Down the Rabbit Hole
Posted by Jason Bradford on February 13, 2009 - 10:24am
This is guest post by Sharon Astyk. In the CNBC interview mentioned, Taleb says that our money system can't be based on debt, which is very different from what most are thinking.
“It was much pleasanter at home, when one wasn’t always growing larger and smaller, and being ordered about by mice and rabbits.” - Alice in Wonderland
Rod Dreher has a fascinating observation over at his blog. He talks about watching an interview on CNBC with Taleb and Roubini:
Both men are notorious bears, and called the current crash long in advance. Both, CNBC tells us, were the hottest tickets at the recent Davos gathering. CNBC called them in to discuss the crisis. Roubini and Taleb were both trying to make their case for why what’s wrong with the economy is radical, is fundamental, goes to the very base of all our economic assumptions.
The CNBC twits just wanted stock tips and investing advice.
The more I think about his point, the more I think that it epitomizes something fundamental about the intellectual shift we have to make - and about how hard it is to make it. Moreover, it caused me to think about how hard it will be to unmake that shift. I commented on the piece at Rod’s blog, and said,
I think the biggest problem is that people have been told that investing is a form of saving - *the* form of saving, in fact. And they believe it - even when their “savings” are being ripped out of their hands. So the problem, through that lens, must be investing in the wrong things, rather than the whole fact that what you put into the markets should be what you can afford to lose, not what you depend on for basic things.
Add to that the fact that the society has transformed basic things like security in old age and education into things that can only be achieved through fake saving (investing) in a market that goes up, rather than things ordinary people could have, and it is no wonder that people who live in this never-never land can’t grasp that it is a world of myth. That is, they know they are not going to be able to eat during retirement or send their kids to college on their income or on regular savings. But they haven’t yet grasped that the situation has changed radically and the choices are now - change the system or accept that a college education and independent retirement are no longer choices for most of us.
I wanted to say more about this, though, because I think that while this does show where we’re not yet, it also gives us a glimpse of where we are a going, a change as radical as falling into Wonderland or Through the Looking Glass.
Here is what Taleb and Roubini are telling us with their answer that they keep their money in cash - roughly translated this means “We expect the markets to decline still more. We expect to lose anything we put into the markets. We believe that money is safer in holes in the backyard than in the stock market.”
Here is what people who kept asking questions about college and retirement savings were saying, in translation: “We’re terrified to take our money out of the markets, and we’re terrified to leave it in. We depend on the “fake saving” message of investment for basic things like food, housing, health care and education. We know we have no way of insuring food in the pantry when we are old, or that our children will get an education without it, and we’re not yet ready to admit that our hope of those things is already lost, and thus, cut our losses. We desperately need the market to go up, so we are in profound denial about what you are saying. We have no alternate plan, and our government has no alternate plan. If what you say is true, we face utter disaster. Please tell me that there’s a way to make that not happen.”
And they are right. Both sides of the discussion are right. Without infinite growth, the hopes of an independent retirement were doomed - everyone was told they’d need half a million dollars or more to live on in retirement? What was the likelihood of that money being saved over the course of 35 working years out a 50K per year salary? Hmmm….
Four years at a State University costs $50,000 - a young family with two kids, who began saving at birth - what was the odds they were going to be able to pay for college without the markets? None.
That is, it isn’t just that people bought the mantra of fake saving, it was that they knew that this mantra was their only hope and clung to it as people being swept away in a current cling to anything in reach. And thus, most of us got into the stock market somehow. In fact, we often didn’t have any choice - our pensions, our health insurance funds, our mortgages were invested without our consent. Our companies matched not our savings, but our 401K contributions. And all of this meant that the markets had an enormous amount of the average person’s money to play with. This enforced participation meant that the growth cycle had a feedback loop going - more people had to play, which meant more pay. Now we’re into negative loops.
We were lied to, and we were betrayed, and most of us will never see our money again. And that leads to an even more important corrollary point - it will be a very long time before our society sees this level of investment again.
Think about it. I’m 35, and my friends in their 40s and early 50s are often already caring for or concerned about aging parents that depend heavily on their investments. Many have lost nearly half of their money already, but haven’t pulled out of the markets because they have been told that this would hurt them, that it is a bad idea, and because they desperately need to believe that they someday will be able to retire. They can’t bring themselves to accept that the money they have now may well be as well as they can do, because it will not support the future they’ve envisioned for themselves. So they leave it in.
Many economists have estimated the bottom - quite a few have estimated it at Dow 4000 or so, while others are optimistic. But let’s assume that the most optimistic estimates are wrong, and that much more of the money is going to disappear. It took *30* years for the Dow to reach the same levels that it hit in 1929 - the recovery was not quick, and there’s really no certainty that we’d recover quickly either.
So millions of baby boomers are facing disaster - either extra years of work, or poverty in old age. And they are going to be angry and betrayed - none of them imagined their later years to be straitened and struggling. They did what they were told. And eventually, they will take what is left of their money out of the markets and salvage what they can - and they won’t put it back. They won’t be able to afford to risk what little they have.
Shift down half a generation or a whole one, to my peers, and those slightly older and younger. As we watch our parents struggle, how many of us are going to trust in the stock market for our own retirement? As we explain to our kids why they may not get to go to college, are we going to put our limited funds there? Universal investmen tis over - and we will remember our whole lives what the dangers of speculation are. I’ve never met a peer of mine who expected to collect social security, and I don’t think that in 10 years, I’ll meet one who expects to derive money from a 401K.
The 20 and 30 year olds buried under massive student loans, the 19 year olds who will have to drop out because the college fund isn’t there - they will remember, inscribed on their chests where their vision of their future lay, that investment is not safe, it is not secure, it is not a way to ensure the future, but a way to betray it.
It took 30 years for the stock market levels to rise back up to the adjusted equivalents of the Dow in 1929 - in part, because it took 30 years for the people who were children in the Depression, and on whom the fear of banks and markets did not imprint, to grow up and tentatively step back into them.
It took 50 years, until the 1980s, to get levels of participation in the markets up to approximate the 1920s - until a generation of children who could not remember the Depression, and had only known growth had grown up.
It was only after that that ideas like giving people their safety nets and letting the gamble in the markets with them came up - and anyone want to bet how long before the next time Social Security privatization comes to the table?
Let’s assume that peak oil and climate change simply aren’t that big a deal (for the record, I assume y’all know that they are). Even without these ecological limits, the idea that the markets will rebound in the long term is probably dubious - because market participation depends on people who believe the “investing is savings” mantra. And people who have seen it shown to be false will not believe it - you have to wait until a new generation of people, more gullible because they have not seen, arises.
And that means that even if we don’t face energy constraints (we do) and ecological constraints (we definitely do), we face capital restraints - much of our current infrastructure, the way of our way of life, was built with other people’s money, invested in the stock market. Who will choose to give their money to corporations to spend? Who will choose to see their health care, housing and education dollars gambled? And that means that our long term recovery prospects must include the reality that the “investing is savings” mantra has been proved to be a lie, and it will be 20 years or more before anyone will come buying that lie again.
Now mixed in with energy and ecological constraints, I think the constraints in investment capital do mean that we must - I don’t mean should, but must, make our plans for the future very carefully, that we must choose now where to put our limited resources and energies, because they may well turn out to be more limited than we thought. Down the rabbit hole we go - and it isn’t very clear what size we’ll be when we stop growing.
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I've come to grips with the fact that the thing I've been reading about for 4 years is finally playing itself out the way I was told it would (by the well-known peak oil prophets, people on TOD, and so forth).
Now that it's happening, I find that a paradigm shift is required for me to remain excited and hopeful about the future. For example, I'm trying to teach my kids to want different things than I wanted when I was young. When I was young I was taught to want a college education and a "thinking" job, a mortgage, two cars in the garage, a season's pass to the local ski area, and so forth...
My kids are learning (hopefully) that a broader range of outcomes (and therefore life goals) are possible, and that most of them are good and will be fulfilling.
What else can I do? Who knows what's ahead? It's all gloom and doom if I allow it to be, if I think logically about it. I'm attempting to arrange my perspective so that even if the worst happens I can still be happy about life.
Does anyone else share similar sentiments?
Tom A-B
Tom, you are to be commended for taking on the adaptation mantra on behalf of your children. I on the other hand, think I have been sending mixed signals; voted for Obama aka Change, and now the kids see me throwing a book at the TV when he's pushing a bigger bailout. My teenage daughter thinks of moving out of the US both pre and post election. If only we could package it into 1 observable metric; yes we can - it's about the best EROEI where energy = capital.
Thanks for another prolific post, Ms. Astyk!
The surest road to happiness is low expectations. Enrich the mind and pass on knowledge to the next generations as money burns a hole in everyone's pockets after a while anyway so is not of duration or of value to pursue as a primary life goal for our children.
Personal habits and culture in general should be based on renewables like neighbourliness and the love of a walk in the countryside.
As I can't drop out now or drag my kids out of the educational system I can just hope they get the right values from us to adjust to the downward slope of life accordingly without any loss of sense of humour that certainly kids from supposedly more materialistic oriented families might experience.
Here's hoping I won't be living under a bridge and quoting poetry under a bridge somewhere with wife and kids in tow, regretting my words from today.
"Blessed are those with low expectations, for they shall not be disappointed!"
Agreed,
those of us who are aware of peak oil, climate change and the possible consequences have a duty to teach our children the skills and values needed for a life far different than those we received.
