Dmitry Orlov's Book--Reinventing Collapse: The Soviet Example and American Prospects

Dmitry Orlov's new book, Reinventing Collapse: The Soviet Example and American Prospects, was published very recently. I pre-ordered a copy because Dmitry has had first hand experience with the collapse of the Soviet Union, and he believes, as I do, that economic collapse is likely to come first, if a society is on an unsustainable course. The great mystery to me is what lies on the other side of an economic collapse.

In this book, Dmitry gives his view of what may be on the other side, and how one might prepare for it. Dmitry starts with a recipe for collapse of a modern military-industrial power:

The ingredients I like to put in my superpower collapse soup are: a severe and chronic shortage in the production of crude oil (the magic elixir of industrial economies), a severe and worsening trade deficit, a runaway military budget and ballooning foreign debt. The heat and agitation can be provided most efficaciously by a humiliating military defeat and widespread fear of a looming catastrophe.

He then goes on to explain how the Soviet Union followed this recipe in the late 1980s, leading to its collapse, and how the United States, with its conflict in Iraq, may be following a similar course.

Many readers are familiar with Dmitry's talk, Closing the 'Collapse Gap': the USSR was Better Prepared for Collapse than the US. In that talk, as in the book "Reinventing Collapse", he points out that the USSR provided housing, transportation, fuel, and garden plots for Soviet citizens, so when financial collapse came, citizens could still get along fairly well. The United States lacks this safety network, so financial collapse is likely to be more of a problem here.

The kinds of things Dmitry expects after financial collapse are shortages of fuel, food, medicine and consumer items; outages of electricity, natural gas and water; transportation breakdowns; hyperinflation; widespread layoffs, plus a lot of despair, confusion, violence and lawlessness. According to him, we should not expect "any grand rescue plans, innovative technology programs, or miracles of social cohesion".

The political establishment is likely to remain intact, at least initially, and will attempt to keep up appearances. There will be paralysis due to the government's inability to spend money in the usual way. There will be less respect for authority, and many laws will be ignored. There is likely to be a flood of internal refugees, as places that require heat or air conditioning become uninhabitable.

In this setting, Dmitry expects a new informal economy to emerge -- one that is based more on barter, and is often semi-criminal. One of the biggest sources of revenue initially will be dismantling and reselling parts of what are now stranded assets--homes that cannot longer be used, airplanes that are no longer needed, and even equipment used in some factories.

Dmitry has some thoughts on how one survives and even thrives in this new setting. He mentions the possibility of a new political party, the "Collapse Party". If it is clear collapse is inevitable and the current political parties have nothing to offer, the logical thing would be to have a Collapse Party, to dismantle institutions that have no future and to save what can be saved. He doesn't think such a party is likely to succeed, however.

If it is not really possible to mitigate, he believes that what one must do is adapt--psychologically as much as any other way. In the new order, relationships with other people will become more important, and relationships based on deeds, contracts, notes, and the like will recede in importance. We will need to lower our standards as to what is acceptable in many areas, including body odor, straight teeth, and medical care. Dmitry has several creative suggestions for occupations. Dmitry suggests that some may choose to be nomadic, since there are advantages to having multiple bases of operation.

I very much enjoyed the book. Dmitry describes his book as a "series of intentionally provocative thought experiments". None of us can know what is ahead, but Dmitry offers us some helpful insights. Dmitry has a wonderful sense of humor, so we find ourselves laughing rather than crying about the future.

I like his essays and his turn of phrase. And he is right about the US being less able to adapt to a collapse scenario. Certainly the former USSR was more resilient than efficient, while the USA is more efficient than resilient.

While the Russians weathered the economic storm after the collapse of the USSR, sooner or later they are again going to have to go through the worldwide collapse with the rest of us. I wonder what else is in store for Russians in the new total collapse.

Your response in first paragraph is reasonable. But the second paragraph still reflect the AMERICAN mindset. Never mind things are changing.

If you have an opinion on the topic share it but spare us the unsupported anti-American ad hominems. Anti-American snobs can be as bigoted and ignorant as any self-centered American racist.

There is nothing unreasonable with my observation that the Russians [and the Cubans] will suffer again as the global shit hits the fan.

Oh and by the way, I emigrated from Europe.

I take it Dmitry is only thinking about a "local" economy - the USA in particular. Such a collapse as happened in the former USSR was circumscribed, as have all collapses been, historically. Those who could escape the boundaries did so. Those that couldn't managed to adapt. But in the end, there was energy inflow to provide recovery.

But what about a world-wide collapse? What about the case where there is never going to be increases in energy production, leaving just the annual solar flux to provide energy flow? There will be no escape, no reprieve, only continuous contraction. It seems to me that is the scenario we need to be thinking about.

My last three blogs have asked some questions along these lines. See: Question Everything.


George - I believe you are correct, however Orlov is saying that the U.S. because of it's huge deficits, foreign military entanglements, and the unsustainablilty of its suburban lifestyles will be liable to be the first to collapse.

IMO the U.S. will be hugely destructive to other economies as the U.S. economic contractions gather speed.

How many will we drag down with us? No idea. But there is no denying that a rapidly contracting U.S. economy could become an economic black-hole for the entire planet.

There will be, no doubt, a worldwide collapse and Russia will suffer along with everyone else. Yet, Russia and the Russian people are probably in the very best position to survive. I mean there will likely be a higher percentage of Russians surviving the collapse than any other nation in the world.

Think about it, they have plenty of oil, if they just stop exporting, and they probably will. They have plenty of coal, again if they stop exporting. And they have land, lots and lots of land. And unlike almost every other place in the world, Russia has few if any water problems. And Russia, because of its immense size and sparse population, is less affected by all the other environmental problems like pollution and erosion than almost any other place in the world.

The Russian people are in the catbird seat when the world's economies collapse. True, many will suffer and many will die, but the average Russian will have a very good chance of surviving the collapse.

Ron Patterson

How is Russia going to protect itself from China if China decides it wants to 'share' some of those resources? 1 Billion vs. 150 million seems like a tall order without resorting to nukes, especially since Russia already gave China its best 'toys'.

That's why they would immediately escalate to a nuclear strike - and China knows it.
It might not stop them though.

China's army runs on oil. It will be in short supply and very expensive. Also, China will soon be in the throes of dealing with too many huge internal issues to invade Russia. Drought is already wracking their cropland, and the've become a food importer for the first time ever. That situation will only increase, causing internal strife. And if they do manage to invade? What, Siberia? Without oil and gas for heat, it's almost impossible to live there.

Siberia is where most of Russia's oil is.
Having internal troubles often means that a war is sought to divert attention.

Ron, while I believe your comments on the natural advantages of Russia are basicly correct it is not true that they have few environmental or pollution problems.The 70 years of communist management resulted in appalling degradation.
Nancy Lubin wrote a chapter on this subject in "The New World Order" edited by Carol Rae Hansen (1992).
Also,Vaclav Smil's "China's Environmental Crisis"(1993) could be of interest.
I'm sure there is more up to date information around as well.

Ron, while I believe your comments on the natural advantages of Russia are basicly correct it is not true that they have few environmental or pollution problems. The 70 years of communist management resulted in appalling degradation.


You should re-read the original post. He did not say that Russia has "few environmental/population problems". Here it is again, for your benefit:

"Russia, because of its immense size and sparse population, is less affected by all the other environmental problems like pollution and erosion than almost any other place in the world."

I think Australia is in a much better position than Russia. As a net energy exporter, Australia stands to benefit from any rise in energy prices.

Oil seeps off the NSW coast are yet to be assayed, perhaps a billion barrels there. The QLD coast is completely unexplored because of the great barrier reef. SA has geothermal energy sources estimated in excess of 50 billion barrels. Every state has massive energy resources close to population centers.

Australia also has vast areas of prime agricultural land that are uninhabited. Not to mention a climate which is warm and varied. Even though we are still in the grip of the worst drought ever Australia still manages to produce enough food for 70 million people. Much of this is energy intensive meat and dairy products. Water is a huge issue, but considering how bad things are now, is it really that critical?

If you consider Japan with only 17% of it's land arable and that's including land for urban and industrial use can supply half it's food requirements, Australia could support a population in excess of 200 million. Of course the lifestyle would be radically different, but that is a matter of choice. Just think about it; we cull 5 million kangaroos every year that go into dog food. Even that amount of meat would be sufficient. Dogs and cats just need a little bit of curry powder.

There is so much excess consumption here it is ridiculous, people just throw stuff away that is perfectly good. Many will loose their jobs, but there are so many areas that there are labor shortages that people will simply have to change.

Social order is the most important issue. How people react will determine their fate. Once people realize how well off they are compared to the rest of the world they will have great incentive to ensure that social cohesion is maintained.

Anyway, moral of this story; you better hurry up and emigrate while the doors are wide open. They will slam shut once the ideals of endless economic growth are seriously challenged.

Global Warming is turning Australia into even more of a desert than it already is. Extended, years long drought is destroying what little crop land there is. In 10 years it will struggle to support its current population, never mind 200m people. Russia on the other hand will be come a more temperate place, and areas formerly too cold to farm will become farmable. With plenty of sunlight, Australia will be able to produce lots of electricity, but for whom? All population areas will be too far away for export.

Japan only produces 23% of its food locally. I can dig out the article if you're interested. The rest is imported. 95% of energy is imported. They're in for a world of hurt, but at least their population is declining.

why would there not be an increase in energy production? you use solar to to MAKE solar. there is your energy production increase. there is also DIY energy production that I think at some point people will take up.

What are you saying? we can't truly make solar with solar yet or maybe ever..

Right, what I am saying is even if we can manufacture solar panels using solar panels, we can't transport them or mine the material to make them without solar power..

we can't transport them or mine the material to make them without solar power..

I don't follow.

I am saying that if we can manufacture solar power with solar power, we would also have to mine the materials ect and transport them using solar power, or else your not truly using solar power. We can't get away from fossil fuels like one would think.

You seem to keep passing over nuclear.
The world is not going to be all solar for a long time, if ever.
Or are you looking at theoretical solutions to problems we might have thousands of years in the future?

The world is not going to be all solar for a long time, if ever.

DaveMart - the world *IS* Solar.

Coal, oil, wind, water - all expressions of energy from sol. (ok, ok. Wind also has a spinning globe effect.)

No matter what the source of energy, the energy conversion capital equipment must produce enough excess useful energy above consumption needs to be self-sustaining. Since fossil fuels are such high-quality sources with relatively cheap conversion capital (including refining and transport) they have been self-sustaining. The problem is they are not renewable, hence peak oil, etc. In order to expand energy production you need excess energy to mine, form, and construct the conversion capital (not to mention maintenance). These are the questions we need to answer about any proposed alternative energy production technology. Is the conversion capital self-sustaining, or does it need subsidization? If the latter, it probably isn't a good choice.


we would also have to mine the materials ect and transport them using solar power

electric vehicles charged from solar panels.

Where can I buy one of those?

The development of fossil fuel technologies in the 18th and 19th centuries was initiated through the use of biomass energy (a relatively inefficient form of solar energy) mostly in the form of food for workers and animals. With 21st century knowledge even more efficient solar energy utilization methods can be used to grow a solar based economy. Concentrated solar thermal can be used directly to melt metals and glass in order to make parts for more CSP systems.

We could eliminate the requirement for biomass consumption by downloading our conciousness-es into solar powered android bodies and giant orbital solar reflectors would beam sunshine down upon us 24 hrs a day. Our positronic brains would be much faster so we would need to learn Dolphin to speak to each other.

This technology is only 5 years away, perhaps 10.

I love it!!! Where do I sign up? Can our pets become androids too?

Experimenting with brain downloads is Educational and Entertaining.

It's EduTainment!

Learn Dolphin here

LOL @ the peace flag photo...

thomas deplume -

As you probably know, many here at TOD hold the view that we can't get from Here to There because we are presently dependent upon a dying technology, i.e., the burning of fossil fuels to produce useful work. They say that we can't go solar, wind, etc. in a big way because a significant amount of fossil fuel is required to create the infrastructure for such systems.

I say that this view is sorely off base. If one studies the history of technology, one sees that new technologies don't just suddenly snap into being like spring flowers. Rather, they are generally bootstrapped and gradually carried into being by the older technologies, of which they gradually displace.

Much horsepower (of the kind with hooves) had been used to bring the steam engine into being, and much fossil fuel technology was required to bring nuclear energy into being. One builds on the other, hopefully in not too wrenching of a way.

One of my favorite little examples of this sort of thing is that of the Japanese Zero fighter plane of WW II. The Japanese got into the aeronautics game quite late, but they were amazingly quick learners. Contrary to blatant racist views to the contrary, they had mastered the state of the art of aeronautical engineer and were good flyers. Their Zero fighter was developed a year or so prior to Pearl Harbor under great secrecy. At the time it was arguable the best fighter plane in the world. However, I read that when they took the first prototype Zero from its hanger to the test field, they had to tow it by horse-drawn wagons because trucks were in such short supply in Japan. So here we had 18th-Century technology helping to bring 20th-Century technolgy into being.

That's the way things usually work. As such, I think the best possible use of our dwindling fossil fuel reserves is to create a sustainable energy infrastructure. Sort of like towing a Zero fighter plane with a horse.

Much horsepower (of the kind with hooves) had been used to bring the steam engine into being, and much fossil fuel technology was required to bring nuclear energy into being.

True, but we had not hit "peak horse" or peak oil respectively at the times that those technologies emerged.

Exactly, and while what Joule says is theoretically possible, if the downside slope is too steep, or causes too much social unrest that the infrastructure can't be built, then what? I can easily imagine a scenario where the rich bunker off and continue to use oil the way we waste it today, not building that solar / wind / whatever energy infrastructure for the next generation. The majority of the planet could be left to fend for itself. Need some real world examples of that? Look at how poor nations that can only afford a little oil use it. IN many many countries, it is used by a very few rich and the army, while the vast majority of the population get none and live in poverty. This could very easily be the case. We need a plan B.

We have a built infrastructure problem. Even if we could suddenly make solar powered vehicles of all types, all of our current vehicles would lose most of their value - become "stranded assets". If we somehow had a cheap attachment to our existing cars and trucks that allowed them to run on solar power, we would be a whole lot better off--but no one even suggests this may be possible.

I give cars and trucks as an example. We would really need ways of transforming other parts of the economy to run on solar power also--all very cheaply.

Gail - I want to thank-you for posting this about the Dmitry Orlov book. I ordered it this morning on-line.

I have watched a presentation that you gave on Peak Oil (on-line I don't have the link) and I was very impressed. I have just begun giving peak oil presentations and I want to ask you about giving peak oil presentations to high school senoirs. Do you think that's too young?


I don't know how old high school seniors are in America, but here in Britain a presentation aimed at 16-18 year olds would be great! I'm 16 and have a good understanding of peak oil and have already made at least 4 people aware, so the answer to your question is no, it's not too young.

Hell no. I'm doing a peak oil presentation to 5 year olds this coming week. It will be about soil - healthy soil, sick soil, what grows in healthy and sick soil. Or doesn't.

Of course, 5 year olds come with parents attached. Doubleplus good.

cfm in Gray, ME, Milliways

With the amount Peak Oil is now being discussed in the media, it is likely that they are going to start hearing about it one way or another. If you can make a presentation to them, that would be good.

Hey - I am working on a set of presentations for exactly this purpose (will be uploaded to when I switch that on)... but I'd love input and feedback and ideas - more brains better than fewer... i am emailable (address in my personal details on here) if anyone is interested in shared work in this regard

Joe -- Go for it!

I just did a presentation for my son and his peers in a fifth-sixth grade classroom. These 11 and 12 year-old students really want to talk about the world they are growing up to live in.

My presentation included rides in the bed of my Zap Xebra electric truck, and rides on some inexpensive electric scooters. Most of these kids have already gotten rides on my pedicab or cargo trike. (Those are now sold and I am building up another pedal machine -- a pedicab/cargo trike combo.)

We talked at length about ecological footprint, over-consumption, mis-consumption, overpopulation, resource depletion (especially petroleum and water), and resource war.

Believe me, kids today do not get enough healthy discussion with adults about reality!!!

The students I've spoken with really wanted to keep going. One of my son's former teachers grabbed me by the arm playfully, but said quite seriously "I wish I still had a child of yours in my class!" as I tend to provide plenty of fodder for classroom discussion.

I encouraged the students to take the discussion home as well -- and armed them with a few websites and published material to discuss with their parents.

Go for it, Joe.

Cars depreciate so rapidly that they are pretty valueless after 5 years anyway.
The exception to this would be electric cars which cost very little on maintenance and last many years.

If 5 year old cars are valueless just try buying one for less than $5,000. For the majority of American families 5 year old cars are unaffordable.

It serves me right for commenting on another market.
Still, $5k is a fraction of the new price, so for the original buyer, who gets new cars, he has lost most of his money.
Certainly that is the way it works in the UK.

EDIT: to add addenda:

I am trying to make the point that to car manufacturers it is the new buyer that counts, and that if they keep the car for the average of 4-5 years then they have already lost most of the value of their purchase.

