again, Americans make a big show of their philanthropy, but, compared to other developed countries, they are in fact quite stingy when it comes to helping those in need. There is even a streak of political sadism, which, for example, shows up in people's attitudes toward welfare recipients. This sadism can be seen in the so-called welfare reform, which has forced single mothers to work jobs that barely cover the cost of daycare, which is often substandard.
Aside from the government, there are charities, many of which are church-based, and so they have the ulterior motive of recruiting people to their cause. But even when a charity does not make any specific demands, its real purpose is to reinforce the superiority of those who are charitable, at the expense of those who are the recipients. There is a flow of forced gratitude from the beneficiary to the benefactor. The greater the need, the more humiliating is the transaction to the beneficiary, and the more satisfying it is to the benefactor. There is no motivation for the benefactor to provide more charity in response to greater need, except in special circumstances, such as immediately following a natural disaster. Where the need is large, constant, and growing, we should expect charities to matter very little when it comes to satisfying it.
Since neither government largesse nor charity is likely to provide for those who cannot provide for themselves, we should look for other options. One promising direction is a revival of mutual help societies, which take membership contributions and then use them to help those in need. At least in theory, such organizations are vastly better than either government aid or charities. Those who are helped by them do not have to surrender their dignity, and can survive difficult times without being stigmatized.
To make it intact through times of great need, the only reasonable approach, it seems to me, is to form communities that are strong and cohesive enough to provide for the well-being of all of their members, that are large enough to be resourceful, yet small enough so that people can relate to each other directly, and to take direct responsibility for each other's well-being.
11.
If this effort fails, then the outlook becomes dire indeed. I would like to emphasize, once again, that we must do all we can to avoid this stage of collapse. We can allow the financial system, and the commercial sector, and most of the government institutions to collapse, but not this.
What makes this particularly challenging is that the existence of finance and credit, of consumer society, and of government-imposed law and order has allowed society, in the sense of direct, mutual help and of freely accepting responsibility for each others' welfare, to atrophy. This process of social decay may be less advanced in groups that have survived recent adversity: immigrant and minority groups, or people who served together in the armed forces. The instincts that underlie this behavior are strong, and they are what helped us survive as a species, but they need to be reactivated in time to create groups that are cohesive enough to be viable.
12.
Culture can mean a great many things to people, but what I mean here is a specific very important element of culture: how people relate to each other face to face. Take honesty, for instance: do people demand it of themselves and others, or do they feel that it is acceptable to lie to get what you want? Do they take pride in how much they have or in how much they can give? I took this list of virtues from Colin Turnbull, who wrote a book about a tribe in which most of these virtues were almost entirely missing. Turnbull's point was that these personal virtues are also all but destroyed in Western society, but that for the time being their absence is being masked by the impersonal institutions of finance, commerce, and government.
I believe that Turnbull has a point. Ours is a cold world, in which the citizens are theoretically expected to fend for themselves, but in reality can only survive thanks to the impersonal services of finance, commerce, and government. It only allows us to practice these warm virtues among family and friends. But that is a start, and from there we can expand this circle of warmth to encompass more and more of the people who matter to us and we to them.
13.
In his amazing book about the legacy of European colonialism, Exterminate all the Brutes, Sven Lindqvist makes the stunning observation that violence renders one unrecognizable. The aggressor, whether active or passive, becomes a stranger.