Had the "state of the world" and "tough times are coming" talk with my 11 year old tonight. He's a pretty smart kid and knew all about the stimulus package both in the US and here in Oz. He nailed the inflationary effect in about two seconds. Then we had to talk about why he might not get a motorbike for few years and that didn't go down too well. I think that there might be more than few Gen Xers kids that aren'tgoing tobe too happy about being depression kids. Don't think us Xers really have the skills toholdit alltogether either.
Tom,
You are encouraged to remain optimistic: where there is life, there's hope- it's as simple as that.
Kevin Walsh
Chicago Peak Oil
It was a surreal interview. For some analysis that is more chewy than Rod Dreher at Beliefnet (Taleb adds a comment in the thread) here is a link to
3 quarks, where it is posted.
This guy is spot on (and he should know)
"Hugh Hendry: Bank Chiefs, Regulators Have Damned Our Future"
http://greenlightadvisor.com/glablog/2009/02/12/hugh-hendry-bank-chiefs-...
"In this interview, Mr Hendry, co-founder and CIO, Eclectica Asset Management, says unabashedly of bank chiefs, regulators and politicians alike, “I damn them all because they’ve damned our future.”
I average about $100,000 positive balance in my chequing account for sudden unexpected investing opportunities in petroleum (stripper wells or private-equity junior petes). About once a month I get a phone call from the credit union when someone there notices the high amount, asking me to invest in their GICs at 3%. I use this as an opportunity to explain Peak Oil and why I won't buy ordinary paper. It's never the same clerk who calls me twice. I don't think I'm converting any of them to the cause but at least I can have a bit of fun and maybe plant a seed of doubt in their minds.
Eesh, where do I start?
Taleb has predicted 9 of the last two recessions; in other words, if you keep making the same prediction, you are bound to be right eventually.
$50,000 for university education? Now yes, but who says that will stay that way? This is the next bubble to pop.
You need to stay diversified. My gold investments have done great in this recession which has offset some of my stock losses. Furthermore, with the Obama pork bill, some of my stocks are set to bounce higher.
If you make an estimate from true fundamentals you will be correct, the problem is in timing and accounting for the actions of people who aren't behaving rationally.
That's complete and utter nonsense. All you've done here is access the standard "x has predicted 9 of the last two recessions" template and inserted Taleb's name.
Yes, the joke works because people like him are so common...and tiresome.
It is very clear you haven't read The Black Swan or know anything of Taleb's background for you to make such a statement.
The joke's on you.
His quote in a recent New Yorker interview: "The gods don't want us to be too ambitious, too agressive, they just want us to leave the planet the way we got it" is hardly tiresome. If we had thought along those lines from the beginning we wouldn't be in all this trouble now. And our water would taste delicious. Our air would be clean.
"$50,000 for university education? Now yes, but who says that will stay that way?"
In California the situation is much better. The total cost of attending a State University is estimated here
http://www.calstate.edu/SAS/fa_coa.shtml
in the range of 13K (living with parents) to 21K (living off campus), but of that, only about 4K goes to university fees (there is no tuition cost to state residents). The junior colleges charge about 100 dollars in fees a term and $13/$20 per unit in a quarter/semester system.
Rephrase that thought. Consider "social contract".
The California City College system is even less expensive.
I went to Los Angeles Trade Technical, and was able to get an Associates of Science in Electrical Engineering Technology (and a $30k/yr job, back-in-the-day) at a cost of $50/semester.
So, there are ways of maximizing education savings.
Also, anyone with a 2yr college degree can then transfer to a 4yr college to continue on for their Bachelor's, again an overall big cost savings. They just need to make sure they went to an accredited school, and let their counselor know to make sure they take classes that will give credit when they transfer to the 4yr school.
So, parents just need to be educated, and educate their children on how to maximize the education benefits to the cost.
"Knowledge is Power" - Sir Francis Bacon
How about some proof, Keithster? You are the real tiresome old retread around here. You've had your ass nailed to the wall so many times that your name is synonomous here with lies, falsehoods, and misrepresentations. So, before anyone takes anything you ever say seriously, you probably ought to support your claims. Otherwise we can all automatically write you off as the same old tiresome Keithster that you always are.
So you claim Taleb has predicted 9 different recessions. It should be easy for you to prove your claim with appropriate quotes, news articles, etc. Can you produce? Or do we simply write your rantings off yet again? Here's your chance to make your point.
Note: My prediction is Keithster will give some asinine reply, try to divert the conversation, and not provide proof of his claim. Prove me wrong, Keithster.
College education & retirement. Forget about it. Soon the concerns will be fending off starvation & keeping from freezing.
The best investing advice I was ever given was to invest in yourself. Invest time in learning new skills; invest energy in building relationships and business connections; invest your spare cash in the tools and infrastructure that will pay back in years to come. When you take personal responsibility for the results of your investment, the chances of a positive outcome are much greater than when you had your cash over to someone else! This is a depression era ethic that we have lost over the years, but are about to regain.
You are spot on. Make yourself more valuable to others. Buy things you can operate and repair yourself. Become a jack of all trades.
Get some land and start gardening (still have to do that).
Best Regards,
J. Daehn
How do ten jacks of all trades but experts of none stack up against ten experts of different trades with few if any other skills? I would rather be in a community of diversified experts than rely only on the limited group of skills I could learn.
If I'm going to specialize, what speciality will I choose? Will it be the right one in the uncertain future?
That's why learning a large set of skills has appeal over one. If I happen to shine at one and there's demand for it, that's just great. Otherwise, I'll know how to tend a sheep from lamb to roasts, sausage, wool, and hide.
Besides, having done the specialization thing, twice actually, doing the same thing every day gets tedious.
My motto has always been: "Master of all trades, Jack of none."
Why set your sights so low?!
Ditto
Like someone who knows about climate change, but not resource depletion. Like someone who knows about x but not related-and-critical y. Farmers, eaters and milk drinkers, Wendell Berry would point out, are just as "qualified" to discuss bovine growth hormone as biologists drawing paychecks from Monsanto.
An expert in one thing only is the classic Greek version of an idiot. I want the craftswoman repairs my shoes to know about globalization and the smell of leather. Both. Nowadays, that's probably a given, because no one else would do such unsensible work.
cfm in Gray, ME
I think the world probably needs both.
In my job (video games programmer) I'm a "jack of all trades" - in my team I have a couple of guys who specialise in Artificial Intelligence, a guy who does user interfaces, one for audio, one for networking and a few other "jacks".
The experts do a great job in their areas, but often they aren't available or there are tasks which don't fit exactly into one of their areas and I find that one of us jacks can easily fill the gaps.
I'm leaving my job next week to finally start learning more practical skills, btw.
I believe the problem began with the Industrial Revolution -- whenever you want to say that started, but probably not until the latter part of the 18th century -- when machinery was substituted for human labor on a truly comprehensive scale, and the average human being had to start wondering what he or she was really "for."
The initial solutions -- more "leisure", more "education", a "comfortable retirement" never quite worked. People couldn't get over the existential hurdle of feeling essentially useless, and drugs and other mind-altering substances became a way of filling the voids. And of course, capitalizing all that required some means of monetizing energy, and so investment banking took off in ways the Doges of Venice couldn't begin to imagine. Turning carbon into money isn't really any easier than turning straw into gold -- it has required incredible powers of imagination and coercion. But it worked pretty well for almost 200 years -- until the essential contradictions couldn't be papered over any longer.
Obviously, the future will not resemble the last fifty years. That has been a dreamworld, based on converting the entire natural world, and most of the human world to commodities for a tiny class of very rich and "pre-rich" (those who imagine they can become rich) All of us who have had our eyes open knew it couldn't last -- but we were powerless to stop it. Now, it appears to be stopping itself.
There will be great tribulation, but I truly believe that when we have gotten over the hangover we will be better off as a species and our culture will be stronger. Those who think we will extinguish ourselves have just as much intellectual credibility, of course, but seeing into the future is an act of faith, not of reason.
I choose to believe that the cooperative and creative parts of human nature will eventually become dominant.
Seeing into the future is predicated upon understanding of demographic, genetic & ecological dynamics. We base predictions of the future on extrapolations of what's happened in the past, and in identifying novel circumstances & evaluating them based on what past experience would lead us to expect. This is not "an act of faith" at all. What you "choose to believe" will have no impact on the outcome. In fact, by choosing faith over clear-headed evaluation of the circumstances, you deny yourself the opportunity to make effective behavioral adjustments to likely outcomes.
But the evidence is clear that people that are happy and have positive attitudes live longer and achieve more than people with negative, gloomy outlooks. Whatever happens with peak oil and climate change, this will likely remain true. We all see the same effect in our daily lives, those who sit around feeling sorry for themselves and fearing the future do not fare well. Belief choices for an individual have huge impacts on individual outcomes, as anyone who has a friend or relative in a cult knows.
Similarly, belief choices for societies have huge impacts on societal outcomes
"What you choose to believe will have no impact on the outcome" is a nonsensical statement. Did the beliefs of the Nazis, Islamic Fundamentalists, or the Crusaders have no impact on historical outcomes? (Of course they did).
From Science Daily http://www.sciencedaily.com/releases/2008/08/080805075614.htm
"This is concluded from an analysis of 30 follow-up studies published in a recent issue of the Journal of Happiness Studies.
Happiness does not lengthen the life of seriously ill people, but it does prolong the life of healthy people. Happiness appears to protect against falling ill. One of the mechanisms behind that effect seems to be that chronic unhappiness causes stress, which on its turn reduces immune response.