Except that that five year old electric car needs to have its batteries replaced.


$6000 (today, never mind a peak oil world). That's not cheap maintenance.

We have no need to replace vehicles at all; cars, trucks, light rail and even bicycles are now obsolete.

Star Trek type teleportation is here, Yay!

only 5 years away, apparently.

perhaps 10.

um... Heisenberg uncertainty principle?

Not an issue as the principle uses quantum entanglement, no measurements are made on the particles.

We can use Zero Point energy to power the teleport device, we just need to work out how to shield the proton from nuclear forces and Bingo! Zero carbon ( as a nod to AGW ), Free, Limitless Power!

5 years away apparently, perhaps 10.

Anyway, if I'm going to wish-upon-a-star for a magic-pixie technofix for PO I'm going to pick a cool one.

We have a built infrastructure problem. Even if we could suddenly make solar powered vehicles of all types, all of our current vehicles would lose most of their value - become "stranded assets".

cars could be converted to electric cars and the remaining parts sold or the cars scraped.

I am newly playing the electric car conversion game and the unequivocal advice I have been receiving is to "start with a lightweight, standard transmission" car. Many other types of cars and trucks, though entirely possible to be converted, are too heavy to provide much range. The extra batteries needed add more expense, too.

Perhaps these batteries, when available, will provide a good balance between performance and price:

I suspect we will have a lot of scrap metal soon. I've been pondering how to melt it and use it locally rather than having it dismantled and sent somewhere else. My initial research seems to indicate that massive amounts of energy are required to melt it, up until now available primarily from fossil sources.

Yeah, steel melts at 2500 degrees or more, depending on the alloy. How would you get that temp without fossil fuels? That's a pretty big bonfire...

Gail -

Unfortunately, the retrofitting of almost anything is generally fraught with all sorts of serious problems and compromises and usually turns out to be more expensive and troublesome than starting from scratch. (Think of the cost of adding a major addition unto your house as opposed to the cost of buying a house big enough to begin with.) I can hardly think of a more hopeless technical exercise than trying to retrofit existing ICE cars to run on solar power. Any even halfway viable solar-powered car has to be ultra light, slow, and purpose designed.

The best thing would be to let the old fleet of ICE vehicles to die a slow but merciful death, whilst at the same time vigorously promoting vehicles tied to various forms of alternative energy. Various financial incentives could speed up the process greatly.

I tend to think that the current fleet of SUVs will eventually wind up being used as de facto pickup trucks for various contractors, which is about the only legitimate use of such large vehicles.

Don't forget: during the mid to late 1970s the back rows of used car lots were filled will all sorts of muscle cars that the dealer could hardly give away (today the finer specimens in pristine conditions command six-figure prices). So, in many respects the market is pretty efficient in getting rid of unwanted and/or obsolete technology. But one has to give it time, something which we don't have a hell of a lot of.

Most of the compacts and subcompacts could be converted to EVs, which could be recharged with solar.

A fair number of the pickups and SUVs might be kept running for quite a while with WWII-era "producer gas" devices. This would be feasible for local travel, at least.

If we somehow had a cheap attachment to our existing cars and trucks that allowed them to run on solar power, we would be a whole lot better off--but no one even suggests this may be possible.

What about the hybrid conversion kits we've already started to see like the Poulsen hybrid? I don't know how well these work now but there is probably great scope for improvement in these. Add this to the work ppl are doing with things like the Solar Prius project and converting cars to solar-electric doesn't seem that far fetched does it?

If we somehow had a cheap attachment to our existing cars and trucks that allowed them to run on solar power, we would be a whole lot better off--but no one even suggests this may be possible.

Isn't the issue that sunlight is too diffuse an energy source to allow cars to run on solar? Even if the roof and hood were covered with highly efficient solar cells that charged battery packs, the amount of energy you collected from them would at most allow you to drive a few miles per day, even in Arizona. If you're charging from PVs on the roof of your house, that's a different story. I'm still waiting to see how scalable / cheap Nanosolar's non-silicon PV panels will be.

One thing that no one ever talks about is the strong US military presence in the Persian Gulf gives it the ability to hold all oil coming out of the Gulf hostage. Isn't it possible that at some point the US will start demanding oil at a discounted price with the threat that no one will get any if the Gulf states don't comply? It seems unlikely that the US will just "collapse" without attempting to play it's military card this way.

I think you raise an intersting question taste. The last vestige of our super power status is the military and its advanced technology. Also there is the Carter Doctrine that says something on the order of our having the right to appropriate energy sources as needed. So what would a hawk like McBush do if he gets elected and our country is descending into the crapper due to a lack of reasonably priced oil? Seems to me McBush would lose his temper, which is well known for, and do what you suggest or some other scenario in which it is deemed necessary for us to secure oil.

And this brings up an interesting question: Will Americans vote for someone that will use the military to secure oil by continuing the war in Iraq and possibly open that front up to other middle east countries like Iran, or will they opt for a president that will have us exit Iraq and concentrate on an at home energy policy of moving towards energy independence by way of deploying on a mass scale renewable energy production sources, such as wind and solar?

Or more simply put, will we lash out to take what we need, or will we go inward to solve our own problems?

One thing that no one ever talks about is the strong US military presence in the Persian Gulf gives it the ability to hold all oil coming out of the Gulf hostage. Isn't it possible that at some point the US will start demanding oil at a discounted price with the threat that no one will get any if the Gulf states don't comply

There is, indeed, a certain monkey logic to grab the other monkeys' bananas.

So saying, the pragmatism of attempting to hijack and run away with huge amounts of explosive liquid on an ongoing basis in a highly-armed region is not high. It worked when we were the principle addicts, perhaps less well now.

Always good advice to re-read the book Dune. The Saudis' end-game may be planned something like Maud Dib's. Bet I know where a few of those missing soviet nukes ended up. (I don't really believe this, just trying to get into the swim of Orlov-style thought experiments). But the point is that there are those who would be expected to take some sort of umbrage at this, and supertankers make good targets. As do refineries, etc. As one involved in the politics & logistics of extinguishing the Kuwait fires, I have a kinda queasy feeling about how that would go. When a bunch of people at odds with each other try to take the same hostage, it doesn't often go well for the hostage.

Orlov's great, I'll read anything he ever writes I can get my hands on. The fact that he's making some incredibly salient points about specific ways stuff may roll out is a bonus, and a big one. I've recommended this book to all I know without even reading it.

If Saudi Arabia gets nuclear weapons it is most likely they'd get them through Pakistan's program, which they helped fund. Just google Saudi + "nuclear weapons"

As far as their endgame, it has been reported that they have rigged their oil fields with explosives:

They began exploring the possibility of a single-button self-destruct system, protected with a series of built-in fail-safes. It was evidently their way to ensure that if someone else grabbed the world's largest oil reserves and forced them to flee the country they had founded, the House of Saud could at least make certain that what they left behind was worthless.

Seems to have originally been done as a deterrent against Saddam, but would be just as effective against Iran and the U.S.

Looking forward to Orlov's book too, great post.

Daniel Pipes is a right-wing loony who absolutely detests Arabs. While I don't know if it's actually possible that the Saudis have a endgame plan like that, I would never trust anything Pipes says, any more than I would trust anything that Richard Perle, John Bolton or Paul Wolfowitz says.

“As far as their endgame, it has been reported that they have rigged their oil fields with explosives:” Posted by Deodand

This story has cropped up a few times since the Arab Oil Embargo of ‘73 -’74. I recall that during the embargo there was a bit of speculation that the US would invade Saudi Arabia to lift the embargo, and I remember reading an account that the Saudis had mined their oilfields and refineries to forstall this. Whether or not any of this was/is true, I have no idea.

Antoinetta III

I wish it were true, because it would give us our first real world Bond villain.

Who rigs their home to self-destruct? Honestly, what have you lot been drinking? I had five pints of Guiness tonight and even I can spot this as rubbish :)

I find this credible. It is well known that the Swiss have detonation charges installed in every single bridge and tunnel on the border of their their country, and maybe in all of the interior as well. This has been SOP in Switzerland at least since WWII. It wouldn't even surprise me if the Saudis had paid the Swiss some consulting fees to help them get it all set up.

If only there was some way to know what goes on within Saudi Ameraco. Like if the CIA had a woman or man on the inside.

(Frankly, I would not be shocked if a well or 2 go up from booby-traps terrorists would get blamed. Or is it the other way 'round. Whichever would make people sleep better)

Oh come on, if they let that particular cat out of the bag then it would be open season on the USA the likes of which we haven;t seen since the fall of Rome.
You might get some oil but good luck getting it home and good luck cleaning up the mess from 1000 car bombs a week or counting the dead from bio terrorism or the odd nuke on Tel Aviv.
Not a good idea.

One could argue that Paulson's trip to the ME, to arm twist the Gulf states to stay on a dollar peg amounts to exactly this. Would the Gulf states maintain such an obviously self damaging policy if it were not for the US military presence in the Gulf?

No one will get any?

Let's see, the top oil exporters to the United States currently, in order, are:

Saudi Arabia

Canada + Mexico + Nigeria + Venezuela: 5.04 million barrels per day
Saudi Arabia + Iraq: 2.31 million barrels per day
(Source: EIA)

It is a myth that the Persian Gulf is the primary source of crude oil (or petroleum products) imported into the United States. It is likely fantasy to think that Iraq's production could be boosted significantly. And what would securing Saudi Arabia's production actually accomplish? Saudi Arabia's net exports are something in the neighbourhood of 7 million barrels of oil per day, which is not nearly enough (only 1/3 of U.S. consumption, and U.S. production is even less than 1/3). So, the U.S. would have to commandeer from a whole bunch of other places, or else pay... the current price determined by the international market. Net effect? Nothing, aside from annoying a whole bunch of people and proving once and for all that the U.S. government cannot be trusted.

I really can't see anyone with half a brain thinking this would be a good idea. But then, the U.S. did invade Iraq...

Just: You make good points but there is no more evidence that the USA invasion of Iraq was propelled by stupidity than there is evidence that the dismantling of the industrial strength of the USA was propelled by stupidity. IMO it might empower or make the general public feel good to believe this but the evidence just isn't there.

This is covered somewhat in Heinberg's book Power Down. As one of four scenarios, he discusses basically endless war to control the dwindling fossil fuel resources. He's one of the many that feel we won't be able to transition to an alternative high-energy infrastructure in time.

"The United States lacks this safety network, so financial collapse is likely to be more of a problem here."

Understatement. Perhaps we can grow some food on the fields of the NASCAR race ways, football and baseball stadiums, the lawns of the White House and etc. But then again who will teach us how to grow food let alone foster productive soils sans petro-chemical inputs?

"Perhaps we can grow some food on the fields of the NASCAR race ways, football and baseball stadiums..."

I like it!

and everyone in the stands is issued a mirror to focus on a solar collector.


I've not read the book but I have a keen interest in collapse. The central limit theorem pretty much assures that many types of changes will result in a bell shaped curve as long as they are fairly independent. The vast majority of systems fall under this situation. Except when they don't.

You have two types of forces operating on a strained system external pressures and internal correlations and feedback loops. So far at least from what I can tell external forces are probably not enough to cause as system to collapse. The can make parts of the system degrade faster etc but they don't lead to collapses.

You have to have some sort of internal feedback mechanism which makes basically all attempts at changing cause the system to decay. In effect this is the same sort of situation you get with a explosion.

So what really interesting is that it seems that only two results are possible in a strained system thats decaying.
A fairly slow decay at about the same order of magnitude as the original growth rate.

Or a explosive decay.

You have interesting observations. There aren't too many people who would think of the central limit theorem in the context of collapse.

I think you are right that there are only two results in a strained system - a fairly slow decay at about the same order of magnitude as the original growth rate and explosive decay.

It seems like there are enough internal financial pressures that these pressures are likely to push the US financial system over the edge. Exactly how the US copes with this problem is not clear.

Also, how the US financial system problems interact with the rest of the world's problems are not entirely clear. Will it mean that the US is disproportionately cut out of purchasing oil supply that is available? If that is the case, it could mean that a fair amount of the world can continue on a slow decline path for quite a while, using the oil that would have been exported to the US. There could be other scenarios as well.

I tend to agree with you on that.

Actually for civilization this internal financial pressure is in general the problem of the transfer of wealth to the top. Sort of a inverse central limit. The wealth distribution function rapidly sharpens before collapse.

I know very little about the real wealth distribution in the USRR but it would not surprise me to find that by the 1990's the elite have effectively absorbed all the wealth in the system and further concentration destabilized the financial network and of course the normal economy.

Effectively what happens is as the economy worsens the elite withdraw more and more wealth and real money for the economy causing further declines. Under normal conditions the deals if you will get good enough and the flow reverses. However in our current situation with wealth already highly concentrated and now unable to efficiently reach the normal economy no such balance happens.

As a example if you consider the traditional local bank it could be very intelligent at lending money for maximum growth ( Not that this is right or wrong just they are better ). With the rise of mega banks this intelligence is removed and you have simple reactions taking place.

As in the USSR market manipulation in the US is being used to keep the to big to fail from failing. This destabilizes the entire system effectively preventing the regular economy from healing via reinvestment albeit at fire sale prices by the ultra wealthy to spur a new round of concentration.

I'm not saying that wealth won't continue to concentrate for a while but going forward this will be via effectively dismantling the regular economy regardless of future economic prospects.

In any case you need external pressure ( peak oil ) And a internal force ( messed up financial system )

To cause collapse.

As a further example consider fishing stock collapse the actual direct cause of collapse is probably almost always a ecosystem collapse not the external force of fishing pressure itself.

So its a driven system but the build up of internal forces if you will is the actual direct cause of collapse.

For the US I actually think its further out than most people would think simply because the middle class still holds a enormous amount of wealth that has yet to be concentrated primarily in the form of homes.

My best guess is that before we see collapse we will see large companies form to convert the housing stock to rentals. Even and actually esp if these homes are bought up for pennies on the dollar then you can get this last wave of concentration. I'd think it will be some sort of rent to own hoax. I can't see any way for this to be pulled off without a significant devaluation of housing assets since rent would track income and your talking about bring on a huge amount of rental stock really depressing rental rates. I'd also assume that a lot of these houses would be reconfigured as multiple apartments.

Also of course a buy up of public companies would also create another route to a round of concentration.

This implies a nominal collapse of the stock market is coming. In any case I think we still have room for one last round of concentration of wealth to be attempted but at some point this will blow up as it interacts with the external force of peak oil which is really solved by the 100% opposite solution which is to rapidly decentralize wealth and allow it to be used to ELP.

Thus the system in my opinion has to fail. Probably quit a bit later then most assume but fail non the less.
Best guess all things considered is we may have 2-3 year at least before the system becomes critical.

Certainly peak oil will impoverish the middle class but thats not going to cause failure you have to have one other force. In my opinion the final Brazilification of America will not be successful instead it will cause economic collapse. Its this combination of the final concentration cycle and its impoverishment with rapidly rising commodity prices causing impoverishment at the same time. You can't suck blood twice out of a turnip.

In the past these two conditions where often a heavy tax increase followed by crop failure.

Memel, this is a great post.
I wonder if you could find the time to do an article on this for TOD?
This is very important work, and further discussion and explanation of this and the central limit theorum and how it applies to social collapse would be very valuable IMO.
Thank you for posting.

Sure I will at some point. However at the moment I'm a bit stuck on one part of the problem.

For oil you can see that extraction is forced on the downside because of the formation of what I call stairs.
Production start to drop some changes are made then production rate held constant for X then drops again approaching the logistic. For a individual field eventually you suffer rapid collapse in the forced system generally when water breaks through or pressure collapses etc.

However as you expand to large and larger regions the forcing function changes and the mode of collapse is probably not the collapse of individual fields although that plays a large role.

As you mention once you go global if you will it becomes increasingly a social issue and less and less of a technical issue. Peak Oil is important not because of the absolute drop in oil but because its causes widespread commodity and price inflation at a time when fiat curriencies are in bad shape. This financial forcing if you will is a far larger problem than the physical drop in oil supplies. But the physical supplies are at best unstable with a lot of reason that we can see low exports, low production and low eroi.

But like I said its easy enough to see that everything is heading for a high potential of collapse and its easy enough to look at it after it really starts and say hey we are collapsing but predicting collapse with any sort of firm mathematical model escapes me.

It driving me a bit crazy we have tons of evidence that the system is now being forced and is highly coupled thus the central limit theorem probably does not hold. And you have a assertion unproved but fairly self evident that if its not central limit then its collapsed. But I can't actually prove it. Nothing I know in math except for some sort of detailed model allows you to make the leap form doing a good job of proving collapse is certain to in any way predicting the details. Since the system is highly coupled and probably chaotic with a lot of the initial conditions any sort of detailed model would be highly sensitive to your conditions so they are not robust.

Its like watching a long who's path you don't know burn in a dark room. You know the dynamite will explode and as you watch the fuse you can make all kinds of predictions based on the past path to try and determine when it will explode but these are for the most part simply wild ass guesses they have no more predictive power then just doing a reasonable guess.

