A Freddy and Fredericka Future?

In one of my favorite non-science fiction novels, "Freddy and Fredericka", the future King and Queen of England are dropped naked from an airplane into America as sort of a rite of passage. Though heir to the throne and infinitely wealthy back home, Freddy must use only his wits, skills of persuasion and physical abilities to somehow rise to the unlikely position of the leader of the USA - if he manages this, basically from scratch, he will then have earned the throne of England not only due to hereditary decree but via his own merits. Kind of a neat concept. The book is a hilarious romp, but one of its themes, of what social and human capital might accomplish if financial capital suddenly vanished (from Freddy's perspective), is an interesting thought-parallel to today's fiat/currency situation. More below the fold.

The USA is (financially) insolvent. Given the technical definition this is a widely accepted view on Wall St as our debts are greater than our assets in financial terms. What is not widely accepted, (and hopefully will remain a minority view for some time), is that because continued servicing and retiring of our debt is completely energy dependent, the paper claims extant in our system will eventually, sometime this decade, be reset, i.e. most paper wealth we recognize today will be lost. The same goes for most other OECD countries. This system reached a fiat credit climax after supplementing energy gain with increasing amounts of debt and we're now left with a modus operandi of extend and pretend until the system breaks and/or something new emerges. This does not imply that our future productive capacity is insolvent or that civilization is doomed--only that the current claims structure will undergo a wrenching rebirth. The balls in the sovereign credit pinball machine will soon become blurry from fast movements - Greece, Portugal, Spain, Italy, Japan, Australia, ???? - and who knows who else before some balls disappear or the whole game tilts.

Basically, if we add up the 'financial' net worth of the USA, and subtract out the financial debt owed by the government, households, corporations, household net worth, we get in the neighborhood of negative $40,000,000,000,000**. (This includes the unfunded future liabilities like Medicare/Medicaid which are unlikely to change much because they are already expressed as a Net Present Value.) This also includes a substantial amount of built capital in the form of houses, corporate tangible assets etc. (without which the amount would be even more negative). We already require new debt dollars to the tune of ~$4 for every new GDP $. As global oil becomes more scarce, we will have to increasingly pay for it with more and more debt so that the next time we see $150 oil, we'll be generating $6-7 debt dollars to generate a new GDP dollar. Barring some unforseen white swan, this is a financial death spiral, not for civilization or the country, but for the currency and financial system we currently use. The changeover may be bad or it may not - it depends how we prepare and react when the debt jubilee arrives, either piecemeal or in one fell swoop, sometime this decade.

Debt on its own of course doesn't tell the whole story. When I came out of MBA school, I was 100k in debt – but given the society I was graduating into, I had the ability to service and eventually pay this debt back (debt of the self-extinguishing variety). Today I'd rather come out of school in debt as an electrician than a business major. The relevant analogue being in a post peak world: not only are we seriously in debt, but we spend a majority of new debt dollars on either neurochemical entropy or investments that are dead-ends in a liquid fuel starved future. The country is in a much different situation than I was when I finished my MBA. Jobs and energy to the level required to service our growing debt are physically not sustainable the way they were in 1992. Changes will need to be made and quickly on both our consumption and production trajectories to a reset that goes beyond the financial.

Our problems are not only resource and affordability related. We have a serious within-and-between country equity problem. Growth or whatever trajectory is socially chosen must be generally available to all, or the populist angst from the have nots towards the haves will start to manifest physically. The truth, for better or worse, is that no matter what social system replaces our current brand of capitalism, there will be winners and losers and some social hierarchy will either quickly or gradually emerge: some on top, some in the middle and some on bottom. If we were somehow able to remove those from the top, or from the bottom, a new top and bottom would form! This remains one of the more pressing questions facing our society today.

One of my themes in the past year or so is how financial wealth is likely to act as an albatross to well-being and adaptability going forward, as people with large sums (millions+) of financial assets will find it difficult to protect this ‘perceived digital fitness’ advantage in future currency resets and financial flux. They will continue to try to increase digits in the bank while losing sight of the changing cultural definition of wealth. I feel confident stating the above, because its taken me nigh 40 years to realize that it’s the process of getting the spoils (whatever they are) than the spoils themselves which drives us.

It is important to realize that money itself is largely just some electronic digits on computers that people in today's age have agreed to use as markers for physical things. At some point, international currency imbalances will force our 'Story of Money' so far into a corner that we will have to develop and initiate a new story that is consistent with a new reality. When that happens, our government will basically have two options: austerity measures, draconian fiscal discipline and rationing of goods which would drop consumption by more than 1/2, or cut right to the end game of currency-destroying hyperinflation. Such would be the end of our current story of money, for it would render all digital wealth (and debt) worthless. But my biggest insight of late is when this eventually happens, our productive capacities don't disappear, only our ability to organize and direct them using the previous rules.

Which brings us to tonight's thought experiment.


Imagine if all of our digital wealth disappeared essentially overnight - at $40 trillion each American is around $120,000 in financial debt. With it would go all debts and credits of the old system, mortgages, bank deposits, brokerage accts, bond balances, etc.. All of our jobs remained, all of our salaries would be paid in a new paper scrip (Patriot dollars or some such) and all of our physical, social, natural and human capital (houses, skills, knowledge and relationships etc.) remained. In effect, the major changes would be the wealth loss to existing creditors, and a possible competition/incentive vacuum - (i.e. what would drive technology, effort, and investment forward without the cohesive impact of competing for wealth?) Such a thing has happened many times before, but never on such a scale (obviously). What would happen now?