Another possible mechanism is that happiness adds to the chance of adopting a healthy life style.
An implication of this finding is that public health can also be promoted by policies that aim at greater happiness for a greater number."
I think you missed Darwindog's point. He wasnt arguing about positive outlocks and longevity but that the use of logic and reason are far more reliable ways of predicting future outcomes than faith and intuition.
Logic and reason only work for making predictions in linear systems. For non-linear, dynamic systems, they're not better than faith, and probably not as good as intuition. Your brain is a non-linear, dynamic system, but not the logical, reasoning part of it.
"Seeing into" the future is an act of imagination. Believing that you can "see into" the future is an act of self-delusion. Betting on any particular vision of the future is gambling. But we don't have much choice, do we? Even if we stay the course, we're betting on the status quo, or maybe on our own luck. Hold on to that rabbit's foot. Or piece of the true cross. Or whatever.
A better strategy is to cultivate the ability to imagine multiple futures across a wide range of possibilities, then developing the ability to live flexibly and to adapt to whichever of these futures pans out. Note, however, that this is merely a survival strategy, and not a strategy for "hitting the jackpot". That requires maximizing one's probabilities of being at the right place at the right time and doing the right things for one particular possible future, and then being exceptionally lucky enough for that to be the future that actually happens. Of course, for every one person who is lucky enough to actually hit the jackpot under such a strategy, there are many, many more that fail to hit the jackpot, but we never hear about them. . .
Umm. Does the phrase, "Nasty, brutish and short" mean anything to you? Crack a history book; life pre-industrial revolution was horrible.
History is written by the ruling class. Crack a Jared Diamond book; the Stone Age may not be as bad as you were led to believe.
http://www.sacredlands.org/jared_diamond_01.htm
That's a crock. History is written by students of histry, they are professors and writers. Is your hero Jared Diamond a member of the ruling class?
History books, by their definition, address the historic period, and are largely concerned with discussing civilization (which constitutes the majority of the population and humand experience during this period, and the vast majority of the historical record). Pre-history books (I recommend as an introduction Marshal Sahlins' essay "The Original Affluent Society" which, despite its imperfections, is very insightful) suggest that life was not necessarily horrible, or even "bad." Certainly, it was not as plush as is today enjoyed by the top 1% of humanity, but there is a solid argument that it was better than what is currently enjoyed by the bottom 50% of humanity.
I spend time sitting in the Indian Caves around this country. They all face to the south to capture the winters sun. There are soot marks on the ceilings from the fires of long, long ago. The petroglyphs and pictographs on the rock walls illustrate, Elk, Deer, Desert Sheep, Lions, and Bears. One of my favorite places is a little canyon called "Pleasant Creek". It was aptly named, not by the Indians, but by the white folks who showed up here 100 years ago. Even on a cold winter's day, sitting in the big cave half way up the canyon is very pleasant. I can almost see and hear the chatter of the women grinding rice grass seeds, or cooking a rabbit over an open fire while children play in the creek below.
I once read a biography of Chief Washakie, Chief of the Shoshone of northern Utah, Nevada, southern Idaho, and south western Wyoming. The old Chief was born in 1800 and he died in either 1902 or 1903. He knew all of the Mountain Men, he knew Brigham Young, and he knew many of the Generals of the US Army, including George Custer. The brutish part of Washakie's life came after he was confined to the Reservation. Best from the Fremont
Agrarian life may have been nasty, brutish and short. There is a growing body of evidence from paleontology that hunter-gatherer life was far more pleasant that agrarian life. The average hunter-gatherer appears to have spent about 4 hours per day supplying himself and other tribal members with their daily caloric intake. The average agrarian worker spent about 12 hours per day. Further, the hunter-gatherer skeletons are larger, with better bone density, fewer cavities, and far less evidence of disease. So why did we become farmers? Because we had been too successful as hunter-gatherers and our numbers steadily grew to a point that the local ecosystem could not support us. Many hunter-gatherer societies practice infanticide and/or simple forms of abortion to control population. However, all it would have taken is for one such society to decide that living as farmers was preferable to dying to begin to change the course of human history.
As soon as you create an agrarian society larger than a few hundred people, despite the other problems created by agriculture, such a society gains the advantage of increasingly specialized labor. With specialized labor comes professional soldiers and with professional soldiers comes conquest of other hunter-gatherer societies for territory and slave bodies. The rest, as they say, is history.
I think that modern anthropologists have found that most of the nutrients in hunter-gatherer societies are from vegetation collected by the women in the tribe. Hunting, which is a male dominated activity, doesn't appear to be as "fruitful" as we wish it would be.
Just saying....
In many Midwest rural areas like where I live the economy for the most part has been in recession/depression for decades surviving on agricultural subsidies and Social Security benefits. The die off of old timers and the egress of the young to the cities has only recently been slowed by developments like ethanol, wind farms, factory farms and low wage industry.
In this environment, the things that matter are who owns the land and who sleeps with who. Those who own land are the better off and their progeny determine who will be the next generation of the better off, if any. Overall there has been a population decline in the last 50 years.
It is the world of the real IMO. The Alice in Wonderland world of Wall Street seems alien, far away and untrustworthy to me. It is a world of abstractions created out of other abstractions to the point that no one recognizes the real if it bites them on the leg.
This where I am coming from when I criticize abstract concepts like EROEI and other arguments involving abstractions so often posted on TOD. There seems to be an inability to differentiate an abstraction from the real. Energy is seen as real while the concrete forms of energy with all their differences are treated as subserviant to the abstract. And the economic gain of transforming a less useful form of energy like corn to a more useful form like ethanol is condemned. It is truly an Alice in Wonderland world.
Grain is perceived as real to the point that its water needs are defined in concrete gallons per ton while the water needs of oats and corn are quite different, for example. This getting bigger and smaller, comparing things that are not alike and the mistaking the abstract for the real has to end if reality is ever to reassert itself.
I read these comments with a sense of gallows humor. We all desperately want to be able to look into the future to determine a course best for ourselves and those we love. But all we have is our "here and now". Take a moment to reflect upon what visionaries at the Chicago and New York world's fairs dreamed the future would bring. Some things came about and many others did not. Remember also that Jared Diamond in his book Collapse said that most of the civilizations he studied crashed at their peaks. I see a lot of similarities in what those civilizations experienced and what is happening now. We sense that our world is changing, but we all are desperate to hold on to what we know and have. Maybe we have to learn how to let go more.
So will having your assets in gold, stocks, paper currency, or whatever protect you in the future? Who knows? From my limited knowledge I believe most of the world's major religions have two things in common. They state that we should love our neighbors as ourselves, and that we should do unto others as we would have them do to us. One leading rabbi even said that it was easier for a camel to pass through the eye of a needle than a rich person to enter heaven. So if you really have any faith in this guy, why do I see so many in this country scrambling around searching for places to hide their wealth?
Now, believe it or not, I am not affiliated with any major religion. But I do take much of what they have in common to heart. I believe we should focus on what we can do, what we do have some control over, in the here and now of my life. In the past 18 months I have paid off my mortgage and all outstanding debts. My 1/3 acre lot is in the suburbs. I am looking at installing a small solar panel system. I have removed all the trees from my south facing exposures and have planted a dozen fruit trees. I am looking at grape and raspberry bushes this winter, and have just purchased enough wood to build a series of raised beds for gardening. I still need to get the material for a drip irrigation system. I am continuing to purchase how-to books for my library. I am stockpiling food and other necessities. I partially heat my home with wood and keep 3+ cords of seasoned wood ready for the next winter. I think you get my drift. I spend time leaning on the fence talking to my neighbors and getting to know them better. It is time well spent. I have no idea of what the future will bring. These things that I am doing give me pleasure and that sense of worth spoken about in the thread.
Perhaps we all are spending too much time in front of our computers reading posts like this and worrying about the future. I suggest we all push away from the keyboard a bit more and do more things for ourselves and those we love. It will be a better use of our time.
Sorry, but I just can't let this one go. If you need to refer to mythic literature - I prefer the King James Bible for all it's 'thee''s and 'verily''s - the quote is:
Matthew 19:23
Then said Jesus unto his disciples, Verily I say unto you, That a rich man shall hardly enter into the kingdom of heaven.
Matthew 19:24
And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.
'camel' may be mistranslated from 'rope' but either image works.
I assume since this is New Testament that it is not specifically in reference to the Jewish faith. Yes, a leading rabbi may have said this but I think we can let the quote stand from Jesus.
Now of course we should have a discussion of whether rich women can get in.
The 'Eye of The Needle' is (I believe) a low gate in the wall of the old city
of Jerusalem. I think the literal interpretation is that a Camel can pass
through the eye of the needle - but needs to do so on it's knees . . .
not an easy thing to get a Camel to do .. I guess .. but presumably possible. .. as is (on your knees) penitence for the rich .. although the bankers that
sat before the select committee here in the UK last week .. will clearly not
be going to heaven !
; )
A camel might be able to pass through the gate on its knees, but not if it is also loaded down with cargo on its back. Part of the point was that "you can't take it with you", and that riches and "stuff" can encumber one and prevent one from doing the right and important things that one really should do.
Thanks all for enriching my original point.
Whooosh!
+10000
Totally agree with your POV.
Fantasy worlds (doomerish or otherwise) are simple and consistent.
Reality is messy and uncertain.
IMHO, most of the discussions about EROEI that I've seen on TOD are absolute nonsense - and EROEI is used to justify the "energy cliff" and the inevitable end of civilization.
I assume that civilization will continue and I will make my plans accordingly.