The amount of information we have about the oil supply really puts us in the same situation.

The only difference is that the actually stair step pattern itself seems to have information about the forcing function so the path is not entirely random.

In any case at some point I'll be forced to simply throw up where I'm at and leave it at that.
For a ton of reasons I really want to see some more production data over the next several months. This is simply because my best guess was we would be down 2mbd in production this year. Price is indicating that its happening and I'm waiting to see if we continue to get bogus production data.

If so then I need to get unstuck because lying about the worlds production right now hurts all of us.
If they do report the right numbers then I'll try to see if I can fit a forcing function.

I need two points at least to draw a strait line :)

Trying to find a sensible comment to that is not easy in itself.
The only comment that occurs which might throw some light on the issue is to look more closely at the nature of the 'stairs'.
Their duration vs how rapidly they decline when they drop down might be informative, as might what the relative sizes of the drop are at different stages.
I would suspect that in line with a normal u-shaped overall decline that the depth gets increasingly great and the time before each one decreases in a fairly smooth function, although it is also possible that the steps are much more random.
Using the ELM then it might be likely that a collapse in a weakened system would occur at the point where in spite of reduced demand due to recession in the world economy and overall production actually decreasing the price of oil rises in non-oil exporting countries in terms of the basket of goods they would have to sell to buy the same amount of oil.
This would be an entirely unsustainable death-spiral and should destroy the system in short order.
Demand destruction for the next few years might stabilise the real price of oil, but by 2012 the conditions I name might be current.
Well, that is the best I can do and even that hurt my brain a bit! :-)

Exactly your pretty much where I'm at. In chemistry for absorption spectra you have this concept of fine structure big peaks are actually made of closely spaced peaks.

We are thinking on the same lines that the fine structure if you can interpet it actually tells you how the system would behave. If you had the right model you don't need the complete spectra.

In any case look at it this way over the last 5 years we have had a huge forcing function applied to the system in the form of price the first time this happened the response was about 10mbpd after that despite repeated doubling of price the response has been effectively flat.

Given the above discussion even if I'm not smart enough to figure out the exact model even the general outline is enough to think we have a good chance of seeing a hell of a drop.

And finally using past declines like the lower 48 which does show a good step like structure is probably not correct since even though it was exhaustively extracted it was down under a relatively low price regime. The US was not extracted under conditions where the price was doubling every 18 months.

For example the last five years we have been at about 10mbpd higher than the previous five years.
Thats like and additional 50mbpd of "pressure" in a sense on next years extraction. The US actually had this for a few years right around the peak if you look.

With the HL plot you can see this was only maintained for 4-5 years before dropping off steeply.

So this can be used at least as some supporting evidence that our 10mbpd increase from pricing pressure should drop rapidly any day now.

Then a plateau for X (unknown amount of time ) and another drop.

You can see the two steps in US production so using my model the US should be on its way to a quick drop of 2mbd to 3mbd over the next few years to it next step. Also note it looks like its more stressed now.
So it should pretty much head strait for 3mbpd over the next 2-3 years.

So in any case if we can't discern the world production the US production should drop like a rock.

But just to repeat I see no way to be able to pick these steps out with some sort of predictive model.
Once you have the first one then the second one should be similar.

But of course for the world it looks like the first step is a bitch :)

The systemic breakdown may happen first in the high petrol tax countries of Europe rather than in the lower tax regime of the US.
It was drawn to my intention here that since tax on fuel here is at a fixed rate with only the VAT element rising proportionately we have not been paying so much as a percentage extra at the pumps.
Here is what I replied:
'Demand for petrol has so far been inelastic, and some here have made the point, persuasively IMO, that demand destruction will only really take off when a recession/depression hits.
In Europe Government finances are heavily dependent on petrol tax.
So far to the limited extent that demand has dropped Government revenues have been protected by the VAT component.
If demand seriously drops, as it must in a world with decreasing oil available, and in my view this is likely to occur shortly with recession, then a horse and cart will have been driven through Government revenues.
Either Government spending would have to be savagely slashed, revenues would have to be greatly increased - in economic terms the best way would be to increase the price of fuel still more as this would restrain demand, but in any case taxes would have to go up a great deal, or Government deficits would spiral out of control leading to hyper-inflation.
Under those circumstances it would seem that after a tipping point the high petroleum tax countries would be in an even worse position than the countries which had traditionally had a low tax on petrol.'

This sounds like systemic breakdown to me, starting perhaps in this winter.
If I were you I would publish here what you have now, unless you want too make it an historical treatise.
Even Einstein compromised when he could not work out a TOE and turned out what he had! :-)

Dave - Are you suggesting that government deficits aren't already out of control. We have a congress whose main job is to meet regularly to raise the debt limit cielings.

All I want to know is when does hyper-inflation begin? Perhaps at the point when the U.S. is unable to meet it's obligations and defaults on it's debts? I suppose then it would be a good thing about then to have a huge mortgage on your home because then you get to pay it back with ridiculously cheap dollars...

Government deficits would spiral out of control leading to hyper-inflation.

Here is the wiki technical definition Joe:

In economics, hyperinflation is inflation that is "out of control," a condition in which prices increase rapidly as a currency loses its value. Formal definitions vary from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50% a month." In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.

Britain and America are certainly in a highly inflationary environment at the moment.
Both pulled back from, at least in Britain's case, even more perilous circumstances in the 70's, but of course there was no oil peak then.

For me, the point of no return will pass when we move unequivocally into recession, with present large government deficits increasing at a geometric rate.
If the answer chosen then is to inflate the money supply still more, then we are past the tipping point, and hyperinflation will surely result.

At a guess, the US's remaining status as a reserve currency will allow it to inflate into hyperinflation.
In southern Europe deficits are already so large that hyper inflation seems certain.
Northern Europe including Germany and their old partners in an informal currency block before the Euro will deflate, but large government social expenditures will mean that they will be chasing the tail of balancing the budget, with one deflation going on top of another, and the budget deficit still large.
France and Britain are swing cases, with France probably opting to stick with the German currency in the end, regardless of the cost, just as it did before the Euro.
Britain is probably just about strong enough to avoid hyper-inflation, or to put it the other way, so weak that the attempt to inflate will be swiftly rejected by the markets, and an inability to finance Treasury bonds will force the Government to savagely retrench, and unlike Spain and Italy that might just about bring the problem under control.
All these are just my guesses of course, and things could play out a lot of different ways, but the pressures are not in doubt, or their potential to lead to hyper-inflation.
The Euro is a dead duck, of course, and it will quack it's last shortly, probably within the year or 18months, at least with all it's present members.

You estimate a US economic collapse by 2012?

I really hope for a slow decline because it would be far more manageable than a fast/rapid decline. A rapid US economic collapse would be chaos. It would make 1929 look benign. And 1929 almost destroyed the world's economy.

Peak oil has caught most of the world of the world flatfooted, the MSM and governments are still putting it off for decades, yet we are on the peak now IMO.

Would the precursor to a rapid economic collapse look different than a slow decline?

If there are different signs indicative of a rapid collapse what are they? At what point does someone take a sabbatical from the cities and go visit the country cousins or cash in the 403B and buy back some of the family farm?

Predicting collapse i.e the timing is fiendishly difficult. What seems to underly a collapse is extensive coupling and feedback loops. Formerly independent variables become dependent. For example the US cannot lower interest rates to spur the economy because we are dependent on oil imports as our fiat currency drops relative others imports and esp oil imports become more expensive. This is just the tip of the iceberg as far as the number of coupled/feedback loops you can think of. Another is of course export land. High oil prices result in growth in exporting nations leading to lower exports and higher prices.

For these couplings and feedback loops to result in a fast collapse they have to trigger some sort of exponentially accelerating change or hyper-exponential condition.

In my opinion this is caused by cross coupling between various negative feedback loops.
In the case of export-land/petro-dollar/US economy this would be dumping of US dollars on the world market by oil producing countries and a change of petro currency. You can easily see how such a move would collapse the US economy. It would send the price of oil in dollars skyrocketing causing further dumping.

Needless to say the Middle East countries technically have us over a barrel(pun intended) Whats funny to me is Iran is pretty stupid if they wanted to hurt the US they would have built up a huge reserve of dollars then dumped them.

In any case the fast collapse problem bears a lot of resemblance to a 3 body problem which is both not closed and the solutions are dependent on the initial conditions and of course chaotic under some regimes.

So its a real catch 22 by definition collapse is the movement of a system into the chaotic regime which means the original system was not solvable analytically and sensitive to its initial conditions.

The best I can come up with is that the system does not fit a simple analytic and seems to be showing coupling therefore its a suseptiable for collapse. Given that almost all forces in the system are negative
collapse is effectively certain but with this you can pretty much prove you also cannot predict collapse.

I can estimate using a hand waving form of fixed point analysis and some assumptions about stability around various fixed points in a unknown equation. For example we can be pretty sure that some sort of economic problems will develop when gasoline reaches 8-10 dollars a gallon in the US and 15 in Europe.

So the first inflection point if you will would be at that point between now and then we can expect the system to remain fairly stable with at best world demand to stop growing. So the first inflection point is where demand growth is stopped to declining world wide. Right now we are in the situation that some importing countries have stagnant demand to slight declines and some are growing. This I think can go on for another year or two which puts us into 2010-2011. In the 2011-2012 time frame a lot of exporting countries should have had internal demand increase enough that even with high prices the absolute value of the exports begins to decline. Rapidly devaluing fiat currencies would serve to diminish the purchasing power of previously stored currencies.

Basically whats happening is the price of oil has risen long enough that the prices of goods are also rising rapidly and wages and profits are stagnant to declining. Since oil exporting nations are also major importers of finished goods the combination of lower Westexas has talked about this not sure he has calculated it but massive oil induced price inflation should accellerate the time at which oil exporters reach a break even point where further increases in the price of oil simply costs them more money when they buy finished goods or food. I'm guessing how soon this would be but assuming that 100+ plus oil takes about six months to a year to percolate through the system and that fuel costs will be passed along much faster once the number of competitors drop expecting it to reach a critical point by 2011-2012 is reasonable. This is the second critical point. At this point demand in the producing countries stops growing because the flow of funds is now equal the more they charge the more they pay. No way they have enough time to fully industrialize and they don't have other critical raw materials anyway so they will always have a import/export economy moving manufacturing to the ME does not help. They don't have the coal reserves to support heavy industry for example.

So we can kinda see the system evolve to these two critical points past this if any of the feedback loops have gone critical we collapse. Maybe we struggle along for another year or two but making it to 2015 seems impossible. This puts the collapse window between 2012-2015.

Since oil exporting nations are also major importers of finished goods the combination of lower Westexas has talked about this not sure he has calculated it but massive oil induced price inflation should accellerate the time at which oil exporters reach a break even point where further increases in the price of oil simply costs them more money when they buy finished goods or food.

I don't follow you here. Any given price will take time to feed through the system, so if oil is at, say, $100/barrel and it goes to $200, there will be a time lag during which the oil exporting/goods importing country gets more goods for it's money.
Of course, the time that the lag takes to work through probably gets progressively shorter and the nominal currency amounts are on an exponential curve, so the practical differences may be limited.

Correct its your basic trade imbalance problem. The time lag is more than compensated for by a rapid decline in the value of the fiat currency vs required commodities.

Also of course the oil exporting nations will try to buy fixed assets and companies but these are undergoing massive deflation so they are losing wealth.

Your right but I think that the lag is more then covered by the currency markets and deflation of fixed assets bought in the importing countries.

Given the reluctance of KSA to raise production regardless of if they can or not one has to imagine that they are already caught fairly deep in the spiral.

This gives a inflation rate of 3.8%

This gives somewhat higher numbers.,Economy_and_Trade/228361

Given 1-100/130 = 23% and a inflation rate change of 2% to 3% and esp the big jump in 2007-2008 from below 1% in previous years then KSA is only seeing a real increase of 22%.

Further more not all of their crude is light sweet and the heavy sour oils are sold at a steep discount like 6 dollars or 20% its less.

So they are already starting to suffer the higher the oil price goes the less we can get these large changes in price on a percentage basis. Also of course the dollar lost like 30% of its purchasing power vs
the Euro over the same time period. It can be argued that KSA probably has already failed to make any real
gains from the increase in oil prices. In fact given that internal consumption has increased over the same time period technically they have actually lost like 10% ? in external purchasing power ?

So looks to me that KSA has already lost purchasing power since 2006. They basically lost money in 2007 and 2008.

So regardless of if they can produce more oil or not I suspect we won't know until the dollar stabilizes and oil goes much higher.

It really depends on how you calculate this but its interesting to note if the above is right then KSA is already negative for purchasing power. If they want to make money they have to drop the dollar peg.

Now we are getting somewhere, as that statement sounds subject to analysis, and might provide the trigger to show wehn collapse sets in.
Let's see if I have your argument right:

It has been established on this forum that the fall in value of the dollar relative to other currencies only accounts for a small portion of the rise in nominal oil prices.

To this to determine the worth of, say, Saudi exports, we need to add the general inflation of the costs of the goods that Saudi wishes to import.

To this in addition we have to account for the reduced amounts of exports.

So we have:(US depreciation + goods inflation) times oil exports volume
From these figures it should be possible to get a figure for the actual relative rate of increase of oil prices, as against the value of goods it is traded for.

And does the smaller volume of oil buy more or less of the goods it is being traded for?

For some countries, such as Mexico, the answer is clearly less.

I wonder what the answers are for the top five exporters, and for the world exporters?

Exactly. The only reason I think the fall of the dollar had a bigger impact on the Saudi's is because it devalued their dollar holdings an they have a dollar peg so they imported the dollar inflation.

But your on the right track. In general eventually since the costs of higher oil have to be passed on this must be passed on into all the imports they get. So they will be paying the same high fuel costs for imports as everybody else. In addition internal inflation will continue to heat up because of the money flows.

Trade imbalances simply can't last forever they can cause a transfer of wealth for sometime but sooner than later the money has to be recycled. Even if this means assigning a nominal debt to the importer that will never be repaid. I'm not sure of the right way to figure this but it looks to me that the real value or absolute transfer of wealth into the oil exporting countries is quite a bit lower then it looks like from nominal prices. And this will peak before we see a price peak.

Probably a simple guess when this happens is when internal consumption equals external exports. At this point its a pretty good guess that most of the money from exports is going into the internal economy and in general into internal and external inflation. The big assumption is of course that the wealth is flowing in so fast that these countries cannot really convert it to useful expansion i.e they are blowing most of the money. I'd say Mexico is different since its a diverse economy. Same for Norway. But all the rest of the exports are not.

One more thing for KSA and other oil exporting nations you have to look at the total financial situation.

They have suffered huge losses on currency devaluation and you can bet that they where heavily invested in MBS's CDO and the whole alphabet soup of crap we have created and associated hedge funds.

So god only knows what the real losses are but they are huge.

Of the number one and two exporters, Russia is in a far better position than Saudi, as it's economy and import needs are far more diversified.
For Saudi it seems that perhaps the rate of inflation in that country would be a fair approximation of the situation, so that we would have the amount of exports times the value, but minus the rate of internal inflation.
Any idea of the numbers on that, say over the last year?
I would guess that it is still positive, but the trend taking into account falling exports might be negative within, say, two years.

So by 2015. Do you think it will be equivalent to the great depression or worse, and if it is a resource driven collapse it would, I suppose, become the new normal, the economy would be contracted and so disrupted that even potential energy alternatives that currently exist i.e. solar, wind etc. would be difficult to put in place and development of new technologies would be near impossible.

Also if the US, EU economies degrade to third world levels what does that mean for the current second (developing) and third (undeveloped) world, would they be worse off than now (for example they would be getting no foreign aid) or would they stay consistent with how they are surviving through their experience. Are we looking at a large numbers of countries ending up like Zimbabwe or Somalia?

Also if as you say collapse is coming too soon for the ME to industrialize, what does that mean for the US as the US has greatly de industrialized, and much of our remaining manufacturing ability depends upon foreign supply, a collapse would, to various extent disrupt the supply of component parts. This would mean that the US would quickly see a dearth of manufactured goods, as well as spare parts for what we have.

If these scenarios are correct the probable outcome would be far worse than we have seen so far in Somalia etc.
Mass starvation and endemic war would be the outlook, especially in the Middle East.

A lot of the financial problems we are seeing now could easily be the precursors to financial collapse. One estimate is that these could come to a head later this year. Memmel is suggesting it will take a little longer. My financial forecast for 2008 raises some of these issues.

Thanks Gail for this blog on Dmitri Orlov and his ideas. I picked up the only copy of Reinventing Collapseat at my local bookstore yesterday and it is quite a read.

RE: Financial Collapse, I live in CA and we suffer from wildfires every year (last year was the worst on record). Every day they publish in the papers a fire forecast based on the availability of dry tinder and whether or not a Santa Ana* wind condition is present.

My point is this: The present economy looks like a high probability of fire in one sector could lead to a major fire in a number of sectors simultaneously. After all there is plenty of dry tinder that could burn and light other sectors aflame.

*Santa Ana Wind conditions are when the hot dry winds blow in from the east. When this occurs firefighters are forced to try and stay ahead of the fires and pray for the wind to change. Often times vandals or pyromaniacs wait for just such conditions to light the fires.

Dmitry Orlov discusses the effects of hyper-inflation in post-collapse USSR

"I handed out lots of these silly thousand ruple notes: People would recoil in shock and say'that's a lot of money.' 'No it isn't. Be sure to spend it right away'."

That is truly frightening for anybody who has been squirreling dollars away in pass-book savings accounts...

Gail - I read your forecast above and you bring up some great points particularly about houing purchases (which BTW has been the major engine that has drove our overheated economy for so long)falling due to bankers being reluctant to extend long term loans as they become more skeptical of the long term prospects for american workers going forward.

Memmel brought up something yesterday that ran along these same lines. As people become poorer they will automatically increase the living density in their homes. I know this first-hand because I worked as a property manager for years in the medium to low income sector. As soon as somebady would get behind financially they would start adding to the household. We had limits to density based on square footage. We would often discover 8 to 10 people huddled up in a two bed 1 ba apartment and we would then have to evict.

"For the US I actually think its further out than most people would think simply because the middle class still holds a enormous amount of wealth that has yet to be concentrated primarily in the form of homes.

My best guess is that before we see collapse we will see large companies form to convert the housing stock to rentals."

Getting the $$$ from where.

but this vortex was created in 1985.

We've been spinning in it for that long.

At least $350m trillion were vaporized the day before Bear Stearns
was liquidated by the Feds.

At least 240 000 homes in LA County will be in foreclosure.

CA will be bankrupt by August.

“Another unusual aspect of the Great Depression was deflation. Prices fell 25%, 30%, 30%, and 40% in the UK, Germany, the US, and France respectively from 1929 to 1933. These were the four largest economies in the world at that time."

The corruption has tainted the very measures that most shape public perception of the economy-the monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation; the quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth; and the monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity.

Total homes underwater in Los Angeles County: 256,617

From this number, we’ll also have to cut it down and eliminate 20% simply because of homes being resold. That is, one household buying a home, selling it, and buying another in that same timeframe. As we are constantly told by the realtors out there, the “typical” family will only stay in their home for 7 years. So that will still give us 205,294 homes that are underwater."

The only airline flying by XMas in the US will


For the US I actually think its further out than most people would think simply because the middle class still holds a enormous amount of wealth that has yet to be concentrated primarily in the form of homes.

memmel, I think much of what you say is spot on but you may have it backwards with respect to the point above.

I could easily make the case that the middle class doesn't have much wealth at all, especially if one is using houses as the gauge.

First, a mortgage is a liability, which makes the house a liability — not an asset — despite what the real estate agent would like to have you and me believe.

Second, the national home equity rate is now lower than the debt owed, 47.9% the last quarter of last year.

Third, it's true that a paid off house is closer to an asset to some extent, but only if the appreciation makes up for the cash flow it took to maintain the house while under ownership. Using this stricter definition of asset, most homes don't look nearly as good as "assets."

Fourth, homes do not generate income. They are not a very good asset, in my opinion, because of this, unless one rents it out for a positive cash flow.

I believe the combination of the above factors will prove very soon that the "wealth" the middle class "owns" (remember most is still owed to the lenders) is an illusion. Last time I checked, housing values were still going down. We will soon discover just how far down they can go. I think the collapse of which we are seeing the early stages will accelerate.


Your talking about the nominal value of the house assuming its purchased with a 30 year loan. Thats different from the wealth associated with a house which as you point out is its value as a rental property. This is anywhere from 50%-70% less than its value thats assigned to it as a private loan.

The wealth of a house does not drop a whole lot even if its nominal value drops a bunch since its its rental value that matters. This is the wealth you can extract out of the middle class. The lower the nominal value of the house vs rental rates the better for wealth extraction. Say after housing really craps out that a house that sold for 500k in California in 2005 requires a 50% down payment and is selling for 100-150k and can generate 1000 a month in rent. No one but landlords have the 50-75k to buy and in fact I'm saying that it will large corporations buying these houses up in bulk converting them to rentals. If you rent a 4 bedroom by the room you might get closer to say 1500 a month. You can see that the rental value of these homes is still quite high even if the nominal price drops dramatically. As long as downpayment requirments continue to increase the situation becomes better and better.

So I'm talking about what your saying positive cash flow but furthermore high down payment requirements to eliminate the individual and depress prices.

Its eventually a win/win for the remaining banks and the mega rental management companies since the loan is effectively 100% secured. Mega rental corp raised the money for the other half of the payment via equity sales so super wealthy individuals are magically able to control a very illiquid asset with liquid stock.

This is really the same way that traditional commercial real estate works. The banks who used to control all this will be willing to give up since the 30 year loan is no longer viable and middle class defaults are too high and housing values dropping to fast to give out individual loans. In effect they will be forced into this but once in its very lucrative not quite as good as loaning 100% of the value into existence but still a very good deal.

Now as far as why the super wealthy would be willing to buy up the US housing stock and convert it to rentals that fairly simple. Once the economy starts contracting commercial real estate is dead the consumer is toast the only way to make money from them is to intercept the large flow of money for basic stuff food/housing/clothing/energy. Housing is the only one that could really be taken over once the banks are overwhelmed with foreclosures and effectively insolvent.

In fact I'm sure the government will collude to figure out how to convert the foreclosed homes to ones owned by rentals with a nominal 100k loan and 25-50% down and let the banks write off the rest of the loan value. Maybe the banks get 5% of the rental proceeds for 50 years or something to nominally write off the 500k loan. Although the loan value is much lower say 75k they would probably be making 10-15% effective interest rate assuming they are getting say 400 a month of the rental income stream and its effectively zero risk.

But you can see that in a collapsing economy its the biggest income stream open to consolidation.
In fact its pretty much as far as I can tell the last way big business could really make money in a collapsing economy. Food/Energy are already under big business control.

But a nominal 1000 dollars a month from say 100-150 million people is a lot of money.

memmel---and others who care to comment---

This real estate stuff is most interesting. And I like this (is it called "systems" or "systemic"?) way of analyzing the incoming data to extrapolate and come up with what the future might look like. I would bet that governments around the world are conducting similar analysis! And of course they are not telling anyone the results, unlike TOD members.

Here is my question. Perhaps the only answer is "it depends on who you are and what your skills are" BUT the question is: what do you think an individual should do to maximize their chances of success in coming through this--ahem--shall I call it "Brazilification" of the US?

For instance--should one choose a place in the country or city? A simple life or machines galore? Emigrate? Find an uninhabited island? become a farmer? Live in a big metro area? Choose service sector? Or be a producer? Try to claw one's way into the business elite and stay there somehow? Get as much education as possible?

(Mostly the idea is to avoid the worst outcomes, from an individual standpoint, ie: being extremely poor, living crowded in a tiny room with people you don't know, pressed for rent by some bank trying to stay afloat. On the other hand, maybe if someone in the crowded rooming group can play the guitar or harmonica well things won't be so bad! :))

I'd say overall of course practice ELP. Economize localize produce. In my opinion I would move away from the largest cities and look for something less than 1 million people preferably something around 100,000 or less.

I'd look at developing a skill set that made sense post peak certainly farming is one but blacksmith/i.e machinist would also be important. Also something people may not think about such as paramedic or other emergency medical training. Its really tough to even come up with a list of possible decent post peak jobs but if the job is directly related to basics food/clothing/shelter/energy/beer. Then you probably will do well. I'm serious about the beer a good bartender will probably do well post peak if a reasonable economy holds up. Next I'd at least find a place with enough room to grow a decent garden or purchase some farmland within walking distance you can grow a garden on. Note this goes hand in hand with looking at the smaller towns and cities. If you want or need to live in a larger city then I assume its because the pay is lucrative and you should rent the smallest place thats reasonable and invest in a farm or some other means of growing a reasonable amount of food. The future is too uncertain to not make sure you can take care of at least some of your food needs. At some point you probably should store 1-2 years worth of wheat and other food items that can last for a long time in storage.

I would not take a substantial drop in income to achieve any of this the biggest thing you need post peak is money so if your making excellent money now cut your expenses and save like mad. In the US a decent trailer on a few acres of good farmland is readily available in the midwest for 100k or less.
We can assume that prices will drop for all this and that say 30-50k is not a bad bottom price for what I'd consider a reasonable post peak living style which is a double wide trailer on 1-2 acres within reasonable cycling distance of a large town or rail stop. If your city job cannot result in being able to save 30-50k over the next 2-3 years then the pay is probably not high enough to justify keeping it.

Bottom line is.

1.) Higher salary deeply in debt no home equity, credit cards to the limit etc.
Discharge the debt i.e sell everything pay off what you can make painful decisions.
I'f your credit is still good buy a cheaper place or some land before its tarnished.
I can't personally recommend walking away from debt obligations but you have to make your own decisions.
If your salary is under 100k or your debt load is high you have to rebalance.

2.) High salary 100k plus lower debt work in city.
Keep the job ! Save money if you own a suburban house and it not where you want to be post peak then sell and rent and wait a bit to buy another property. Or stay where your at. You have a chance to make one more move so think hard. If your assets are high enough then what you need to do is figure out how to retire within a year or two. In my opinion acting like your going into a forced retirement is the easiest way to get ready for peak oil. Expect housing prices to continue to drop and probably at increasing speeds. So if you own any property you don't want to keep post peak time to unload even if it means renting. The baby boomer crowd thats still working needs to make some tough decisions if they wait to unload the house until after official retirement they probably will find its lot 50% or more of its value.

3.) Low salary work in large city.
Get to a smaller town ! Your probably not going to save enough to buy anything outright in the short term.
So get out of the big city get integrated in a small town rent and save money. If your job does not match well with basic needs change your line of work but be careful about a long schooling. If you get into the community of your choice and aggressively save money eventually as things settle out post peak housing prices will collapse and people with decent steady jobs will be doing well. At that point a loan is possible.

Overall for anyone I'd suggest no long term loans i.e greater than 1-2 years until after oil production is officially down 10-15mbpd from the current production rates or 5 years have passed which ever is less.
If you have a mortgage pay it off downsize sell and rent what ever you have to to eliminate the long term loan. Same for car loans etc.

Thanks for the response---but why is it so important to pay off the long term loan? If it's a low interest rate and one's job is secure (for now at least) then why not keep this loan? After all, inflation is taking its value away every day.

I agree with you about the "beer" skills. I am studying fermentation in my free time. Very interesting. Growing up in NY suburbs we never thought about yeast and its many benefits.....of course people drank alcohol like crazy but no one knew how to make it.

The problem with a long term loan is that if you default you lose all of the equity built up.
For example if you miss the last payment on your car or house then you lose the car or house.

The first thing you have to keep in mind about a job in the future is no jobs are secure.
None zero zip nada.

If you own property outright and have enough savings to cover attempts at hiking taxes and retroactive inheritance taxes etc you have a chance of keeping it through the big tax crunch. Your almost certain
to see a spasm of extreme taxation before the governments retract. If you have a lot of equity and a payment then your going to be paying a lot more. Given that the governments can only tax owned property to a certain level before this alone collapses property values and they become the proud owners of a lot of homes. I think as long as we have representative governments their is a limit to how high taxes will go. Say at most 10 times the current levels.

Obviously even if these moves don't collapse property values they will cause them to decline a lot. Also of course everyone losing jobs even if yours is secure would put tons of foreclosed properties on the market so you would be underwater on your loan. Basically every outstanding loan made in the last 10 years would put you under water.

If you have 50% equity in your house then sell it and buy one 50% cheaper so no loan. Given what I'm saying you can easily rent for 1-2 years and wait on the market before buying. You will probably actually be able to pick up a similar home for 50% off in a few years. So selling now and waiting is a smart move.

But get out of the loan what ever way makes sense and start saving for the coming taxes if you want to own property. You have to estimate the real value of property for houses in the US I put it at 20-70 dollars a square foot or about 40-140k or so for a 2000 sqft home. This gives a rental value of 400-1000 dollars.

If you have any type of loan on the property its probably not cash flow positive given the above numbers.

No way in my opinion does any of the more traditional ways to decide to carry a long term loan work out in a depression situation. Even with the above you have to figure your renters may well miss half the payments. If its you home you need to treat yourself like your a renter.

Now if you actually own your house and are happy with its location etc etc then don't worry about it if the value drops and you decide to sell later equivalent properties will be of the same value. So as long as your a happy trading a house for a house your not really losing any money. If your retired now and still healthy then it would be prudent to go back to work for a bit while jobs are still available and save up some more money unless your super wealthy. Maybe go to school etc. And also of course pay close attention to your investment portfolio.

One thing I say on the housing blogs is you have to consider when buying a property what other people can afford what you can afford is irrelevant if no one is around to sell the property to when you need to sell.

I sold a lot of four-plexes to small investors over the years. Often times they would take out 90% LTV and struggle with negative cash flows. If you have initially a negative cash flow of 8% per annum and you hold it for three years and you have rent increases of 3.5% per annum it only takes a few years to balance that position. Also if you are looking for substantial tax deductions because you're income is high the rental formula with the current tax circumstance makes a prudent investment.

The idea of owning property for speculation is a symptom of how we got into a lot of the trouble we now find ourselves in (the burst housing bubble).

But here is something that readers of TOD need to understand. If you don't have the intestinal fortitude to carefully evaluate rental property and you don't clearly understand what it means to own rental property I reccomend you keep your money in something that you might have more agency over.

Rental Property is not for the faint of heart!

If you go with my above example with housing prices falling per annum at say 10% then 10% LTV loans are history. I'm suggesting that they will quickly move to 50% LTV.

Next I'm assuming flat to declining rents but with a 50% LTV after you have the initial massive drop in prices you would be cash flow positive on any rental properties if you can get the loan. Since its cash flow positive further drops in absolute value of the home do not lead to a default and we expect the value drops to slow dramatically once housing is cash flow positive. As long as you can get renters you can even let the property decay quite a bit over time and still make money. The slumlord equation.

These high LTV values pretty much mean a mega corp using stock offerings to raise cash to purchase rentals.

So all that has to happen is for housing value to start depreciating year over year and the banks will be forced to dramatically up the LTV no choice.

Next in both the US and Britain the density per housing unit is absurdly low around 2.6 people per housing unit.
">Percent of Occupied Housing Units With 1.01 or More Occupants Per Room

This is for the US but you can see California is at 8.1% and Ohio for example is at 1%.

We have a huge overhang of housing I calculated that if the US went from 2.6->3.6 people per housing unit we would have 35 million extra housing units. In good times the US builds about 2 million housing units a year. So about a 17 year supply of houses that in general should never have been built.

In a deep recession the easiest way to save money is to increase your living density. So given all this the expectation of rental rates increasing makes not sense. Instead they will probably drop by about 50% from todays rates.

Britain has about the same demographics as the US. Given all this in my opinion the housing stock actual value is far far less then current prices would indicate. Only decades of increasingly low loan requirements and government props have allowed housing to both be overbuilt and nominally increase in value.

Most people don't realize the magnitude of the housing bubble in real terms its a 20-30 year bubble thats popping. You would have to go back at least 20-30 years if not more to reach a point where housing and demographics and prices where correctly matched.

Its interesting because the root cause of all this seems to be that the post war baby boomer population bought houses and when their kids finally left and bought homes they did not downsize but continued to live in a home much to large for them effectively doubling the number of homes "required" the fact they where unusually wealthy following WWII because labor was dear fueled this overbuilding.

In any case this entire ponzi scheme is coming crashing down now.

I don't know about the States, but in the UK most rented properties are run by councils and housing associations, with the private landlord rented sector being relatively small.
The real forces which support rents are immigration and the Government paying rents for single mothers and the low paid, elderly etc.
The break up of the traditional family has been the main factor in the reduction in the number of people per housing unit, together with ageing.
In square feet per person we probably have around half the US figure.
I don't know how it will play out but I suspect that rents might be quite sticky here.

Well immigration will stop that pretty much a given. Also we can expect the large social services support to stop world wide. In fact it would be incredibly easy once the recession/depression gets underway to reclassify many people as able to work and eliminate most of their benefits.

You of course opened a new can of worms with the social welfare but it can be dropped quickly by assigning multiple single mother to a flat instead of one for example before pulling the rug out completely.

You could easily simply do 2-3 single mothers to a flat and only pay at this rate. They can choose to not accept it and get a job. I'd suspect you will get a similar situation in the US where the programs would probably continue but the density calculation would change and the services cut dramatically.

Whats good about this approach for the wealthy is that the total amount given to a landlord would be higher than the single rate so they get more money. In the cases that a single mother decided to not do this and works for cash to pay rent then you get even more money. Its a win win for the landlords. Also of course as the economy worsens more people would qualify for cattle housing.

No way the current social programs in the west can continue into a depression like environment.

Over all it sounds like that in England all thats needed on the rental side is consolidation of existing rental corporations I suspect that falling property values would drive this.