Yes, reality is messy and uncertain. But it is far easier to predict collapse when compared to growth because of the asymmetric nature of the two processes.
Consider the task of traversing from one specific leaf of this tree to the bottom and vice versa:
Going up, which is closest to "growth," presents more choices throughout the whole process. Choose one branch over another and you will end up possibly nowhere near your targeted leaf. It's hard or impossible to know which branch will bring you to your leaf in advance, there is just little data to work with until you've done it once and recorded the path.
However, going down from the specific leaf to the base of the trunk is no trouble at all. Every time you meet a new branch simply pick the direction that "goes down" or "is thicker" than the one you're on. You may take a few side trips but they are easily correctable and you'll be down in no time.
Collapse is very much like moving from the top of the tree down. People who say things like, "We don't know the future" are, in my view, technically correct but are not being very helpful and are possibly just being mentally lazy.
A little bit of looking into it and anyone can see that we are far more capable of predicting some elements of the future on the way down rather than on the way up. Concepts like EROEI helps us understand how we are going to move down the tree. They are the equivalent of the guidance "pick the thicker branch, that will get you down."
So, calgarydude, you are welcome to plan as you wish, of course, but I recommend that anyone else reading this ponder the tree metaphor before following your lead. We are far from unable to see the collapsed future, in my view.
I wish the rating system was up again.
Plus a few, at least.
Nice tree, aangel.
Now all you need to do is prune that into a 30cm bonsai. Without damaging the health of the tree. (whatever "health" would mean in such a context) Our bright future is in the bonsai.
(and I'm re-purposing your tree metaphor, sorry)
"...and I will make my plans accordingly".
A good friend sold his business two years ago. He's my age, mid sixties, and he's worked very hard his whole life. His wife has worked hard and his children have worked hard, all at a common enterprise. Two years ago he called the family together and together they decided to sell out for quite a substantial amount of cash. Each of the kids got fair payment for their efforts, and my friend, the father, "invested" what he received, which was substantial, with an "Investment Firm". Well, I was visiting the other day with my friend and he told me to date he has lost about 40% of his cash, and it seems, he said, as if every day he looses more. He is at the mercy of his "Investment Adviser" because even though he was successful in his business, he knows little of the equity markets and is frightened to death about the prospects of managing his own money. I'm not sure what he's going to do and I didn't want to ruin his day with my prognostications about the future of the financial market (DOW at 900 before there no longer is a DOW). His final comment to me was "Well, we can live off of Elk meat and beans. We did it when we were young".
I made a comment some time ago that we don't know we're skidding off of the bridge into the chasm below, until we're skidding off of the bridge into the chasm below. Such events are called Black Swans; they complicate the whole business of prognostication. But, prognostication is prognostication; the assumption of business as usual is prognostication, and so is the assumption that business will not be at all as usual. I do like the analogy of the tree and it's trunk however. I'm pretty sure what the weather will be like tomorrow, next week, and even this time next year. I'm not at all sure what it will be like 10,000 years from now. Best from the Fremont
Hi Fremont,
Sad story, about his fear and loss.
re: "I didn't want to ruin his day with my prognostications about the future of the financial market.."
This puzzles me. Why would it ruin his day to hear your honest and straightforward thoughts?
Perhaps it would help him. There must be people (like the article "How to build a lifeboat" at automatic earth) who talk about how to manage cash and what to do.
It seems that you are fairly sure about the markets. He still has that 60% to do something with.
I recall the DOW at somewhere around 900 during 1972. I may be a bit off, but, it was in the neighborhood between 700 and 1000. The first house I purchased that same year cost $16,000. So, I would say, everything between a DOW at 900 and a DOW at 14,000 is cotton candy. And I would call cotton candy on the price difference between my little $16,000 house and it's present value of $225,000. The little ranch I now live on is supposed to be worth quite a lot of money. But, it's real economic value isn't any more than maybe $1,500, maybe $2,000.
About my friend. What could I tell him? I'm pretty sure he's going to loose everything and I don't think there is much he can do about it. Should I tell him to find another "advisor"? Should I tell him to get some books and learn the ins and outs of the markets? Just where exactly might you put cash money these days? If deflation doesn't wipe us all out, then the inflation we're likely in for surely will. Lots of folks say buy gold. Maybe. But, then if I'm the guy with the cold gold coin, and no one else has anything, what am I going to do with it? Buy a nice condo on the beach? Oh, and ever notice how the shills pushing gold are doing their best to create their own bubble in precious metals? What goes up comes down. I remember silver at $45 and gold at $850 back when. Does anyone believe their gold coin, in the midst of a depression, is going to be worth $2500 an ounce? Got news for you: plan on something in the area of $30 to $40 an ounce. And in the case of hyperinflation, then your coin will be worth what your wheelbarrow of $100 bills is worth. Depressions are called depressions, because nearly everyone has nearly nothing at all.
Maybe my friend should have bought a farm, but, he's kind of old to begin farming. But, I think farm ground is probably the best bet for capital preservation, but, even with farm ground, the chances are pretty good for severe deflation. In my life time, farm ground went for $100 an acre and scrub ground cost much less, a whole section (640 acres) for $250. I expect to see those prices once again. But, who is going to have the money to buy it, and why would they? If you have nothing, now you're going to settle down and be a farmer? No, you've learned that life in a culvert isn't so bad once you get the hang of it. And, you've got all of that free time you always longed for in the old days. There will be plenty to scavenge and that's what we'll do. We'll be as ravens and crows picking over the dead and rotting remains of our once non-negotiable American Way of Life.
But, I could be wrong. Best from the Fremont
HI Fremont,
Thanks for your reply. Probably too late to be writing again, but I wanted to respond.
re: "What could I tell him? I'm pretty sure he's going to loose everything and I don't think there is much he can do about it."
To me, sharing your honest thoughts is...well, I guess I'd say, it's something I value.
You never really know what a person might do with the information. There's so much out there - if he doesn't know anything about "peak", he might learn and then make different (his own) decisions.
And then, there's his family - his children. He might talk to them. Although he might be too old to begin a career as a farmer, perhaps some of them are not. Perhaps they want to talk about how they might pool their (now divided) resources; what they might think about doing. How they might better help each other out.
Yes, deflation. But...a farm that is thriving (dare I be too idealistic and refer to it as organic or sustainable) - is something that supports people, one way or another. If you're friend is kind of old, maybe he could just sit there. I have a friend who just met a 74 year old (woman, as it turns out) farmer, who has a lot of "woofers" and students in to help her. She seems to enjoy life very much. At least, she impressed my friend in this respect.
EROEI is reality. Put energy into a process, get energy out. If you get less energy out than you put in: don't do that.
You don't spend a week (or a month) building a windmill to get less work out of it than you could have done in the same time. Nor do you spend time raising toy poodles when you need herding dogs. It is only when there is a veneer of unreality applied by the Feds and Monsanto that a lot of the countryside makes sense like it is.
Don't take on unnecessary debt (and it's almost always unnecessary), don't sell the rooster, and don't eat the seed corn.
Yes, it's going to be very hard to make the shift and most won't make it unless they are forced to. Here is how I explained it the other day:
----
Using conversation theory, we can make some guesses.
Start with some premises:
So, although it's true there is a small network of people preparing for Energy Descent, as a conversation in the network it is growing slowly in large part due to the reasons in this post but also for a few others.
To have a conversation spread more quickly, the physical support that keeps the existing conversations locked into the network must be taken away. People having their car be repossessed is an example of a physical support being removed.
Without these physical supports, the existing conversations have less strength and there is space for a new conversation to propagate across the network.
All that is a fancy way of saying: "(Most) People won't change until they are hit over the head by a 2x4."
Coming from this angle, it is not cynical or defeatist to say that at all. It's simply a result of the analysis, no different than saying a boat drifting with the current will keep drifting unless an outside force acts on it.
------
I agree that the problems are fundamental. I don't have time to consider all that you say now, but solutions are not necessarily impossible or complicated, they maybe just require a fundamental acceptance by the majority of physical limitations.
EG: Old age/retirement/support etc.
solution - a Faustian pact. Pick an age to retire, maybe see an advisor first etc. Say that I pick 55 years..I get 'reasonable' medical care for 10 years post retirement [ie not 14 IVF babies on welfare]. After 65 I get pain relief/hospice care only [or thereabouts]. No surgery, hyper-expensive drugs 10 years after my chosen date. I can change the date by restarting work.
Employment - Normal working week 30 hours. Adjust fixed labour overheads so that employers do not lose out by employing more workers etc.
Simple things that would require acceptance.
It's doable. I did something like this and it's worked so far. I decided when in my twenties that I didn't know that I would live until retirement age, so what I would do is: work a few years, take off a year, work a few more years, take off...I did this for 30 years. I also decided to retire when I'd had enough; that was over 10 years ago at 58. I also decided that I needed accident insurance, but nothing else. If I got cancer or a stroke or whatever, so be it; that would be time to accept the end. I want to die with the parts I was born with--so no transplants, etc. Now near three score and ten, I take maybe, if necessary, an aspirin a year--and that's it for the drugs. I avoid doctors and pharmaceuticals like the plague. The only thing that surprised me is when I found out a few weeks ago that in-home hospice care would be around $1000 a day, I decided that that was one colossal waste of money, so no hospice for me: I don't want to die like a dog, helpless, a vegetable, so...
Hi pond.
Interesting thoughts.
The thing is...some surgeries, like some drugs (a single course of antibiotics, perhaps, even a double course...) are relatively easy and have great benefit.