Bad as things are likely to be here in much of the world it will be worse, so great pressure will remain on our leaky borders and the machinery to police the borders is likely to creak even more than at present.

More renters and more competition for jobs lowering wages. The point is that by assuming packing densities and wage levels closer to the current third world real rents will decrease. Either via more people per housing unit or lower rental rates. Rents cannot exceed the amount of income allocated and with wages falling and petrol and food prices skyrocketing then real rents will fall and people will pack into housing units.

This is fairly simple economics. The expectation that rent and home values could increase or remain steady given that Europe and the US are massively overbuilt compared to third world lifestyles is a fallacy.

This dark immigration if you will simply ensures that the slum population density will be high and that wage pressure will be low. It does not change the basic equation but it does cause a social powder keg.

Look at South Africa today and your seeing the future of Europe and the US in say maybe five years.
Later on Brazil is the model.
We are not special.

Your right however conditions in the current third world will deteriorate to levels we probably can't imagine. But this is already happening and its why Africans are desperately leaving their countries right now.

In any case if you can figure out the end point then its pretty easy to look at todays world and see that all the indicators point to the endpoint being true. Then all you need to do is create plausible intermediate steps to reach the end point. In general you only find that some flimsy assumptions that are not valid in a deflationary economy prevent you from reaching the end point.

memmel - thankyou for your well reasoned analysis of housing in america.

By way of anecdote I will illustrate what i feel is an ongoing trend:

In 2005 Dave buys a house in Temecula, CA with 3% down. His intention was to commute 95 miles per day round trip to a job that enabled him to purchase the home. When his loan reset at a higher interest he took another roommate to reduce cost. When he realized that the loss of value (22%) had put him upside down on his loan he made the radical decision to default on the loan. He told the bank what he was doing and rather than go through a foreclusure the Bank offered him $3,000 to leave the house in good condition and volutarily leave. This is what he did.

He left Temecula and moved 45 miles closer to work and rented a 3bd townhome with his two roommates. Where he moved has convenient mass transit (light rail and efficient bus service)is a walk community and being close to the beach, little need for heating or cooling (Oceanside CA).

On balance even though a foreclosure makes him radioactive to a lender he is actually better off. He has more disposable income. He has far more spare time and stress is far less. His use and enjoyment is also much higher.

The question is: Is this a trend or an anomoly? I assert that it is a huge trend going forward but will take years to document and play out.

If you still have the heart to speculate in R.E. look to areas with
1. good employment prospects going forward,
2. public transportation
3. high urban density.

San Francisco is too expensive but it is a good model. Look to San Diego along the coastal areas and particularly downtown San Diego. L.A. is F**ked because of it's "freeway paradigm" although they can attach light rail to existing freeways without condemning additional property. This would however take a huge political effort as well as deep deep pockets.

Will the Federal govt help?

Yeah sure! If you believe that I have some bargain priced properties in North Las Vegas that you need to look at.

Sorry for the late response but yes I think your seeing the start of a pretty big trend.

Considering I think that the housing market is going to collapse I'd not get involved in rentals and probably not for a long time. But renting rooms or renting out parts of a house or duplex you live in is slightly different however right now I would not invest in anything that required a long term loan.

Andre, I have to agree with you. What the middle class has is debt, not wealth. When I look around at my neighbors and see nearly $100K worth of financed high end SUVs sitting in their driveways, I shudder. US net savings is now negative. They may have paper assets in pensions, 401Ks and the like but those are going downhill fast and will get far worse.

Assuming that owner occupiers would live somewhere, whilst it is valid to deduct for repairs to the property , they are also better off if they own the whole house or most of it by the amount of rent they would otherwise have to pay.
So the imputed rent value is an asset whether or not they rent out the property.
In the UK at least continued immigration and population rise means that rents are still rising, for the moment anyway.
Again in the UK something like a third of all homes are fully paid for, and of course still more have very low mortgages remaining.

This is the second half of the problem. Housing Units with large loans on them can be devalued and taken over by mega corp rental companies. But we are still left with a lot of remaining units with tons of equity thats not currently directly accessible to the wealthy and their governments but this is easy enough to change since most countries already have various inheritance taxes on the books.

What they would do is effectively prorate the inheritance tax and start collecting it early on individually owned homes. This prorated tax income can then be used as a revenue stream to back bonds. In the cases that the home owner is unable to pay the inheritance tax early the government would set up a reverse mortgage instead of simply taking the house. So the poor pensioner would simply be losing equity. To get around the rapidly dropping real value of the homes the government would use say a average value over 20 years and only reevaluate it every ten years or so. This would capture the highest housing values for tax purposes.

At the end of the day basically once the government revenues begin to decline in line with the real economy they will then borrow all the money thats been stored as equity in the homes under the guise of early collection of some sort of inheritance tax.

For both the US and Europe this will stave off collapse of the government for some time as other income sources dry up.

Technically the owners would be who every buys the bonds created on top of this revenue stream but we can expect once the countries eventually default only the wealthy nationals from favored nations will get repaid. Since these people will eventually get a ton of housing stock dropped on them they are probably the same people that set up mega rental corporation for managing the housing units that did not have equity.

Voila every penny has now been extracted from the middle class.

Sounds reasonable. In Britain the same effect is already achieved by charging for nursing homes, likely this will be altered to apply for all medicines.
Sounds like a scheme to die for.

memmel - mega housing corporations, reverse mortgages to finance inheritance tax?

Is that the fastest way to collapse and disenfranchise the middle class?

"...and in the end the people begged, 'make us your slaves but please feed us.'"

I don't know if its the fastest way to collapse the middle class but housing in its various forms is a asset class that has in general not yet been consolidated into the super rich.
Its sort of the last large asset that can be fleeced from the middle class. I'd argue after this they are no longer middle class for the most part.

I forget who I was reading that stated: the only common denominator between the rich and the rest of this country was the eglitarian nature of the car. Most people have at least one. When we lose the ability to drive our cars when and where we want to go that will be the end of the American middle class.

What I'm concerned about is a backlash against minorities, particularly Mexicans. In CA and Arizona there are vigilantes involving themselves in border enforcement.

They have job adverts on TV for Homeland Security postions with Immigration. The candidates look like a bunch of jack-booted thugs.

Clockwork Orange here we come!

I think that the housing stock would quickly deteriorate into slums, the owners would have little incentive to do any maintenance and the more inhabitants per unit would add to the degradation of individual structures. Under a collapse the civil authorities would have more on their plate than enforcing housing codes, i.e. keeping the water and sewer systems working. This could create a public health crises among other problems.

"There aren't too many people who would think of the central limit theorem in the context of collapse."

Exactly what I do.

An impulsive bathtub vortex:

There will be a solution.

How violent/peaceful is up to each input.

Your theories are not going to save you when the economic collapse comes. Practical preparation might. The theoretical comments you made remind me of nothing so much as the old Monty Python skit: 'Philosophy Soccer'.

Perhaps you would be interested in the following interview with the writer of 'Black Swan'. I have excerpted some comments...

'Taleb's Harsh Assessment of Bankers, Economists and the Fed'

'Reader Michael called to my attention a wide-ranging interview with Nassim Nicholas Taleb, author of the Black Swan and professional iconoclast, in the Times of London. The article is colorful, wide-ranging, and a bit long, so I've excerpted some of the most provocative bits. Needless to say, I am particularly taken by his dim view of academic economics as practiced in the US, which tends to place a premium on abstraction and models:...snip...

'Last May, Taleb published The Black Swan: The Impact of the Highly Improbable. It said, among many other things, that most economists, and almost all bankers, are subhuman and very, very dangerous. They live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems. Bankers and economists scorned and raged at Taleb. He didn’t understand, they said. A few months later, the full global implications of the sub-prime-driven credit crunch became clear. The world banking system still teeters on the edge of meltdown. Taleb had been vindicated. “It was my greatest vindication. But to me that wasn’t a black swan; it was a white swan. I knew it would happen and I said so. It was a black swan to Ben Bernanke [the chairman of the Federal Reserve]. I wouldn’t use him to drive my car. These guys are dangerous. They’re not qualified in their own field.'...snip...

BTW, would you say that treasury offerings going unsold would lead to a 'slow decline' or 'a explosive decay'?

River: What surprises me is the resilience of the premise that at the highest levels, the USA federal government is working with the goal of strengthening the future economic and political position of the USA. There is almost 100% agreement on this theory, and with the exception of a few notable "conspiracy nuts", no one even questions it-the whole idea of even questioning it is considered insane to almost all. A great many postings on this site start with this implicit assumption, IMO without even comprehending that it is an ASSUMPTION, not a fact.

i think you're certainly striking a nail in some way or form there

i think that much of the last 10 years (and much of the last 30 years) in the US, in terms of political machinations and big-dollar Wall Street movements (the strategic movements not the day to day trades) can be much better understood in the context of a liquidating of the US

turning plant and machinery into dollars by outsourcing everything is an example that helps visualize this, but in many more fundamental ways, it appears that those that own the US (or the majority of assets therein) have been liquidating their holdings

combine this with the looting of the treasury that has happened by letting so many big corporations with revolving doors between their executive floors and congress do business so closely with government and allowing regulated industries pick their regulators

then there's the whole blackwaterization of our military but i have done my rant on that a while back (can link if anyone missed it)

The USA is a country that has been operating for a very long time now on the assumption that future generations don't matter; in other words, the discount rate beyond, say, fifty years or so is essentially zero.

Well, guess what? The future is now. Most of those who are now living and all of those that follow us are those folks that had been discounted down to zero. The bills are now coming due - bills which previous generations should have paid but passed on to us.

TPTB, being mostly older and having lived their whole lives this way, are hoping to kick the can down the road one more time. But they are just about out of time. The bills are coming due now.

Taleb's comments also refer to the essential unknowability of the future.
There can be explosive events on the upside as well as the downside.
So the 'black swan' may be a white swan.
Cheap solar and storage, perhaps?

white swan and black swan have clear meanings in his work - to apply our own interpretation of white swan and black swan as some sort of good/bad value judgment instead of predictable/unpredictable kinda confuses the metaphor and makes it a lot less clear what people are referring to

i'd steer clear of that if possible - just 2c

I'm still waiting for my local bookstore to get my copy so I'll just make some general comments along River's lines.

One reason I have almost become agressivly negative in my posts recently is that people simply are not taking even basic action. I don't care whether it is because of denial, PR spin, etc. What angers me is that their lack of action will ultimately impact me regardless of the actions I have already taken.

Further, since the economy of my rural area is based upon dope growing or some kind of government money (In my case, although I have several income sources, the bulk of it is SS and a state pension.), it is likely that the few businesses in town will close making it important that those remaining behind are somewhat self-sufficient/self-reliant. However, this doesn't come about by waiting until you have to do it. Yet, this is exactly what I see.


I think we all know treasury offerings going unsold would be a major problem - likely leading to your second option.

Its a matter of perception. To Bernanke its explosive. To ordinary mortals, well, we saw it coming. Strong societies don't collapse, only weak ones do. It takes time to become weakened.

In one way the US is much better prepared for collapse than the Soviets were. We have hundreds of millions of privately owned firearms :-)

Best hopes for being a better aim than your neighbor...

This is a concern, especially since I live in the South. Gun ownership is very common here.

The only saving grace is that after not too long, many gun owners are likely to run out of ammunition. Leanan posted this over on Drumbeat:

No more cheap shots for gun users

EDMONTON - The price of ammo is shooting up faster than a speeding bullet.

Metal supplies are diminishing due to industrialization in China. On top of that, ammunition supplies have been depleted by wars in Iraq and Afghanistan and by consumers who hoard what they can for fear of higher prices.

Prices are also skyrocketing because fuel prices have meant a doubling of shipping costs in three years.

I think the whole gun ownership thing is overblown. Almost all of it consists of light firearms. Hunting rifles may be good for sniping but snipers don't do well in modern combat situations with overwhelming firepower.

If US citizens had RPG's and 50'cal machine guns and tons of unexploded heavy munitions then maybe a different story. But the US is not Afghanistan or Iraq with huge weapons caches that have been redistributed through out the populace. And the US internally is far less constrained when it comes to dealing with threats.

I think the weapons available in the US is fantastic for banditry esp attacks on isolated homesteads but they are almost worthless for insurrection. I'd suspect that gun running from Cuba, Russia etc would be needed before we would have a decently armed insurrection. However given the large amount of arms manufacture in the US you have the possibility of the distribution of heavy arms to local forces that eventually move to a warlord like situation. We do have large arms depo's so a break down of social order could result in these being redistributed. The current light arms in the civilian population would at best incite the local disorder needed to get heavy arms other than that and use for crime that are not worth much.

If you have ever seen a 50 cal fire then you would understand what I'm saying.

That's a good one! Have you ever seen an insurgency run out of bullets? When you need them, they magically appear, quite unlike oil. ;-)

I agree but this does mean the insurgency would have to rely on either Russia or China for real firepower.

The US citizen unlike your average Iraqi is not correctly armed to fight a real insurgency.
So you would have to have some sort of Iran/Contra like arrangement. Best guess is that the arms would flow into the country via the existing drug smuggling infrastructure and we would see something similar to Columbia where the drug smuggling routes are taken over by insurgents. I'm assuming that if people are having a problem eating the demand for hard drugs in the US will drop off and the drug smugglers will suffer their own form of a recession so the move to smuggling heavy arms will keep them in business. For them at least the beauty of the situation is that the articles they are smuggling can be used for defense of the smuggling routes and smuggling parties. This removes the need for a direct political tie and these drug smugglers already are embedded deeply in the poor communities that will be hardest hit.

In a lot of ways the war on drugs was simply and attempt to close down the smuggling routes so they could not be used for this purpose when the US switches to a more totalitarian government.

It has little to do with red ribbon week.

I have a question. is the oil drum sustainable? could it survive an Orlovian collapse?
can the search function, which is by google, survive peak oil? how will doomers search the oil drum then?

on a more serious note, is the oil drum sustainable?

we have some smart people on TOD but will we need the occupations of actuaries or college professors after the collapse? has anyone here quit their job that would be useless after the collapse and gone to work at Target or fast food?

The Oil Drum will exist until it doesn't. Google will exist until it doesn't.

In the meantime, TOD might have facilitated some conversations that helped people suffer a little less, and created a community that shares ideas and communicates solutions. Judge for yourself whether or not that is a good thing. (All I can say is this: it's not everything, but it is something.)

I am a "slow decliner" myself. A long secular slog downwards, facilitated by resource depletion and perpetuated by institutions and markets, until there is a drastic change in the culture of our polity or a decision by elites to change the course of our structures of regulation and governance.

Can there be small "bounces" back? Sure, that long secular decline I describe above isn't linear. There will be successes and failures, innovations and boondoggles. But what energy source will facilitate a massive bounce? I don't see one other than things that don't exist yet--and those are always possible, sure, even if they are unlikely.

My point is that the negatives will outweigh the positives and increase the probability for negative consequences due to resource constraints and the general state of the US debt/economy and our political momentum that perpetuates our institutions and way of life. That's my guess anyway.

The Oil Drum, indeed any Webserver, is not sustainable: none of its energy 'outputs' are returned to the 'input'.

Of our energy systems the electrical supply and grid are most vulnerable, they will be the first to fail, intermittantly perhaps at first.

Computers need a clean, steady and continuous electrical supply. Variations in supply power can cause early equipment failure and loss of data. UPS's, Uninterruptable Power Supplies, are commonly used to clean and stabilise grid supply, in the event of power failure they are mainly designed to provide enough power for perhaps a 20 mins from batteries, long enough to shut computers down cleanly.

Diesel power generators usually have fuel for a couple of days. Some installations could last longer off grid, most wont.

In any case grid failure would knock out Internet Routers, telephone exchanges, microwave comms relays, satellite ground stations etc etc. Even if a some webservices were running how many people would be listening?

If you want information from the internet: a) Get it now! b) Print it!

After the collapse, there will be very few jobs like we see now. What a person's job title was before will be irrelevant and the New Permaculture Era will value everyone's contribution.

If we lose electrical power very frequently, it is hard to think of much of our culture that is sustainable. It is difficult to run The Oil Drum without electricity. If we can keep electrical power, we are likely to be much better off.

I probably come closest to the model of the person who had decided my former occupation will not really be useful in the future, and changed to doing something else. Writing for The Oil Drum is probably not sustainable either, but it at least gives a little bit of an edge toward trying to solve the problems ahead. I have a husband who is working as a college professor, so my lack of income is not a huge issue. Obviously, the next question is whether my husband's job is sustainable either.

I am trying to do a bit of gardening, but not really enough to be a long-term solution. Full-time gardening would be very difficult to do as a replacement occupation.

If the really big crunch comes I think you'd be surprised at how much would be conserved. I've thought about this and I think we could get along OK at 50% less consumption of energy and probably just about everything else, judging by how many 3 foot wide posteriors I see at Wal Mart.

As electric power costs rise, we can expect demand to drop. In an experiment, I've cut my own electrical consumption by a third without a big effort.