I have a friend in his 80s. After a brief hospitalization, it turns out he'd had an infection, apparently, for years. He's back home now, better than he's been in some time. In a way, it was expensive; yet, relatively speaking - not really.
Sure, I was only using a primitive definition. In the UK we have committees who decide which treatments are cost effective and which the free health service will not fund because of poor value. The TV is aways trying to fill airtime with some weepy story of someone who is trying to pressure for an expensive lifesaving treatment. Understandable motives for the patient, but I feel it's immoral reporting. Someone has to decide, and we are 100% sure to die eventually.
re savings vs. investing
Note that, in the period roughly 1940s thru 1960s, savings could be safely invested in some public monopolies. E.g., AT&T had a virtual nmonopoly on local/long-distance...about 90% of territorial USA. The company was a publicly-owned utility guaranteed about a 6% profit by Federal regulators. Thus it was safe for little-old-ladies and pensioners to invest their savings.
Of course, that opportunity ended when telephony was de-regulated by a corrupt Congress. There were other, similar public utilities that have also disappeared.
Not only that, our tax system has become ever more biased against dividends and in favor of capital gains. This has a lot to do with why Wall Street has become increasingly indistinguishable from the types of institutions that are found in Las Vegas, Atlantic City, or some Native American reservations.
It seems our whole system has has been designed to strip money from the heartland and deliver it to the financial centers along the eastern seaboard and Washington DC.
I don't think it's regional (plenty of money ended up in Bentonville, Arkansas), but it is certainly designed to strip money away from the lower classes, and give it to the upper classes. Watch Obama pretend to care about that for the next four years, while continuing the trend.
As a recent graduate at the beginning of my career in energy, I have no idea where to put my money. With great effort, I've managed to pay off all my debt, but it could have been much harder as I rent an apartment.
I've been putting 10% of my income into my retirement for my whole 3 years, and I'm frustrated that it's gone to a lot of waste. I can't imagine what people who are 'near retirement' are feeling. I don't blame them for falling into the trap of psychology of previous investment, but I doubt it will work out well. As for me, I have to keep saving for some land to own and occasional classes... but with an entire society telling me that now is the time to invest, it is very, very hard to break the mindset. I confess I am going half and half.
If you are just starting out, my recommendation is to try and buy a house, to live in, not as an investment. Now is probably the best time ever to buy a condo or house.
I'm also in Calgary, and I think you're right. I'm hoping the market comes down a little further and my patience is rewarded.
No, no, no,no, no! Not unless you want to lose another 20 - 40% right off the bat! Housing prices are going to fall a good bit more. This doesn't apply to buying, say, a foreclosed home that you can get for 20 - 50% of current prices that needs no renovation.
Cheers
Unlike some of the other posters, I would recommend *not* buying a house right now, if you reside anywhere in N. America. The U.S., Canada, U.K., much of W. Europe, Aus & N.Z. just went through the greatest property & credit bubble in recorded history. In my neck of the woods (CA), prices tripled in most metro areas from 2000-2007, and are just now *starting* to correct --despite constant efforts by government to thwart the badly-needed market correction and keep prices inflated.
Just because a house is less overpriced than it was 1 year ago does not mean it is a "bargain" today. There is an old term for a person who believes this: knife-catcher. Determining if house prices are reasonable in your neighborhood is the easiest thing in the world to determine: calculate the median price:HH income ratio and the median price:rent ratio.
Median house prices are available at sites like DataQuick or local realtor websites, while median HH incomes are available on State and County websites. Determining the median monthly rent is a little trickier, as these statistics are not always readily available to the general public. However, you can scan the local classifieds or Craigslist for asking rents and get a rough idea. Also, be sure you are comparing apples-to-apples: in other words houses comparable to ones for sale, not apartments.
Once you have these ratios (median price:HH income ratio & median price:rent ratio), it;s easy to determine if houses in your area are overpriced. If the median price:HH income ratio is greater than 3:1, houses are still overpriced and likely to fall further. If the median price:rent ratio is significantly greater than 100:1 (comparing house price : monthly rent), then houses are probably overpriced, and renting is likely the better bargain. You can further refine this by estimating the monthly net cost of purchasing as follows: MCP = monthly PITI + HOA + maintenance - net benefit of MID over standard deduction. There are also plenty of online calculators that can help you do this, including CEPR's, Fannie Mae, Dinkytown, etc.
Good luck!
Is there a consensus that the 3:1 ratio applies as well to areas in great demand (say San Francisco) as it does to areas in lower demand (say Stockton, or Vallejo)?
This is a very good question. I would say the 3:1 ratio has held broadly true even in most "premium" neighborhoods across the U.S. for as long as anyone has been gathering price & income statistics. However, since the 1970s, it has consistently skewed a bit higher in densely populated CA metro areas (L.A., S.F., S.D.). Since then, the ratio has been closer to 4:1, so you may find that a more useful benchmark for your area.
OTH, the price:rent ratio has held its ground and consistently reverts to the mean after each property bubble implodes. Also, the price:rent ratio is just a rough rule-of-thunb. If you want a very precise way of comparing rents to price, I recommend reading up on "cap rates", which is what professional RE investors use to guage fair market value on investment properties.
This source gives the 15 year average price:rent ratio at 200 (16.9 times annual rent=200 times monthly).
http://money.cnn.com/magazines/fortune/price_rent_ratios/
This seems to match up to what I am seeing in my neighborhood with apartments vs. condos.
"15 year average price:rent ratio at 200"
Here's the problem with an average that only goes back to 1994: Half the years of this sample period encompass the LARGEST HOUSING BUBBLE IN RECORDED HISTORY (2000-2007). If you want a more reliable ratio, I'd go back as far as your local housing data will go --40 or 50 years if possible. Or just stick with the old, reliable 100:1 as a rule-of-thumb. In some particularly 'desirable' areas, the long-term average might be closer to 110:1 or even 120:1, but 200:1?? In David Lereah's dreams maybe!
I think it is also useful to consider Strauss and Howe's The Fourth Turning and how their theory might play into all of this. Doug Casey has annotated/updated three essays (starting on Jan 19, 2009) he wrote in 1997 at http://www.whiskeyandgunpowder.com entitled Foundations of Crisis, FOC Pt 2 and FOC Pt3 that use their theory as a starting point.
I think the reality is that lots and lots of people are going to be screwed and have few viable options whether it is "saving" money or retiring or establishing a, somewhat, self-reliant home.
Over the years, my position has been to invest in stuff (land, tools, etc.) that allow me to be far less reliant upon the economy. Although I was born in 1938, the Depression has always had a dramatic impact on how I planned for the future.
Todd
About 6 years ago my wife and I took all our investments out of those retirement and college savings plans and put them into tangibles. I think many thought us totally irresponsible.
Instead of looking at the market and feeling dread, I now look at my garden, my solar hot water panels, my greenhouse, my PV system, my double pane windows, my attic insulation, my stores of food, my bikes, my chickens and my time as all well spent.
Money (or securities) vs stuff. A promise of stuff in the future vs real productive assets now (or frivolous waste now). I wonder if Roubini or Taleb's staying in "cash" is all that much better than securities over more than the short run. A "pay-it-forward" economy suggests one's retirement would be greenhouses, double pane windows and the like. Perhaps even a rifle. However, one would never really "retire" entirely. That might be possible for the little guy - it's the sort of thing I've been putting my "retirement" into as well - productive assets and soil. How can a mutual fund operator do that? He cannot. The best equivalent I can imagine is investments - capital - into a retirement community. Which devolves to productive assets, perhaps better managed. Until one finds the managers' family, friends and henchmen nesting in one's retirement.
The whole concept of saving in the form of money doesn't seem to me like saving or investing. It's more like buying a futures option as opposed to taking delivery. Money, however, doesn't rot, like real assets do. That's where the skills come in - to maintain the physical assets.
Seems to me that retirement investing amounts to investing in the Commonwealth and rebuilding the Greater Economy (the environment). That runs into the nature of the economy. Why do $100 worth of damage day-to-day so you can reinvest $10 in rebuilding? There is no amount of "good money" that repairs the "bad money" from which it comes. Thermodynamics guarantees that. Only by turning the cycle around - putting effort first into the repair - does it make any sense to consider what damage might be done to produce some good. Take a simple example - building a raised bed. Assuming that project, how do you build it so as to maximize good - using what would otherwise be wasted and human labor - vs stripping some topsoil elsewhere, dump trucks and so forth.
cfm in Gray, ME
Hey Jason, smart move, me too. I have all sorts of post peak equipment, ranging from 6 new bicycles (and all the tools and spare parts needed to service them for a lifetime), to dehydrators, vacuum sealers, gardening equipment (has everyone got a compost thermometer?) etc. Other than that, I'm 50% cash and 50% gold & silver.
I intend buying a few acres soon, when real estate finally starts falling in Australia.
I'm on board with the idea that investing in tangibles is wiser than investing in markets, stocks, etc., but I'm having trouble convincing my better half. She *can be* convinced, but I need something short and sweet that explains what you all have been on about in this post and elsewhere on TOD. I welcome any suggestions.
Perhaps browse Sharonastyk.com because she writes a lot about this and perhaps speaks better to women since she is one.
I was having this problem with my husband too. He wouldn't believe me a few years ago when I explained what peak oil was going to do to the economy. It was a source of friction. But then along came the problems with the auto makers and he went from "Anger" to "Acceptance" in about a week, (after taking 3 years to get from "Denial" to "Anger")I just keep repeating "it's going to get worse!---your job is going to go too and so is mine!" Now he believes me and we're working on a plan together. (Number one priority is clean water.)