The great depression was a collapse (caused by government) that serves as good an example as any. Under such a scenario energy consumption of all types would easily drop by half, at which point there wouldn't be shortages.

Moreover, for a number of years we could raise our own oil production to, say, another 15-20% of current production, so after a collapse, that additional amount would be huge. I can't see an Orlovian type collapse.

The great depression was a collapse (caused by government) that serves as good an example as any. Under such a scenario energy consumption of all types would easily drop by half, at which point there wouldn't be shortages.

Moreover, for a number of years we could raise our own oil production to, say, another 15-20% of current production, so after a collapse, that additional amount would be huge. I can't see an Orlovian type collapse.

Soviet collapse did not result in the electric grid going down, primarily because Russia's offical GDP shrank by over 50% in 1991-95, and the electricity consumption was reduced as a result, although by a smaller percenatge. This helped a lot, because electrified mass transit in the cities (metro, trolley buses and tramways) kept running, as did commuter trains and intercity electrified rail.

There were, however, liquid fuel shortages because the oil production went down due to lack of investment, and because it was more profitable to export oil overseas (sometimes illegally) than sell it domestically at a lower price.

We have a structural problem in the sense that the US transportation infrastructure is much more dependent on uninterrupted supply of liquid fuels than the Russian infrastructure. One can easily imagine a self-reinforcing feedback loop whether the US economic decline reduces its ability to bid for the declining oil exports, resulting in further economic decline. An increase in domestic drilling will probably offset some of the decline in existing fields for a few years, but I don't see the US oil production going up by 20% any time soon, if ever.


Why don't you say what you're thinking? I will instruct the peanut gallery to withhold the eggs and tomatoes.

He did, twice. Is TOD 'sustainable'?

how can TOD make the US sustainable if it can't make it's own website sustainable?

The TOD website is really not necessary to life -- although at some points we may think it is!

I have read a couple of articles by Orlov and found them to be almost exactly what I expect to happen. Of course events will unfold differently depending on ones location.

Once local governments collapse clean drinking water is going to be a very difficult necessity to find. Of course many items will be difficult to find but without potable water life expectancy is very short. Follow the Boy Scout motto: Be Prepared.

Another item that will be in short supply is sturdy shoes. Once much of the population begins to walk or ride bicycles shoes will wear out much quicker than when driving autos. Shoes will be an excellent barter item and can now be purchased in popular sizes for very little money at thrift stores. Store them for later use or barter.

The items that can be purchased now cheaply and stored for later use is limited only by ones imagination.

Once local governments collapse clean drinking water is going to be a very difficult necessity to find.

so nobody in Russia during the collapse had drinking water.

John 15...If you bothered to read Orlov's other essays/articles you would know that many in the collapsed USSR workers continued to go to work even though they were not being paid. Some workers were later compensated partially, some were not, but those that stayed on their jobs once again began receiving paychecks even if they were smaller than before.

Do you personally know that workers at local US water treatment plants will continue to report to work after their pay checks stop coming? If not, I recommend that you store some drinking water.

I think the other issue is electrical outages. If there are major electrical outages, it will be difficult to keep the water treatment plants operating. It will also be difficult to keep the pumps going that lift water to the higher floors of building.

One of the more underreported items in the 9/11 tower attacks in NYC was the power to the pumps keeping the subways from flooding were less than an hour from being overwhelmed before they were able to get a diesel generator to the site to start the pumps back up.

There are many systems that require vast amounts of power that are necessary for health and safety. Here are a couple:

Air Traffic radar and radio systems (these have emergency generators that can keep operating for up to a week)

Aviation Navigational Aids(Navaids): Vortacs, ILS (instrument landing systems) Non-directional Beacons

These systems have to be maintained or they decay very quickly. Will we be looking at Energy Triage?

Resource triage methinks

Saving oil for feedstocks is going to become a must at some %age of production... more so even than liquid fuels need.

Water, I-NPK, energy, food

the power to the pumps keeping the subways from flooding were less than an hour from being overwhelmed

Oh, got a link for this tid-bit?

Energy Triage?

I don't know. But you won't be able to fly, that's for sure.

also, without at least a few hours of electricity per day, refrigeration and freezing becomes very difficult. Given that our entire food structure is set up for it and is heavily reliant on it . . . if we can't maintain it, things are going to get ugly.

If it comes to that, the government is likely to step in and nationalize the national grid.


A lot of it depends on how things all play out. If the entire grid shuts down forever, tomorrow, then the water system stops operating too. On the other hand, if we are talking about increasing electrical system unreliability (increasingly frequent and increasingly prolonged outages) over a number of years, then municipalities would have time to adapt. As far as the water system of my small town is concerned, I have no doubt that an effort would be made to get solar panels and batteries for each well house if it appeared obvious that electrical system unreliability was only going to get progressively worse. Some of the well houses are already equipped with backup generators, so this would just be the logical next step. Of course, how successful municipalities would be in obtaining the necessary PV panels and batteries (especially if everyone else is wanting them too) is an open question. My guess is that some municipalities will be more successful than other, and few will be able to transition to 100% solar power. Those that are less than 100% successful might have to implement some sort of water rationing scheme.

I thought that it was interesting that Dmitry talked about outages of "water, natural gas, and electricity" as following financial collapse.

I expect everyone will try to mitigate problems. I think the ones with a local fuels source (coal, oil, or natural gas) will probably do best. They will be able to maintain electric power locally and prevent all of the problems. There won't be nearly enough solar panels to go around.

Municipal water supplies are highly dependent on grid power. NYC though is unusual in that most of the city's water is gravity fed but if you live above the 5th floor you would need someone to carry buckets up 20 0r 30 flights of stairs. Penthouse condos would become worthless after a few weeks without the power to pump water.
Way back in the 1970s there was a brief coal miners strike which threatened the availability of electricity. Where I lived (Grand Rapids) the plan was hatched to use fire trucks to pump water from Lake Michigan (about 25 miles) up to the city's 200 ft water towers.
Unlike the Soviet Union we have mortgage companies and landlords who expect to be paid. Is there a threshold of homelessness to be crossed where the courts will no longer enforce eviction notices and mortgage foreclosures?

I am an optimist on people being allowed to remain in their homes. What good are a lot of empty homes and homeless people to banks?

Pour encourage les autres!
As Voltaire explained the English hanging their unsuccessful Admiral Byng.

That's a really good issue.

I can see banks doing quite a bit of foreclosing and/or evicting as the slide starts. And unlike the Great Depression, I don't think there's enough of a community remaining anywhere to buy (and return) their neighbors' lands at bank auctions.

Eventually, it becomes moot, and maybe the banks aren't so interested in taking over properties. But as the real slide starts, it's a concern for a lot of people.

Anyone know how banks handled foreclosures and evictions say, around 1933 or so?

Apperntly they foreclosed on houses and farms quite often (Think of the Joads from Grapes of Wrath).

Want to experience a penny auction?

The Great Depression plus harsh drought conditions were hard on farmers in the 1920s and early 1930s. Many could not make enough money to pay the mortgage. As a result, banks would foreclose on the property. They would then sell the farms at public auctions.

Farmers resented the foreclosures. When they would hear about an upcoming auction, they would gather on the day of the auction and make it clear to officials and potential bidders that bids from outside the farm community were not welcome.

"When the bidding commenced, someone in the crowd would start it off at fifteen cents or so, and it rarely got beyond a few dollars before the bidding stopped and the auctioneer would close the sale. If anyone in the farmyard might be so ignorant of what was going on as to put in a serious bid, a suitably burly man would be likely to step up and put a hand on his shoulder with the words, 'That bid's a little high, ain't it?'"

That's one of my points -- those communities don't exist anymore. Look at the foreclosures on both coasts. Instead of people buying their neighbors' houses at auction as they did in the Depression, you're seeing foreclosure bus tours, etc. People are even buying their neighbors' foreclosed houses for investments or their own use (talk about bad karma!)

I'd like to think that banks would have other things besides my mortgage on their minds in a crash situation, but I just don't see us getting that lucky.

Instead of people buying their neighbors' houses at auction as they did in the Depression, you're seeing foreclosure bus tours, etc. People are even buying their neighbors' foreclosed houses for investments or their own use (talk about bad karma!)

Yes, but that's only because we haven't seen any foreclosed people snap and go postal yet. A few such incidents would considerably change the risk-reward calculus, I think.

Karma is action, not the fruit of the action. The fruit of the action depends on the intention behind it. A sense of community is a dwindling ideal, especially as you get closer to urban areas where anonymity is valued for security/safety reasons. Banks and corporations are going to be naturally selected out of the equation, but probably not before they inflict great hardships at gunpoint (via law enforcement). I suspect labor camps, inner city containment zones, targeted food shortages, or other methods will be employed. Think Katrina on a massive scale. This isn't so much because of peak oil in particular, instead I see it as a result of overshoot and human greed.

Nonetheless, once the population is down enough a sustainable society is more likely. Capitalism as we know it will not be the model for the future. Some form of it perhaps, but certainly something more balanced than what we've tried so far. Otherwise, we will overshoot. And yes, humans are smarter than yeast for those who doubt. :)

1. What good is an apartment in a big city when trucks that bring food in and other essential goods stop comming?

2. A lot of modern apartment buildings are completely unlivable without electricity and water. In the summer they become ovens, and in the winters, bitter cold. Without water, toilets don't work, and forget about even the basic like taking a shower, or washing dishes. A city that is denied water for sanitation and trash pickup will fester diseases. Diseases that like collara, will start wiping out the population in a matter of a month unless water service and trash pick up can be restored. Of course if there is no service for sanitation, there is unlikely service for food delivery either.

3. Before a collapse will happen, Cities will face high unemployment and crime will soar. Drug use will soar as the unemployeed try to self-medicate for depression. People will not be able to seek proper medical care are more likely to spread diseases (ie superbugs). Cities will not be very pleasant during a long term finance\energy crisis.

Do you personally know that workers at local US water treatment plants will continue to report to work after their pay checks stop coming? If not, I recommend that you store some drinking water.

As long as you are within walking or cycling distance of a water source, and have some suitable containers to carry it in, a gallon jug of laundry bleach ($3 at the grocery store) can purify over 3,000 gallons of contaminated water. Replace it every 6 months, it does have a shelf life.

Instructions here:

If you bothered to read Orlov's other essays/articles you would know that many in the collapsed USSR workers continued to go to work even though they were not being paid>/blockquote>I knew that that's why I asked the question.

Do you personally know that workers at local US water treatment plants will continue to report to work after their pay checks stop coming? If not, I recommend that you store some drinking water.

Nobody can know for sure what would happen, but in the case of small towns, that just might happen, for a while anyway. I've got some involvement in the water operations of a small municipality, and I would probably continue coming to work for a while even if we missed a payroll or two; probably many of most of our other workers would, too.

If the local government had gone bankrupt and was totally shut down for good, that would be a different matter.

I am in the mood to write today--and this seems on point. It's been a while--thinking about a post on the logic below, etc; it was the Orlov thinking, etc., got me going. (thanks Gail...)

I wrote this over in the Drumbeat in response to Pethokoukis (USNews): Do We Need an Energy "Manhattan Project"?

Can Big Government really solve the energy crisis? It would be nice to believe that.

My response:

My primary thought is what I left on James' blog--history shows us that every time a crisis comes where people get worried/hungry/threatened, they place demands on government, and government responds in kind with a centralization of power and resources. The Great Depression begat The New Deal, 9-11 begat DHS and an expansion of the military-industrial complex; history shows a pattern.

To expand on the idea, in those times, "government" has done good and bad things, just as the article points out, it can be wasteful and boondoggle-laden, but it can do "good" things when the cause is clear and the effort has a purpose, such as the Manhattan Project itself yielded. But sure, these expansions can also yield drastic policy changes that can mold and reshape a society (see my two examples above, an example of two very different kinds of changes all due to increasing size and power of government).

As James notes in his article though, "You say "Manhattan Project" or "Apollo," I say "Project Independence" or "synfuel"—two failed 1970s attempts to break us from our "addiction to foreign oil," the latter of which blew $60 billion in four years (in today's dollars) with nothing to show for the effort." It's a fair point, sometimes it works (what's the key determinant variable of success? leadership? purpose?) and sometimes it doesn't.

However, private solutions are no panacea either--in a pure setting, they depend on market forces and individual/corp innovation without coordination by the central authority. That means it can find solutions efficiently IF THE PROBLEM CAN BE DEFINED BY extant ind/corporate powers effectively and efficiently. Many of the ind/corporate powers have been trusting and continue to trust governments' estimates of resources and their availability--but that's changing with the price signal now isn't it?

In other words, the standard complaint applies: we have to wait for a price signal to tell us that there is a problem to address, which means corporate response will only respond to the price signal and not to the benefit of people or their hunger or their __________--whereas policy changes to fill the gaps left by corporate interests will make their way through the slow meat-grinder of American government just in time to adapt too late to the problem.

So, that means early response to this inefficiency is a better path doesn't it? It seems to me that we may need much more central coordination of resources and purpose in order to address our problems--once the problem is even defined accurately and precisely.

To this point, as far as I can tell, there is absolutely no consensus of the scope and parameters of the myriad problems we face.

At the end of the day, the question here is what is the most efficient mechanism to get us through this problem...and my point is and always has been is that we have to focus efforts in the most efficient way if this really is a problem--and that requires acceptance and recognition of the problem...and that is just now starting to occur.

Once we agree on the integrated scope and substance of the problems (which I am not sure that we can), then we can start discussing how to solve the problems we face.

But that is an effort of problem and scope definition...which is a time-taking and often generational endeavor.

I have little doubt that different countries will try different methods--and here in the US we will likely try to continue our amalgam of public/private partnership, with mostly private effort running the show.

Some countries will centralize in response, some will decentralize, based on their economic/debt situation and extant energy resources--which I would argue are inherently tied together. Because the US is where it is on those two dimensions, it seems to me that it will be the one to centralize further, especially with current political trends. Europe may continue its recent trend of decentralization, but without energy wealth, can it do so? Brazil's newfound energy wealth will likely lead to decentralization I am guessing.

Either way, it will be an interesting component of how this all goes down.

To that, as one of my colleagues said eloquently,

Political and social changes are perhaps harder. Back then, we had the Nazi/Japan threat (and even then there were still calls from Congress to cut the spending) and later the Soviet Sputnik motivator. This time, the scapegoats will be too many and too diffuse. The problem, though, is really us.

Prof: How about a more recent example-the housing crash and related financial sector problems. How has the USA government responded and how have taxpayer funds been allocated? The differing treatment of the connected and the general public is marked-IMO there appears to be little understanding or acceptance of the major changes in the differing power structures in the USA over the last 30 years. It is not 1970.

No, first we need a monetary Manhattan project to save our currency which is fast becoming worthless. This is a far greater threat than peak oil. The monetary corrupution and mismanagement threatens economic collapse long before the tankers stop arriving. The dollar is down 50% against the Euro in two years and still dropping as the Fed continues pouring money into our bankrupt banking system and sprinkling borrowed money around in a useless effort to revive consumerism.

Around 30% of the run-up in the oil price in the last two years is due to dollar inflation. That percentage continues to increase. Federal borrowing is ongoing at record levels, as is the deficit. It won't be too much longer before we won't be able to afford "cheap" Chinese goods as we have sent all our dollars overseas and they don't want anymore of them. Imagine having to buy Euros to pay for oil. If that happens, the lights go out.

I was pleased to see that Orlov caught on to the securitized debt debacle. He's right on target with that being the probable tipping point.

The dollar decline is mainly due to the very high US consumption of imported oil/gasoline. The dollar decline and oil price increase is part of the solution it just hasn't gone far enough to take most of the low fuel economy vehicles off the road. Talk by others on this site of economic collapse, abandoning the suburbs going back to horses etc because gasoline has to be priced at $10-20 a gallon are just getting carried away.
The US uses twice the liquid fuel and electricity of most developed countries and X10 to x100 times that used by many poorer countries that still maintain electricity/water( sort of not 100% of the time but most manage to survive).
I lived in the US during the late 1970's shortages and it wasn't so bad, we didn't have the very efficient cars available then or the prospect of PHEV. We can turn down temperatures,close off rooms, sleep in sleeping bags, let school kids walk to school, car pool. The baby boomer's did it 30 years ago and can do it again at least we now have more body fat to keep us warm.

Neil1947...'The dollar decline is mainly due to the very high US consumption of imported oil/gasoline. The dollar decline and oil price increase is part of the solution it just hasn't gone far enough to take most of the low fuel economy vehicles off the road. Talk by others on this site of economic collapse, abandoning the suburbs going back to horses ect because gasoline has to be priced at $10-20 a gallon are just getting carried away.'

I have had the pleasure of reading some brilliant posts on TOD that I would rate as 10s. I have had the displeasure of reading some ignorant posts on TOD that I would rate as 0s.

Neil 1947: before judging your post too harshly I would like to see links to some credible sites to back up your contentions. Could you be bothered to do that for those of us that are less informed than you? After all, many of us are under the impression that setting interest rates and, consequently, changing the strength of the dollar in relation to other currencies, is under the pervue of the US Federal Reserve.