Just keep showing your spouse newspapers (all the bad economic news is good evidence) books such as The Long Emergency or Reinventing Collapse. (I had to read parts of these aloud to my husband but he eventually did listen). It is really hard to get someone who has lived with the "growth paradigm" his/her whole life to change their way of thinking!
Note: My father (a person who is solidly in love with Milton Friedman!) recently went from "denial" to "anger" over PO and what it is doing to his investments in the stock market....I consider it progress.
One suggestion: Make it stuff that you can use and enjoy productively.
I've been thinking about canning eequipment - a big outdoor gas grill. We don't have so much garden space - maybe we can can stuff for folks who have room to grow more. Or drying stuff.
Any kind of useful craft, really. How about small scale metal work - sharpening saws etc.? Buy the equipment and learn how to use it expertly.
The world's gone mad. Except it's not the world, just people. I was watching my garden today and of all the hundreds of life forms there (most currently biding their time for Spring, granted) not one of them seemed to give a toss about the economy. It's not the economy, stupid, it's the law of thermodynamics again. We are the intelligent species that has made ourselves dependent on something we're running out of, energy in all its harnessable forms. Without our energy slaves no we won't be able to retire, nor spend years in education, nor travel the world. I find I don't really care.
Congratulations. You are in a state of acceptance. I too usually feel great when I am growing my food, snacking on it, watching the life in the soil and the forest.
I have mixed feelings watching people try to hold on to their expectations, which once seemed so solid in their grasp, but are now crumbles slipping through their fingers. In some respects I am sympathetic, in others I say it was based on a set of damaging lies so good riddance and get over it.
Bugmeister,
Part of the problem is the madness of the people who have taken control of the banks. This Guardian article: A psychologist's view: Rich pickings is about the bankers grovelling before MP's at the recent Select Committee hearing
http://www.guardian.co.uk/business/2009/feb/11/psychologists-view-banking
As the author notes
All power corrupts and absolute power corrupts absolutely Lord Acton
BobE
Hi Tom
Your short response probably sums up the dilemma we all face. I try and tell my kids to learn something practical. It could involve college, but it should be practical, for instance they could learn to be a plumber, or if they go to university, they should become a hydrologist. Both will always be needed. As for PR, lawyers, accountants (me), advertising executives, political lobbyists, conference planners, airline pilots and a host of other careers I am not so sure (sorry to all those I offended). As for being able to afford college, I told my 16 year old scholarship daughter (wants to learn genetics), she will have to raise the money herself. My wife and I both paid our own way, so it isn't like it hasn't happened before.
Meanwhile the months tick away. I live in a strange world of cognitive dissonance. I know the future is vastly different to what everybody else thinks it will be (more of the same), but I have to be very careful about what I say. Most people think I am a nut. Maybe I am. So I mostly do not talk about where this is going. Even with my wife.
Airline Pilot:
I'm not offended - it's been my great career for 20 years and a cool job for 100. When Kids these days ask I do everything I can to convince them to become windmill servicemen, farmers & vets. If I knew then what I know now...
Saving for college or for anything else simply was not possible when my children were dependent on me. Fortunately I was a union member who had earn a defined benefit pension which now amounts to about 20% of my current income. The remaining 80% comes from the taxpayers which is about the same ratio the transit system I worked for had. That Social Security won't be there has been a persistent myth mainly propagated by the Republicans for several decades. The Baby Boomers being the largest voting block will not receive any retirement benefits from the government is absurd. The Social Security Trust Fund holds a large part of the national debt which has always been serviced one way or another wether times are good or bad.
The college problem could be solved via the military technical education model. Colleges spend too much time on courses like English 101 which should have been covered in high school. A post high school military or public service period where the technical skills our economy needs are taught using the military education model means young folks learn quickly what they need to know based on their natural aptitudes and desires. Three or four years of military or civilian public service after their training will make them clarify wether going after that college degree is even desirable.
Thomas-
Well stated. Unfortunately, most people coming out of the military will need to have basic education, and English 101 and a rudimentary understanding of Thermodynamics and Evolutionary Biology a must. Unfortunately most of the US proletariat and elite is ignorant, and lives in a superstition based world.
Tom,
Huh? Are you kidding?! Covered in high school? That's laughable.
You should have a chat with my sister, she has a degree in English and spent a few years teaching basic reading and writing to members of the US Army stationed in Germany. I can't speak for her but based on what she told me of her experience, I think she would most vehemently disagree with your statement.
BTW, try giving a high school graduate, but functionally illiterate recruit, a technical manual for a sophisticated piece of equipment that he or she needs to master in order to survive...I can attest to the fact that her students held her in the highest of esteem.
I'm getting rather sick of the tiresome Dr. Doom and his Black Swan. They're just as clueless as the rest of us but just get a lot of attention by being negative.
We need some PMA.
http://en.wikipedia.org/wiki/PMA
Well I can see why that might appear to make things better...
Err, this is not "the Blog of Unwarranted Optimism". You can probably find one elsewhere without even looking too hard! ;)
I should note that my claim is not that Taleb and Roubini are right about where to put their assets - for the record, mine are not in cash, but in land and tools. What interested me was the psychological implications of a shift away from investing as savings.
Sharon
Land is a risky investment, highly speculative. Tools will rust away before they get used if nobody can afford your crop.
Negative people don't invest..they sell short. They are fundamentally gutless losers.
---------------------------------------------------------------
There's a 'reverse Peak' you should mention; the Slough of Despond and people won't make it to the other side(without Help).
http://en.wikipedia.org/wiki/Pilgrim's_Progress
Wherefore Christian was left to tumble in the Slough of Despond alone; but still he endeavored to struggle to that side of the slough that was farthest from his own house, and next to the wicket-gate; the which he did, but could not get out because of the burden that was upon his back: but I beheld in my dream, that a man came to him, whose name was Help, and asked him what he did there.
CHR. Sir, said Christian, I was bid to go this way by a man called Evangelist, who directed me also to yonder gate, that I might escape the wrath to come. And as I was going thither, I fell in here.
HELP. But why did not you look for the steps?
CHR. Fear followed me so hard that I fled the next way, and fell in.
HELP. Then, said he, Give me thine hand: so he gave him his hand, and he drew him out, [Psalm 40:2], and he set him upon sound ground, and bid him go on his way.
Then I stepped to him that plucked him out, and said, "Sir, wherefore, since over this place is the way from the City of Destruction to yonder gate, is it, that this plat is not mended, that poor travellers might go thither with more security?" And he said unto me, "This miry slough is such a place as cannot be mended: it is the descent whither the scum and filth that attends conviction for sin doth continually run, and therefore it is called the Slough of Despond; for still, as the sinner is awakened about his lost condition, there arise in his soul many fears and doubts, and discouraging apprehensions, which all of them get together, and settle in this place: and this is the reason of the badness of this ground.
Look major... whatever
You are obviously well off and set up in your situation. And wondering why everyone doesn't simply do the same.
Your answer; they are just too darn doomie.
I would posit that many of us who you would pigeon hole into the doomie tag are well off and well situated but understand what we are facing. You do not.
Why do you continue to attend this forum?
IMO the problem is not enough pessimism. People are breezing through mass extinction and hoping for a return to the way things were before this little recession thingy. Soon the extinction list will run short and we need to realise that we are also on that list.
POWER DOWN NOW
Souperman,
Allegories are not your strong point, eh?
I thought the story was apropos.
Christian heeding the warnings of the Evangelist(no shortage of 'em at TOD) resolves to leave his old life in the City of Destruction(does this
sound like sugar-coating?) and promptly
falls into Slough of Despond where the sins of life overwelm his hope and the heavily burdened Christian struggles to cross this swamp to enter the Wicket gate, the entrance to the King's Highway(straight and narrow) which leads to the Desired Country.
In the episode, Christian is pulled from the mire by Help, who wonders how he missed the steps thru the bog. He responds that fear caused him to rush in heedlessly.
It is a rather naive story but
very vivid and a lesson to this board IMO.
Where there is no vision, the people perish. (Proverbs)
Here at TOD there is much negativity without a plan. Maybe that's not a problem for you. In that case, for you the Slough of Despond is the House Beautiful.
How rude.
Well, perhaps the owners will ban me for optimism(as well as ethanol).
Building a set of ethics and values appropriate for the times requires an honest assessment of the context. Despair is a perfectly valid assessment and well-founded despair is a way better assessment than unfounded optimism. You seem to rule out any assessment that isn't optimistic or hopeful. That's unhelpful [and I'm being a lot kinder to you that I will be at "yet another what-do-we-do-about-health-care" meeting tomorrow]. Why not "desperate deeds for desperate times"? We're not in an economy or world of growth any more [Greer in today's Drumbeat] is far better than his usual - ecosophy he calls it - Wendell Berry's "whole horse".
Coming up with the ethics and values for the "Slough of Despond" is exactly what we need. There ARE NO STEPS OUT OF THE BOG!
cfm in Bog, Gray, ME
Perhaps I would be as pessimistic as you if I believed that the only possibility of survival is by reforming from top to bottom mankind first driven to despair.
That has never happened in human history.
In Pilgrim's Progress, Christian and his occasional friends find the straight and narrow road to salvation
despite persecution, temptations and torture along the way.
This is how I think change will happen.
A journey of a thousands miles, so wallowing in the Slough of Despond is not
consistant.
Because people do not post plans here at TOD does not mean that everyone lacks a plan. Sometimes people simply do not wish to share such details for OPSEC reasons. Sometimes we may have been told not to post such things here.
Further, souperman is, in my opinion, essentially correct. This is not going where the majority think it is going. The end result is not going to be anything like what the majority thinks it will be like. In the past decade, my attempts to talk to others about such issues were met with glazed eyes and stony silence. Only in the last 18 months have these same people started to seek out my opinions, at least about economic matters. And yet if I bring up the ongoing extinction event, I still get that glazed eye look and stony silence.
You're going to have a hard time convinincing anyone besides yourself that Sharon, rather than yourself, is the gutless loser.
LAND is highly speculative. Note: Stock market is down @ 44% from peak, and will fall further. But LAND to live on (you think Sharon bought her land as an investment?) and tools (they rust if you don't take care of them, they do not if you do) to work it is a bad investment?
Criminy...
Jeers
http://www.truthdig.com/cartoon/item/20090212_cash_out/
but is it filled with carmel sweetness, oil, or as empty as our bank accounts?
This is the only guy getting any news coverage that really "gets it"...
http://www.youtube.com/watch?v=9nJ7LM3iyNg&NR=1
Site:
http://www.trendsresearch.com/
He isn't the only one but he is very sharp. Just watched a bit of the Bill Moyers show and he had on a guest discussing the bank bailout scams-both guys obviously love Obama and they are almost brokenhearted over his actions as leader so far-they acted like a guy who yesterday came home early and caught his beloved with the mailman.
I didn't think much of Obama to begin with - I'm a DK, Nader kind of guy. But I have to say, I'm finding it hard to believe Obama is turning out to be as much of an idiot, jerk, house-slave as he is. Someone who did nothing - my dog, for instance - would do better than Obama. And my dog is dead.
Is that Obama's shortfall? Is it the shortfall of a man - a Constitutional lawyer - married to a woman - an Intellectual Property Rights lawyer? Is it the hollowness of their metaphor - upwardly mobile University of Chicago? Ias it a system following it's own dynamic to crash. Probably all of those.
Still, in the final analysis, it's not that Obama is unqualified, but that those of us who know what is going on are not out picketing, leafletting and shutting down every office of Bank of America, Citibank, Nestles and so forth across the US and the planet. "By any means necessary". I don't have that courage. I'm too fat.
cfm, too fat in Gray, ME
Obama is doing exactly what he was elected to do paid for by the $1 billion dollars that elected him. Do you think it is coincidence that we're getting a continuation of Clinton policies (of which Bush was also a continuation despite Democrats desperately wanting to believe otherwise)? Is it a coincidence that his attorney general nominee (as well as his solicitor general nominee) would state that the US military can hold military detainees indefinitely without trial despite the rhetoric of his campaign platform? Do you really think it is accidental that he is pouring trillions of dollars into Wall Street to rescue the very people who lined his campaign coffers?
People need to stop expecting white knights to rescue them from the corporate matrix into which they've been born. No one is going to rescue you except you. And right now, none of us is powerful enough to topple the matrix. All we can do is try to extricate ourselves as much as we can. Fortunately, the matrix appears capable of collapsing all on its own.
This is a video response to Peter Schiff predictions
http://www.youtube.com/watch?v=9h2x7R8pxUs
As usual, an interesting post. I guess I have a somewhat different view than some of the people here. I was born and grew up in a third world country (actually, it's probably lower than third, but anyway). We had running water pumped each day from a well and into fifty-gallon drums; we had no flush toilets, but used the outhouse modeled on the type left us from an occupation by US marines early in the century. We had no refrigeration until I was in my early teens. We cooked using charcoal. We had no car early on, but we all had horses. Most of our food came from our own gardens. It was interesting, I suppose, to experience the transition into America in the early 50's and we became a part of the whole.
I quickly realized that making money was not my forte, and I've always preferred time to money, so I didn't get caught up in the everyone trying to be rich mythology. I felt for many years and feel now that America is a country of excess and immaturity. Now retired, I am comfortable living in a small town, renting, own no car but use public transit or walk. I hear the stories everywhere about the doom and gloom before us and how hard life is becoming, yet I think that Americans could easily lose 90 percent of their "wealth" and still be well off. We do not need all the things we have and are made to want by the marketing and advertising industries. We could immediately save much of our water by switching universally to composting toilets or electric toilets or variations thereon. We could save a lot of electricity by hanging our clothes up to dry instead of using a dryer. We could save immeasurable amounts by stopping eating beef. We definitely do not need all cars we have, and judging by the girth of most of the people around here, most should be walking instead of driving, most should be eating less instead of stuffing themselves unceasingly with garbage.
We could all live much, much simpler lives with much less money--and less clutter. I don't think we are doomed to some stone-age existence as some around here seem to think. Climate change, whether icing or warming, will happen and will change our lives, but I think we can adapt. We could, for example, live underground and save on both heating and cooling costs. We can moan and groan all we want about how people don't plan for what's coming, but I think it is almost impossible to change people, but they can adapt to changing conditions. When the environment changes, we'll change, but not before. Yes, many may die, but our genetic system is spread too thin as it is now; there are too many idiots around, so a few less would be beneficial. We don't need 99 percent of the junk we have, so when we can no longer afford or produce it, so much the better. If I have any feeling of doom at all it is the feeling that we should be doomed and destroyed, given the total mess we have made of our water, air, land, and natural systems. There are dozens of things that could do us in, peak oil being but one. But except for total obliteration of the planetary surface, life will go on.
Yes, I grew up in Africa where the daily wage was less than one dollar, yet the most common sound you heard was jovial shouting and laughter. Most whities (I'm Caucasian too) have "affluenza" and a change to living with far less will be healthy.
There's no need for infinite growth to retire, just a change in savings rate/location, and possibly work duration, proportional to the loss in equity. Sure, we had ratings agencies turn poorly rated crap into AAA rated CDOs through an version of proof by exhaustion/obfuscation, along with trillions in extra credit that allowed a never before seen pump and dump scheme. It's not like the money vanished in a puff of smoke, it was merely transfered from the people who didn't understand what was happening and when it was likely to happen to those who did. Pirates of the financial seas and all that...
Besides, it's not like people need four whole years at a state university to get a degree. They can choose to, but there are other avenues. Community college for the first two, possibly a bit more depending on the degree, along with proper planning as well as some elbow grease can cut the time needed to finish to four or five quarters in the state uni after transfer. That's roughly $20,000, assuming the student's family makes over $50,000 a year rendering them ineligible for a Pell Grant, in which case any "trouble" they may have is likely the result of poor planning. A married couple netting $43,000 per year should be able to drop $25,000 per year on a house and have it paid of in about five years, after which they can have the kids and start saving for college. $2500 per kid per year should pay for a financially judicious degree. In my case college resulted in a few thousand dollar surplus from state and federal grant money, and I only applied for financial aid when I needed it even though I could've received it when in community college and padded my account even more.
I suppose the idea of simply saving enough to retire independently of what the market does may be repugnant to those who want a 10% gain per year as opposed to a high enough rate on a CD to keep up with inflation, and it definitely blows that people were misled and have to adjust just so some banksters can make an extra trillion or so, but like they say, if it looks too good to be true, it probably is.
There's no such thing. It's all a matter of timing: in deflationary times, go to cash; for inflation, precious metals; and if you are living in the most indebted country in the world —— cough*USA*cough —— get your cash into another currency.
"Something of actual value, is a tangible thing. Actual value, is a tangible thing which has been grown or mined. ......
There is no tangible item on earth, which was not grown, mined, or made from things grown or mined. Nothing."
As a retired geologist, I can't agree with you more.
Granted, something like my mom's CD earning 4.5% until mid-2010 isn't exactly a text book example since inflation is pretty low right now at 2.5% last year and probably something around 1.5% this year, but for the most part the CODI tracks inflation fairly well, although it does tend to be a bit more exaggerated in terms of highs and lows. I should preface this next part by saying that diversifying is a good thing, since moving all the eggs from one basket (dollar) to another basket (some other currency) isn't the greatest idea as opposed to having a bunch of different baskets. In terms of the dollar specifically, if we were looking at it at ~120 like we saw in 2002 or somewhere around there, with a historical average in the low 90s, I'd be inclined to agree, but as of right now at about 5-10% below the historical average I doubt it'll race to the bottom since it's already been down that road after dropping from ~120 to ~70 something when the previous administration tried to print their way out of debt. Granted, excessive ever increasing debt isn't exactly a good thing, but ever since the credit bubble, which was fueling a good chunk of that debt, collapsed, the personal savings rate has been increasing. I wouldn't be all in for anything as an investment, but I also wouldn't run from the dollar either.
If you woke up tomorrow on a deserted beach, completely naked, would you still be you?
You would look around, you would explore, you would do what you had to do and what your intelligence would tell you was best, making use of what you found to work with.
Don't despair, folks. Nobody knows the future except that for each of us, eventually, no matter what our situation, there isn't any.
Homo sapiens - a remarkable species the members of which are capable of doing remarkable things, for good or bad. But, each of us has the equipment between our ears to survive. Go for it the best way you know how.
As the old Sesame Street song went - "or would you rather be a moose?"
More crucially, the money in the 30s was linked to a scarce commodity. Namely gold. Now, you simply add a few zeros to a field in a database.
The stock market is not a form of false investing or false saving. It is simply a mechanism for capturing inflation.
Example.