Perhaps you should start reading here, since this is a speach delivered by our illustrious Fed Chairman, Bernanke:

'As you know, the Federal Reserve has a dual mandate, which requires the central bank to try to achieve both maximum sustainable employment and price stability.'

...and then there is this mantra by our Treasury Secretart, Paulson, repeated so many times we have lost count...rumor has it that some unfortunates in the press corps covering economic news, therefore compelled to listen to Paulson speaches, have begun carrying barf bags.

'Paulson, like his four predecessors, has stuck with former Treasury chief Robert E. Rubin's phrase that a ``strong'' dollar is in the U.S. interest. Officials repeated the phrase whether the dollar was rising or falling. Now, Paulson is under pressure from European policy makers to more forcefully defend the currency after it fell to a record low last week.'

But, there remains a question that I cannot resist asking regarding your post: When you say that the 'The dollar decline and oil price increase is part of the solution it just hasn't gone far enough to take most of the low fuel economy vehicles off the road' are you including big diesel rigs? I assume you are because diesel prices have risen faster than gasoline prices and this seems to meet with your approval. Because, if you are including the big rigs, I would love to be there to see the look on your face when you arrive at the grocery store only to find there isn't a damn thing for sale in the store.

Diesel is $7 a gallon in Australia, so I went down to the local grocery store and check just in case you had a point, and guess what, shelves are still overflowing.I would be surprised if they were not stocked when diesel is $17 a gallon, as the cost of grocery transport is passed on to purchaser. Sure, may have less fruits coming from China/SE Asia, and more locally grown, and it would put up the price of almost all goods, but would keep the diesel SUV's in the driveway, or on the dealers lots, but at least some diesel would still be available for industry/essential services.
As far as defending the value of US dollar, the second last world power that tried to keep a strong currency(sterling) while running large trade deficits found it didn't work, eventually nobody wanted to be paid in pounds.
Thanks for the link to Federal Reserve Board Papers, the real gorilla in the room that nobody wanted to mention was the $45 Billion a month oil import bill that could go to >100 Billion a month if oil prices increase to >$200 a barrel. China's the only economy thats going to be able to spend this kind of money on oil imports ( thats why diesel is increasing faster than gasoline). Some choice for Chinese; "do we lend to US to cover their trade deficit so they can buy the oil, or do we use the money to buy the oil for our own economy?" I wonder which choice they would make?

No, the dollar decline is caused by creating too many of them. Trade deficits do not cause inflation. When dollars leave the country, we actually have less of them. The Fed and Congress makes up the difference by creating more, and more, and more.

I would add that the Manhattan project succeeded because it was already proven science. The main problem was how to use it to build a bomb, which is not quite the same thing as can we release the power of an atom.

The situation is rather simplified though as we have just about all the technology we need to provide all the energy we need.
Nuclear power can be mass-produced to provide base load power.
Here is one design - there are others:
Next Big Future: Hyperion uranium hydride nuclear battery update

For off-peak in many areas of the world solar is rapidly approaching viability - costs are way down, and prices will follow by 2012-15.

Wind is also a fine resource in places like the American plains.

Perhaps concentrating solar is getting cheaper (it appears to be) but for how much longer? Aluminum is energy intensive to produce. On the other hand, labor at some point will become dirt cheap.

The price of PV isn't changing much, despite the promises:

Wind seems to be getting increasingly cheaper, though. My homeowners' association wouldn't allow this but I would love to try it:

The community I live in would do its best to stop new nuclear and I like it that way.

'Everything is beautiful in its own way
Like a starry summer night
Or a snow covered winter's day
And everybody's beautiful in their own way
And under heaven
The world's gonna find a way.

And we gonna get it all together now
Everything gonna work out fine
Just take a little time to look on the good side my friend
And straighten it out in your mind.'

DaveMart...Do you prefer the Willie Nelson, Ray Stevens or one of the many others that have recorded this bit of feel good? Personally, I like Willie but my favorite is 'Whiskey River'.

The technology appears to be in place.
The financial and other resources needed to use it in time is in serious doubt.
I have no overall opinion on the likelihood of successful adaption, but the most likely outcome seems to me to be vast regional differences, with some places getting by, but others falling into very severe difficulties indeed.
People like Gail and memmel work hard to try to provide an analytic framework to determine what is likely.
Excessive optimism doesn't help, and neither does falling into clinical depression.
I don't know what the future holds - and neither do you.

Right on Brother Dave...and do get a copy of Black Swan if chance allows. Definitely worth the read.

Taleb's core belief, based on his life experience, education and study is that the world is effected much more by 'black swan' events than has been previously thought or admitted...and, as the world becomes more complicated and technical the impact of Black Swans is much greater. Black Swans are unexpected events but are usually explained away after the event by revisionist historians. Typically, the historian/economist/etc will say that 'wow, we shoulda seen dat comin' and write the history accordingly...but, in reality they never do see the black swan coming or it would not qualify as a black swan. In his book Taleb says that he first recognized the existance of Black Swans while reading Shirers 'Berlin Diary', a book that I read along with Shirer's 'Rise and Fall of the Third Reich'. Berlin Diary was written as events unfolded daily and proves that absolutely no one had a clue as to how events would unfold in WW2, or that there would be a WW2, even as that war was practically under way.

BTW, the term black swan is used because all ornotholigists thought that all swans in the world were white...untill the exploration of Australia led to the surprise discovery of black swans. The black swan term is simply used to denote a surprise event, and has nothing to do with good/bad.

Taleb is a brilliant person and writes well...he is also has humor which I have found lacking in many otherwise intelligent people.

I am interested enough in Taleb's writings to even be seriously considering buying his book! - That is pretty extreme for me.
Black Swan events may also be some breakthrough in very low cost energy production or fuel from algae saving us all, but I am not counting on it.
It's just the way I think that I always try to break a problem down to see which bits are soluble and which are resistant, and withoutr breakthroughs purely from the technical point of view I can't see that we can't produce all the energy we need at reasonable cost, higher than today but still do-able.
That's a very different matter though to saying that we will, and people like memmel have persuaded me that at least in economies like the US and UK breakdown is now very likely, perhaps inevitable.
I am trying to understand the arguments which are a bit above my head, but at a much lower level than memmels mathematics we would seem to be approaching a crisis point within the next few months when unless governments are willing to inflict considerable deflationary pain then hyper inflation will have been built in.
I can't see any prospect of deflationary action being taken in the States.
For the UK the signs are more mixed, as the fact that it is not a reserve currency and we are in the EU may bring greater pressure on the establishment to carry out massive deflation.
Areas like China, France and perhaps Japan seem to me to have better chances of pulling through without that degree of damage, although consequences will be severe there too.

River, nice to know the basis of black swan as like most readers I assumed it was based on black being bad (e.g black mark). Only problem is that it's a somewhat eurocentric expression to those of us from Oz as we only know of swans (what the foreigners call "black" swans) and white swans as to us swans are of course normally black. Love reading The Oil Drum but I always notice many northern hemisphere assumptions that unfortunatly rule on the internet and means for example that many posters talk about such things as "$200 oil by next winter" or whatnot assuming that the other bloggers know if they are talking about their winter or our winter (winter of course started yesterday 1 June so tne next winter is 12 months away).


I've acted on your book recommendation and bought a copy of the Taleb today, having finally given up hope of ever getting hold of the copy in our library. I've only read the prologue so far but it's already given me several things to ponder.

The bookshop was doing '3 for 2' but unfortunately they didn't have any Orlov, so I purchased a copy of Naomi Klein's 'The Shock Doctrine' (which I've been meaning to read for ages) and an Unberto Eco novel, just to keep me sane! :)

Our university library has a very poor stock of PO-related books (Roberts' 'The End of Oil' is the most relevant they have) and very little on topics such as ecological economics; but then I suppose that's what you get for being part of a 'mainstream' academic institution. I worry that a lot of academic thought is so blinkered we'll be inundated with Black Swan guano from the incoming flocks!

River,Dave ...Many knew by late 1920s/early 1930's there would be WW2. Shirer was late to the party and did not have the communication lines to be aware of it.
For example, Russian intell predicted in the 1920's there would be another WW by 1940, so they needed to create covert cadres to be in position before then to learn of the plans of Germany, England,etc. That immediately led to recruitment of spies in England,etc.[Recall Kim Philby and "Cambridge 5", plus others in Germany. Geo. Orwell was writing 1934 of the coming bombing of London. Many knew...few could hear bec media access was so limited.]

Perhaps a Black Swan in WW2 was the liquid-thermal-diffusion separation of isotope U235 that was vital to the 1st bombs. Few still have ever heard of that quiet Navy project that surprised Oppenheimer, Groves, Conant in 1943 and was then grabbed as the feedstock for OakRidge.

I'd agree that very many people knew that war was coming - Hitler and Churchill, to take two prominent examples.
I suppose the coincidence would be too much if the Navy's support for the Bussard fusion project got us out of deep doo-doo!

Yes, we have the technology, but not the centralized organization and massive financial backing necessary to put it in place. Hopefully the next administration will be more forward looking than the current one and take strong positive steps in this direction, before it gets too late.

The world consists of a bit more than America!
IN several European countries nuclear is coming to the fore again, and I expect China, Japan and India to put even more emphasis on nuclear as the oil crisis strikes home.
I don't believe that Obama's administration will be in charge in any of those areas!

The world consists of a bit more than America!

Okay, but not much more. ;)

Sorry, with the election and all I've been spending too much time on DailyKos and other American blogs.

What you say is true. It will be very interesting to see how many new nuclear plants get built. I'm personally opposed to nukes, but can see as known, mature, if expensive technology that it will be used by countries to provide power to their citizens. This is especially true of countries with few natural resources of their own.

Speaking from the fringe...:-)
I think that the debate has moved on beyond the pro and anti nuclear debate.
We are running out of power right now, and right now we can't build a renewable system, even in areas with good resources such as the States.
For areas like Northern Europe, the idea relies on absolutely heroic assumptions on technology.
What we can start doing right now is building nuclear reactors, together with some supplement from wind in the States.
Unless we either want to burn coal, which may be in short supply in many regions before long and has no chance at all of being burnt cleanly in large quantities inn the foreseeable future, or to go without power.
The other thing we can do is conserve, and install heat pumps and residential solar thermal.
We have to do what we know, and nuclear is proven to be able to supply most of the electricity for a whole society.
Build times are ling, unfortunately, but they won't get shorter by further delay.
Most of the delay is regulatory anyway, and we are going to have to short circuit that, at least in Europe.

C'mon, Dave. Water, cost, locations.

Nuclear is not now and probably will never be THE answer, or even a large percentage of the answer.


We can argue about the desirability of using nuclear energy, but what is not really in doubt is it's ability to do the job of providing most of the electricity of an advanced technological society, as it already has done so for years in France.
To briefly answer the points you raise: you can build nuclear power stations on the coast for water.
Some might not like the release of water with somewhat raised temperatures, but what is not in doubt is that you can do it.
You can also use dry cooling technology, just as for solar thermal.
Cost - yep it is higher than for fossil fuels which don't pay for their emissions, but save for wind power on-shore in the States far cheaper than alternatives - around 2-3 times cheaper than for the off-shore proposed for Britain.
France has some of the lowest electricity rates in Europe.
as for decomissioning costs, most of that is associated with the weapons industry, and anyway you can reduce costs a lot just by leaving it for a few years.
Locations - we have hundreds which would do fine in small, crowded Britain, so I would imagine most countries would do fine.
We will never be able to provide answers which those philosophically opposed to nuclear power will say are valid, but by using it we can provide base-load power, and we can start doing it now.
No-one at the moment can put together a costed proposal for doing the same with renewables without relying on breakthroughs we have not made or relying on technology that we have not tested at anything like the right scale.
It should also be noted that I firmly support both renewables and conservation, and especially in hot areas a lot of peaking power can be provided by solar.
Especially in North America wind is also a fine resource.
Nuclear at the moment provides much of the base-load power in Britain and the US - so the idea that we can't use it seems weird.
I don't much like coal burning, and with gas short that is the only alternative in practical terms.
If something else pans out later then fine, but lets get on and build something.
In the UK we are just relying on natural gas and LNG supplies which are not going to be available.
Out of 75GW peak load we are loosing around 30GW in the next 15 years or so.
And that is to ignore the fact that NG heats most homes here.

I am in the mood to be a pain in the ass today -- but first prof goose,thanks for the wonderful site and the opportunity to be that pain in the ass.

About this statement of yours:

However, private solutions are no panacea either--in a pure setting, they depend on market forces and individual/corp innovation without coordination by the central authority.

I would venture to say that government ( supposedly by us proles not just an elite) has become so entangled with private corpor ations, now, that the central co-ordination is the corperations. A disentaglement would, I think, be a first step but that would likely be a rather revolutionary and ongoing one but I'm afraid Trotsky isn't about now, so what to do? what to do?

Collapse does indeed seem imminent when viewed from a certain perspective, but the real future has a curious way of just turning out the way it does, disdainful of what we predict. If we want to be ready it leaves us little choice except preparing separate plans for each possibility.

There have been numerous mentions on TOD, often in a dismissive tone, about people's hope for a miraculous technological fix to our energy woes. But in all of that talk I haven't heard anyone seriously predict what might result if such a breakthrough actually happened.

What would the actual consequences be, for example, if some crazed contraptioneer invented an internal combustion engine (suitable for planes, trains and automobiles) that doubled or tripled their present fuel economy? It would use traditional fuels, just several times more efficiently, so that what currently takes a gallon would only take a quart or two.

Would that be good news? Bad news? Irrelevant? What?

I would love to hear your thoughts about the consequences of such an event.

In my view, it would be irrelevant. Can't be disseminated in time.

Remember that we already have a lot of free energy: it comes from the sun or wind or the earth or waves, etc. but the machines to harness it take money, energy and time to build.

I make a point of "boxing people in" during my presentations. Only when they see the futility of waiting for a silver bullet do people get serious about adaptation, in my experience.

Hi Angel (have I got the name right?)

Yes, even silver bullets take a while to make and distribute (not to mention aim and fire) and are useless if the werewolf has already feasted.

And your point on 'boxing in' is also well taken. The tendency to not act until hot crisis forces the personal need to do so seems intrinsic to our nature, and I've run into some form of it in virtually every conversation about peak energy.

So, given the validity of your two points, I would still press the question: what would result if the miracle actually did occur? An internal combustion engine with two to three times the fuel efficiency of todays engines, manufacturable by any motor company, with the first units coming off hundreds of assembly lines precisely two years from today.

What would happen?

In my view, it would be irrelevant. Can't be disseminated in time.

is that how you box people in?

how about this, prove it can't be disseminated in time.

The annual number of new vehicles sold in the US is something like 1/15 of the total vehicle fleet. It's 16 million new light-duty vehicles, i.e. cars and light trucks, compared to 235 million registered vehicles. Even if you assume many of those are secondary vehicles and not primary transportation, it takes a long time to turn over the vehicle fleet even if I waved a magic wand and every new car was a plugin hybrid.

Hi dw,

If I might borrow that magic wand for a moment allow me to slap a few qualifiers onto my proposed miracle.

First, let's lower its cost enough that the 15 year fleet replacement cycle is shortened to something like 5 years. The task becomes easier as the fleet shrinks by some dramatic number due to the prohibitive cost of fueling so many vehicles. Non-essential vehicles will also be skipped for the time being. I suspect that a lot of three car households will drop back to two or even one vehicle as gasoline prices approach the stratosphere.

Secondly, I think we better make the miracle pretty much "Public Domain" so that ramping up fabrication is not bottle necked by limiting it to just one manufacturer.

Lastly, let's allow some retro-fitting. Since it's an engine, not an entire car, it could be dropped into existing vehicles that were still good enough to be worth a few thousand dollars of renovation.

I'll get the wand back to you real soon now, right after I make a few adjustments to my bank account and a few other chores that have been stacking up around here.

Its already happened; PHEV and HEV achieve double or triple the fuel economy of the average US vehicle. The unknown is how high does the US gasoline price have to go before almost no new low mpg vehicles will be sold, and will the replacement of these vehicles be faster enough to reduce oil imports before oil becomes unavailable or really really expensive. Improving the fuel economy of planes may be more difficult, but we can live with less air travel.

(Neil 1947)

Hi Neil,

The magical mystery breakthrough that I postulated was of the sort that would actually change the numbers that we currently have. I was basically asking 'what if' we got some new technology (within the constraints of the First Law of Thermodynamics, of course) that doubled or tripled the fuel efficiency of our most common engines. What would happen then? Would reduced fuel consumption drop demand for (and price of) petroleum and buy our species a few more decades of comfortable existence, or would we go hog wild and waste the efficiency by just driving more?

HEV and PHEV, although quite cool and I would love to own either one if I could afford it, are essentially just expensive re-mixes of current technology, and under real-world driving conditions don't do much better than my dirt cheap old Geo Metro 3 cylinder that still gets 47 mpg when I drive carefully.