Everyone earns 10k per year from working and one "rich" person earns 100k from stocks. Then you add a load of inflation. The standard pleb continues earning 10k and the rich person is now earning 1 million. There has been a transfer of wealth from the standard plebs to the rich guy. The 10k they were earning is now worth less than it was.
Basically. Investing is the avoidance of inflation. And the politicians and wealthy use inflation to drain off the excess wealth of the plebs.
When you invest you are getting your store of wealth OFF of a downward elevator, not on to an upwards one.
You just have to know when that elevator is going to switch direction... You can tell that when the controllers of the direction announce that they are going to switch it. And they do announce it. The controllers are the banks, the elevator is money. When they lend more, they are allowing the value of the currency to fall. When they tighten lending the value increases. It really couldn't be simpler.
The finance crisis for example is already over:
e.g.
http://inflationdata.com/inflation/images/charts/M3%20Money%20Supply/M3_...
There will be a bit of lag, sure, but now comes the inflation.
Sounds like you have been reading the Generational Dynamics website (www.generationaldynamics.com). If anyone has not seen that site yet, I strongly recommend it to you. It will open your eyes to a lot of things that have happened and will likely happen again.
http://www.nytimes.com/2009/02/14/opinion/14johnson.html?_r=1
Bouncing Baby Bailout
That seems to be the plan.
What can we tell our grandchildren? If we are lucky my grandson may have life similar to my grandfathers, which was as a farmer back in Dakota, that they obtained by homesteading. What do the American Indians, from whom the land was taken tell their grandchildren?
Ahhh, I love the smell of capitulation in the morning! :-)
The other day our fearless president (hee, hee) was pushing the stimulus package with the threat that if we don't get it in time, the economy could sink into a decline "from which it may never recover." (!!!!!!)
(not exactly a "fireside chat, nothing to fear but fear itself" type, is he?)
Even in the cold war planning for a nuclear war, nobody ever predicted an "economy that may never recover" even if there WERE A FREAKIN NUCLEAR WAR!
We are sitting things up for the biggest rebound in world history, the question is, exactly where to be positioned for the maximum return. Billionaires will be made by the hundreds, and millionaires by the tens of thousands. This so called "collapse" is so textbook now it is scary in it's familiarity, we have seen it before, we have studied it all of our lives, the question is, do we have the balls to profit from it.
RC
Even the most bearish are expecting a large bounce at some point. Many of them, actually. But the trend is, and will be, down for a goodly bit yet. Maybe a generation or more... Good luck with timing the market. It's been done, so you might.
But your implication of a long-term rebound and no crash is based on dreams and wishes. There is nothing in the current situation *not* pointing to a major, long-term depression.
Feel free to share if you've got something other than your agenda/beliefs/wishes to share.
Cheers
ccpo,
I am just now getting back online after being displaced from my rural home by an ice storm that destroyed my electric meter and forced me to move to a larger city, so I haven't had much time to post.
As far as anything beyond my "agenda/beliefs/wishes", I do of course wish the best for the world, things are hard enough in good times so who needs bad ones! But over the years, and actually too late in life to do me as much good as it should have, I have learned an important lesson: Demographics.
Simply because the U.S. is full of aging boomers who may feel that the best is behind them now, this is not true of the world. Asia, Latin America, Eastern Europe, Africa all are working for a brighter tomorrow. They are developing young talent pools that will dwarf the U.S. in raw numbers, young people who want to have a decent modern standard of living. It is a tide that we cannot slow nor stop, and we should not want to.
The key issue in the minds of those who are alert to resourse depletion is whether or not the physical world can deliver the needed resources for these billions to continue to improve their standard of living.
My argument has always been that there is for a considerable amount of time (more than another couple of centuries)enough natural resources and energy to provide for humanity IF, and this is a very, very big IF, we can reduce waste and improve our technology to capture the energy and material of our world and our sun to such a point that it can provide for all with a margin for some growth (not waste, and not 7 children per family, but some marginal growth to create a living standard that can be considered decent by all).
I could be wrong...or I could be right in theory, but the human race proves unable to make the correct choices and allows by false choices or inaction a period of horrible suffering to occur, meaning that doomsday predictions come true even though they didn't have to.
But my personal choice of which way to bet is made easy by the simple fact that if I bet on doom, I get doom and death. If I can find ways to bet on success, at least I have a chance at success. I may not get there, but at least I have the chance. For me, betting on success is a no risk wager. What choice do I have?
The rest of this "economic collapse" is simply "white noise", the static that is always there but goes unnoticed except when we are between signals in search mode, trying to find a clear and understandable message. At times of confusion and lost signal, the white noise can become deafening.
RC
Sorry to hear that. I hope the transition is temporary.
This is not a point I was arguing. I was discussing the shorter term prospects of the market rising, with a nod to a possible long term drop to the markets - if they continue to exist as is.
The gist of your argument above is shared by most, I'd wager, in some form. Whether it be due to a massive die off that leaves fewer people who use their resources and technology well, or a stabilization of population combined with going to renewability as a a way of living and a steady state-type of economy... or just the long term trends of life on this planet.
But when discussing the markets and a significant rise in them, we are talking short term. Very short term, so the above didn't enter into my thinking for that post.
The Caveat is, of course, climate change. It is that and that alone that makes me pessimistic for civilization on the hundred year and beyond scale. Right now I don't see us responding quickly enough to prevent mass disruptions to current geo-socio-political-enviro issues.
But, if we can manage to act en mass and keep temps at 2C+, then we can certainly transition to a new paradigm.... but it can't be a growth paradigm... at least not until we learn to live in the oceans and/or go to other celestial bodies.
Cheers
I recently discovered this site and find it to be one of the best concentrations of intelligent discussion on the Web. But the overload of doomers here can be quite depressing, especially when they talk of passing this viewpoint on to their kids. It seems that there is a fundamental assumption underlying most arguments: we live in a closed system, where resources are finite. Man can exploit/deplete resources, but the Earth cannot replenish them in anything less than millions of years.
I remember learning this viewpoint at high school, in the ideas of Malthus (scarcity), and Plato (the atom is the smallest unit of matter, and indivisible).
I grew up in New Zealand, where our greatest scientific achievement is a guy called Ernest Rutherford, who split the atom and discovered the nucleus in 1911. Despite this, and proof of the existence of quarks in the 1960's, I was still taught in the 1980's that Plato's idea was true.
Malthusian thinking is also a fallacy that crumbles quickly when held up to scrutiny.
Can some please tell me, where is the evidence that the Earth runs out of resources? I'm talking about absolutely exhausting something, and that resource being lost to us forever.
How much of every resource did we have in 1900, 1950, 2000. I bet for almost every resource, the amount increased at each time interval.
Combining both Plato and Matlhus, can be simplified to: "The Earth is made up of bricks. If you remove all the bricks, there's no Earth left." ie Matter is fixed, and therefore Nature is. Except that now we know matter is not fixed. It can be teleported. It can be cloned and copied. It moves in waves. It exists in more than one dimension, it changes state.
We don't even know what the Earth is made of - there are competing theories about the composition of the core, for example. What we do know is that this amazing planet sustains life and consciousness, and has been around for much longer than human history. In this time, some people have starved, some tribes have died out. Others had nothing, dreamed, and ended up with massive amounts of resources. This has happened again and again, in many civilisations throughout history.
Whatever we seek, the Earth yields to us.
Although many species are dying out, many new species are being discovered every year. Nature is not a zero-sum game. The Earth is teeming with life and has been for billions of years. We look for new species, and we find them. We look for evidence of species being wiped out, we find that.
I realise to the doomers and scientists that this is perhaps a "new age" viewpoint, not dissimilar from a religious argument ("God/Allah will provide"). An EROEI calculation can be based on known reserves and hard maths! Sure, until the next Black Swan comes along and the data and maths gets revised again.
I challenge anyone here to name a scientist that can explain all the phenomena that we have observed in Nature. If our theories can't explain everything, how can we be so sure they are correct?
To me, all the evidence in history points to the Earth's, and humans', ability to adapt, survive, and flourish - whatever we are confronted with. Nature is for the most part a loving Mother; growth and abundance are her modus operandi; reproduction, expansion, and diversification are the features of her systems.
Let me finish with a recent example of my point: as the amount of CO2 plants are exposed to increases, so does their ability to process CO2. This is just like War of the Worlds - all of man's weapons were irrelevant against the Martian invaders, because the Earth responded biologically.
Please. Tell your kids the glass is half full!
Zos
I'm inclined to agree with you.
Let's take the situation with copper as an example. It's been said that copper is essential to industrial civilization, and as supplies shrink we will be unable to expand or even maintain our systems and they will fail. Ignoring the fact that copper can be recycled with high efficiency and our uses can become more efficient, there are substitutes for copper. Aluminum is a big one already (most LD power lines use aluminum cables), but there are even better things we already know about.
I am thinking about doped carbon nanotubes. These have already been demonstrated to be lighter than aluminum and conduct better than copper. Our technology for making them proceeds apace, and has many uses (nanotubes turn out to be good electrodes for Li-ion batteries). When we get to the point where nanotube cables are as cheap as copper, we will literally be able to pull our wiring material out of the air. When you want to dispose of them, if you have no other option you burn them in oxygen and return them whence they came.
Carbon fiber, polyethylene (including Spectra), plastic resins, ammonia and such come mostly from CHON (carbon, hydrogen, oxygen and nitrogen). We literally cannot run out of these materials as long as we have air and water. As we learn to make our essentials from them, the argument for inevitable collapse becomes less and less credible.