'What If' the auxiliary engine in that HEV Toyota Prius got 100 miles per gallon instead of the paltry 37 that it currently achieves after the batteries run flat on long freeway trips?

Basically I'm trying to generate a divergent line of thought that explored what would happen if the miracle most people expect as their birthright actually happened. Then what?


While I would love to see a magical mystery breakthrough, most improvements will likely come from evolutionary changes to existing technology.

I think the most important what if question is --- what if people started using common sense and existing technology to maximize fuel efficiency? Such as buying small high mileage vehicles rather than SUv's, and many other efficiency improving steps.

BTW, my Prius gets around 50 MPG on long freeway trips. Incremental improvements could probably bring this up to 60 MPG in a few years. Add PHEV and we go even higher.

The real what if is whether we could start taking significant no-nonsense steps to reduce energy usage, something I have not seen yet.


Hi Budr,

That's the tough question alright: "... can we start taking significant no-nonsense steps to reduce energy usage, something I have not yet seen"

I haven't seen it either.

There is, of course, the no nonsense step of making gas so expensive almost no one can buy it ( the so-called "Demand Destruction" solution ). Unfortunately that might have "World Economy Destruction" as an additional feature.

The possibility of some unforeseen technological breakthrough has also been mentioned on TOD from time to time, but apparently not actually discussed as a general possibility. Typically the concept just gets dissed & dropped.

Deliverance of an unspecified technological 'miracle' does seems like an awfully narrow escape route, but before dismissing it entirely shouldn't we first examine the basic concept?

That's why the question was posed as it was: If such an unlikely event were to occur, then what?

(BTW, no intention to disrespect the Prius. I would buy one tomorrow if I could afford to.)

Thanks for your thoughtful reply.

HEV and PHEV, although quite cool and I would love to own either one if I could afford it, are essentially just expensive re-mixes of current technology, and under real-world driving conditions don't do much better than my dirt cheap old Geo Metro 3 cylinder that still gets 47 mpg when I drive carefully.

'What If' the auxiliary engine in that HEV Toyota Prius got 100 miles per gallon instead of the paltry 37 that it currently achieves after the batteries run flat on long freeway trips?

does your Geo drive in an all-electric mode at all, because a PHEV does and the batteries will just get better and better. long freeway trips don't happen for most people. many commuters just need a 10-20 miles in all-electric mode to make a good dent in their gas bill whether they have an EV, HEV or PHEV. what if the all-electric range didn't get better? well as gas prices rose people would find their needs closer to home so it wouldn't matter as much as time goes on.

The thermodynamic efficiency of heat engines is well understood, and there are no big gains to be had there. The only way to increase efficiency is with higher compression ratios or higher combustion temperatures. Diesel engines already run at the mechanical limits of high compression. Gasoline engines are limited by the knock limit of available fuels.

There is work being done ranging from experimental to in-production, such as:

Ceramic engines to raise operating temp- I think working prototypes exist, but material and production are horrifically expensive.
HCCI- high compression gasoline engine, maybe a few years away from production
Ethanol- ethanol has a very high knock limit, but a high compression engine built just for ethanol would be useless with gasoline.
Turbocharged, direct fuel injection- in production now

None of the previous technologies will double thermodynamic efficiency. Gas engines are inefficient because of idling when stopped and because they're sized for peak power and therefore run inefficiently when throttled down to a small fraction of peak power. Hybrids address that with idle stop and giving extra power for acceleration so you can use an undersized engine. A Prius already gets over double the mileage of US cars (comparing to 27MPG CAFE standard) at only a modest price premium.

Agreed that the thermodynamic efficiency of existing (i.e. more or less conventional) heat engines is well understood. This is because research and development has focused on refinement of an existing type, to the near exclusion of effort to invent a new type. The increments of improvement are, predictably, becoming smaller and smaller, at greater and greater expense, a typical situation of diminishing return.

What I postulated in my not entirely hypothetical "What If" scenario was not an incremental refinement of an existing type, but rather the invention of a whole NEW type.

For example, "what if " the molecular excitation of the gaseous medium within the cylinder from fuel combustion were converted into increased VOLUME instead of increased HEAT? The less heat created, the less heat lost (wasted), and the more volume created the more foot pounds extractable (useful work) from the fuel's intrinsic energy content.

The First Law of Thermodynamics would seem to dictate such a result (assuming only that the fuel burn is complete, or nearly so.) Energy not converted into heat would have to be converted into a something else, such as usable work. Theoretically, 60% efficiency is not unreasonable, one just can't get it from conventional piston/rod/crank arrangements.

Free-piston engines are not based on conventional piston/rod/crank arrangements, nor is the Tesla gas turbine, or most recently the Jantzen Isothermal engine.

My point is only this: it is not outside the realm of feasibility that an unforeseen breakthrough is accomplished, especially now that attention is swinging towards efficiency itself as a worthy goal.

One of those bright inventors might get lucky. My question was: IF that happens, THEN what?

Hi Brenton,
I did understand what you were proposing, but really for the majority of drivers what's under the hood is a bit of a black box. What really matters is; how much fuel it uses x price of fuel x distance driven. When gasoline was <$1 a gallon, fuel economy wasn't very important, people built homes long distances from most services,as long as expressways allowed rapid access to shops, jobs etc. A new type of engine getting x2-4 economy would mean that motorists could drive even bigger SUV's, and continue a lifestyle similar to the last 30years.
Now, however, when gasoline is $4 and may be going to $10 or a gallon, a new type of engine X2-4 efficient would not only allow the production of a vehicle getting 50-100 mpg, but millions of motorists would be willing to buy it.
Hey, wait a minute, such vehicles exist now or will be available soon! and some people are lining up to buy. I think you are discounting the technology going into HEV's and PHEV's. If every one drove >75mpg vehicles, the US and Australia would not be importing very much oil or gasoline( and fewer would be complaining about fuel prices, even if they were >$4 a gallon). More importantly it will buy time.

Hi again, Neil,

You raise several good points, not the least of which is that among the unintended consequences of cheap gasoline was the enormous disincentive to develop fuel efficient engines, lifestyles and cities.

Now that Hell is the Limit on energy prices perhaps we'll see a reversal of that trend. I see no reason why efficiency itself could not become the most lucrative new field of economic and technological endeavor.

One thing that strikes me is the tendency, even here on TOD where brains are in ample supply, to think that the lines of technological solutions that we HAVE explored or refined are the only ones that we CAN. That's why I used internal combustion engines as my example.

Uncountable billions of thoughts, words, dollars and work-hours have gone into the refinement of an intrinsically inefficient machine, for three simply idiotic reasons: 1) we already had them, 2) they worked (sort of), and 3) gas was so damned cheap no one cared that 80% of the output went up in heat & smoke.

As you pointed out, $4 ($10, higher?) fuel has shifted the incentive factor in a good direction (although, like hunger, it doesn't feel so good at the time.)

Incidentally, I'm not so much discounting the technology that's going into HEV and PHEV vehicles, as I am proceeding beyond it. They are great. They might buy us the time we need, yet I view them primarily as examples of the sort of effort investment that occurs when people start to feel the heat.

I'm compelled, however, to acknowledge the inescapable fact that for 7 billion people to avoid die-off there is (an as yet undetermined) number of energy units required. Conservation, Efficiency and other improvements move the wall further into the future, but it looms nonetheless. First we need to buy some time, and then we need to address that core issue.

As for whether we can buy ourselves time enough soon enough, well, it's shaping up to be a genuine suspense thriller.

Unless you are talking about a Mr. Fusion that can be on the store shelves within the next four years or so, I suspect that any unexpected technofix that might come along is very likely going to prove to be much too little, much too late.


Three things I am sure of; 1) Individuals do things (or don't) to prepare for the future, 2) the future arrives, 3) the preparations (or lack thereof) prove to be either good enough or not.

I share your suspicion that any fix, Techno or otherwise, had best come sooner than late (and that four years is a very generous figure.)

My personal belief is once one is convinced that old ways are failing and something new has to be done, then one should do something. Put another way: one of the first things that should be abandoned when faced with imminent calamity is the faulty thinking that created the problem in the first place.

Obviously the sum total of our 'old thinking' is failing. I say this because numerous vital systems are manifesting precursors of catastrophic failure. Time to try something new.

Let's, for example, start throwing jillions of dollars at "Mr. Fusion" type solutions.

We could get lucky.

It has greater chance of success than, say, changing human nature overnight, and in comparison to the obvious consequences of business-as-usual we have nothing greater to lose.

[Incidentally, and to be as forthright as I can, a colleague and I do indeed have a "Mr. Fusion" type solution in development that could conceivably be prototyped in a year, and on the shelves in two; a radically redesigned internal combustion engine with expected fuel economy of 60%. He's the engineer. I'm just a sympathetic sounding board. His design concept is utterly brilliant, but in a cruel twist of fate neither the inventor nor I know a damned thing about business, nor do we very much care to. The situation is a bit ironic, but we'll persevere and see how things play out.]

Meanwhile, thanks for your response to my post.

Best of luck on that 60%efficiency ICE.
There is no doubt that there are enough renewable energy resources for every one of the worlds 7Billion to be able to drive each day as far as a 9kwh battery would last.Whether the world can afford to install that capacity is another matter. The US has 3-4 x that electric grid capacity now, and should be able to switch to renewable sources before the coal and gas runs out.
If world oil production is only 25-50% of 2007 production, very few of the >7Billion would be able to use ICE engines even at 100% efficiency( except perhaps as motor scooters). It would buy extra time, though, before oil becomes too expensive and that's all we really need. If oil starts to decline immediately, however, we will not have time to replace 25%efficient ICE vehicles with 60% efficient ICE vehicles, but will have to go directly to electric, replacing 7-8% of vehicles per year. The same applies to other Mr Fusion solutions, there may not be enough time to develop ( along lines of recent TOD post)

The starting comments were as to whether the US would have a contained collapse or a global collapse.

When a large corporation goes bankrupt,if the FED does not save it, it is an insular event for all its own staff and office holders. Whether any other closely associated companies also go bankrupt is irrelevant to the people of Company A.

Each Company in turn fights for its own life and some make it and some don't, not caused by the other companies, but by their own degree of dis-functionality

The US will be an insular collapse for all Americans. I do not think their culture will fare as well as some of the other cultures under similar circumstances.

I was Living in Canada when the USSR collapsed, we received many Eastern Europeans and Russians as immigrants. Almost without exception, each was horrified at the "harshness and uncaring" of the Canadian culture. And we are by far a much more caring culture than the Elephant South of us, so the Americans are in for some big surprises when their turn comes for getting empathy and caring.

Canadians are more 'caring and empathetic' than Americans? Wow, I find that hard to believe...but, I will take your word for it.

I mean, we meant well, didn't we? Even today we are spreading democracy in Iraq, Afganistan and, perhaps soon, to Iran. Of course building democracies and negotiating 'free trade' agreements can be difficult and messy work and occasionally a few million people get killed in the process...but, isn't it all worth it in the 'big picture'?

I feel absolutely certain that many countries that we have helped in the past will come to the aid of America in her time of need. Cuba comes to mind instantly because they are so near by...then Venesuela, Mexico, Nicarauga, Columbia, Ecuador, GB...uh, I think GB might be in the same boat with the US. France! France definitely owes us one even if they did sink the Brit fleet to assure our independence from GB! the Phillipines...uh, maybe not the phillipines I think we killed about 400,000 of them while spreading democracy there...Russia! Surely Russia will help us...and the mid east countries where we have protected their natural resources with such dilligence. Hey, America has friends everywhere. You know, now that I give this some serious consideration, a lot of countries might breathe a collective sigh of relief when the 'old' America becomes the 'new and improved' America.

...and I propose a new national anthem for the New America...

I'm a rolling thunder, a pouring rain
I'm comin' on like a hurricane
My lightning's flashing across the sky
You're only young but you're gonna die

I won't take no prisoners, won't spare no lives
Nobody's putting up a fight
I got my bell, I'm gonna take you to hell
I'm gonna get you, Satan get you

Hell's Bells
Yeah, Hell's Bells
You got me ringing Hell's Bells
My temperature's high, Hell's Bells

I'll give you black sensations up and down your spine
If you're into evil you're a friend of mine
See my white light flashing as I split the night
'Cause if good's on the left, then I'm stickin' to the right

I won't take no prisoners, won't spare no lives
Nobody's puttin' up a fight
I got my bell, I'm gonna take you to hell
I'm gonna get you, Satan get you

Thank you, AC DC ... Best Aussie band ever!

I'll agree that the French did provide a lot of needed assistance during the Revolutionary War, but they most certainly did not "sink the Brit fleet." They trapped them in the Chesapeake Bay so that Cornwallis couldn't evacuate his army from the Yorktown peninsula.

Yes, the United States has taken some colossally stupid actions with regards to foreign policy. It has also gone out of its way to help out when others needed that help. Does that mean I expect that, faced with calamity, the United States will be overwhelmed with offers of assistance? Nope. I thought it was great that Cuba offered to assist after Katrina (and if I had the choice, I would have accepted the help,) but I don't see that type of offer being made when the time comes that we truly need assistance.

I agree that the world's polities might breathe a sigh of relief if, and when, the United States becomes unable to project its policies abroad. However, I don't think it will result in peace and harmony through all of the nations. Instead, it's likely there will be a lot of wars that break out that wouldn't with the threat of carrier strike group cruising offshore. I only wish that my country had been a little more benevolent and forward thinking so that we'd be missed.

Well, reindeer, I find your comment interesting since I have Russian neighbors next door. I don't find them very "caring." Quite the opposite.

Anti Americanism is rampant, and you're part of it. paint an entire nation with one brush. Very broad thinking on your part.

Since we are painting entire nations, the Russians I have met make Americans look like a big bunch of Mother Theresas.

Thanks for a great summary Gail, I'm going to go order the book right now...

Those of you who believe that the US will take military action, rather than pay the market price for oil as it continues to escalate may be correct.

However, a war between the main oil consumers -- US, EU, China, India and Japan (Russia is self-sufficient for the moment) -- would make no sense, as they are all part of the same energy, finance and broader economic matrix.

What might work better strategically is for the major consumers to go to war with the major producers. This is the real fault line in the globalized world, and one which, sooner or later, people will be hard pressed to ignore.

While I am no supporter of a consumer vs. producer magnum resource war, I would be greatly surprised if it hasn't already been discussed in the DOD and Chinese Politburo.

Some other thoughts:

1) Such a war would be sold as the final crusade against Islam. The West, Japan and India vs. the Infidels. On this basis, Holy Russia could be drawn in on the consumers' side as well.

2) As part of an overall strategy, the consumer coalition might also agree, in the aftermath, to continue to consume oil at levels in proportion to what they used before the war, so as not to upset pre-war trade and financial balances.

3) Such a war could also be part of a broader plan for the consumer coalition to pool resources to work on alternative fuels and green technologies.

4) While, in such a war, the consumer nations would undoubtedly have a huge advantage in conventional firepower, there would inevitably be a 4th generation warfare counter-punch from the producing nations, i.e. terrorism, sabotage, systems disruption. It would be global.

5) The most effective way to employ this strategy might be simply to threaten it, with the result that producer nations would agree to lower prices at the cost of their own profitability and/or oil use. The threat to bomb the holy places of Islam would not go unnoticed.

While such a strategy would undoubtedly require great diplomacy on the part of the consumer nations among themselves and the will to face real asymmetric risks, the alterative may simply not be accpetable to Pentagon types.

Stalin and Saddam Hussein were once US allies, as has been every major dictator who has followed the US party line since WW II. In other words, don't expect any squeamishness regarding either the idea of such a war or the composition of the consumer coalition.

Whether such an option could actually materialize, no one knows. But I seriously doubt that the US will not bring military pressure to bear on the price of oil if it begins to affect what Dick Cheney memorably termed the non-negotiability of the American way of life.

Those are just the kind of crazy words that would appeal to the US public in a panic.

Any such war would be a suicide pact. #1, the nations of the Persian Gulf are food importers and need currency from oil to pay for trade. #2, you need political stability to produce oil commercially because oil infrastructure is delicate and highly flammable. The oil-consumers couldn't afford to have that much production offline even if they could hope to control it in the aftermath.

Given the preponderance of military strength on the US side, any US military move to secure oil or other resources would be countered by asymetric warfare on the part of any and all opponents. Sabotage would be by far the preferred tactic to use.

Interestingly, sabotage just happens to look exactly like "terrorism".

I will leave it to all of you to draw your own inferences as to exactly what is really happening, and why.

Hi again,

OK I accept the criticism.

We are each, as individuals, loving and caring but the culture around us does some strange things to the way we act.

I cant believe that people are genuinely attempting to make serious comments on this essay in fantasyland. The notion that the USSR collapse is in any way isomorphic to the future of the united states is ridiculous. The USSR was an anemic kleptocracy command economy at its close, and while the US isn't perfect its far more resilient than the wild wild east in the day. Theres more and more speculation here on ludicrous scenarios of complete economic implosion which will simply not happen.

"History is on our side. We will bury you."

Everyone's convinced their lot will last forever :)