1) Would it be possible under such circumstances to maintain social stability?

2) Could we continue the current socio-economic system via pursuing something else other than accumulation of digital wealth? Or would the creation of a new currency just start the whole leveraged relative-fitness amplitude accordion all over again?

3) In such a scenario what would be some unexpected benefits? Some unexpected drawbacks?

4) How likely is such a scenario in the next decade for the USA and other developed nations?

5) What would a new social hierarchy look like? Would we, in aggregate, respond like Freddy in the novel?

6) What sort of plans/framework would be needed in place for when such an eventuality occurred?

B) If I'm seriously out to lunch with this hypothetical, please explain why.

Feel free to comment on any/all of above or any related insights to the fiat/credit/energy nexus you want to share.

The above scenario is not one I advocate but do think is possible. The outcome of such an experiment obviously completely depends on ones assumptions so I tried to leave the details as general as possible so we can discuss what the removal of leveraged, digital debt would imply for our society. It's in discussing these difficult subjects that some doors are closed off and others are opened.

**If you haven't watched it, I recommend Chris Martenson's "Crash Course" for a methodical, understandable video presentation of our financial system and its relation to energy. My parents listened to my esoteric language on these topics for years and after watching Chris' videos, said "Aha! Now we get it"...;-)

lots of assumptions about things that seem unrealistic in this scenario. but here goes as i multi task. football, prairie home companion, and campfire.

1) not likely.

2) not likely, because the system would most likely be controlled by raw power, not finesse.

3) Reduced population. firing squads, famines, and the four horseman.

4) Depends on black swans.

5) Afghanistan.

6) benevolent dictator.

I frequently discuss these maters with informed friends. It's the bottle neck first. too many unknowns.

my opinion is that this will be the bottleneck. not lack of oil, etc. The world governments will keep things going and pull out all stops until there are no more stops. The irony is that there is plenty of real wealth to share, but peoples perceptions about not having what they used to will probably upset the applecart. I hope not.

nate, I was sick when you announced your retirement several weeks ago, because your insights are so edifying.. My information is that the family of man currently operates with less than $2.00/per person/day for about 3 billion of us. it is my belief that barter is already practiced to a large extent, especially within "less developed" societies. Hell, even here in the good old USA, a form of barter is very common. Sex for example. Want hard bodied women? get some toys! of course, there are other forms of barter. In my world if you want some welding done to a piece of farm equipment, a fat young hog might be the payment. it is tempting to believe the world of wall-street rules, but i can tell you that there is another world out there that is not measured by digits. elaborate, but simple forms of trade, have been practiced for generations, and would you believe i believe this might be a truer, and purer form of exchange than the tertiary economy we believe controls our world. Several weeks ago you indicated you intended to meet your neighbors. Please note as you get into this exercise the real currency of the system. A man who operates with the morals and ethics of a gold- in- sachs will not survive in this system. these folks do not know the value of a credit default or a derivative , but if you cheat them do not expect further transactions to take place. And they just might burn down your barn if you cheat them. It is this kind of world i see for our future. That some of these bankers have not been hung is a surprise to me. but then, they have not cheated and swindled the right folks yet. ..someday - the armies of bitterness will all be going the same way. And they'll all walk together, and there'll be a dead terror from it. The Grapes of Wrath

Since the virtual 'money' we now exchange is a faith-based fiction, it will only disappear when the faith that sustains it disappears as well. Since the US is becoming obsessively faith-based, it looks like we will be holding onto the fiction as long as possible. When we are forced to let go, it'll be a long, long way back down to the fact-based ground. There will be blood.

"Barring some unforseen white swan, this is a financial death spiral, not for civilization or the country, but for the currency and financial system we currently use..."

Another good post. You've got to wonder where people are at (especially intelligent business leaders) and how they are able to avoid looking beyond page two. There is plenty of reason to assume that the dollar is hanging on by its fingernails and that a serious devaluation and/or collapse is only a question of time. Plenty of factors are going to help it skitter the edge, but oil exporters shifting away from the dollar (following Iran's lead) would certainly hurry things along - and there is talk of doing so. I'm not a huge fan of Peter Schiff politics per se, but he's certainly been accurate over the last few years and he's not shy about sharing his crystal-clear opinion on this subject. For an overview on the collapse of the dollar see: http://visionsofanothertime.wordpress.com/2009/12/17/the-future-of-the-d... - best, Joseph

I'm an electrician from Zimbabwe.

Donnella Meadows "Thinking in systems" talks of this. Her analogy is the board game Monopoly.

You are talking about when the winner gets beaten up, the coffee table is over-turned and the game is either re-started or you lose relatives.

I'm reading this book at the moment. Its well written and clearly explained for a novice to systems analysis like myself.

Well, just off the top of my head - since I'm taking a break from senior-care at the moment - it would certainly mess with the ability of older folks to cheat death.

The way things are currently set up, financial savings are a large part of the mechanism that enables older people - particularly those without kids - to secure help from younger people. All else being equal, it'd mean that those with loyal kids would survive longer.

And if the prospect was a series of such resets, having a lot of kids as a resilient self-interested care mechanism might come back into vogue again, requiring something like China's one-child policy to keep population down...

::edit:: ... taking another short break and continuing my first-blurt response to the questions....

1) Would it be possible under such circumstances to maintain social stability?

well, there'd be a lot of p*ssed-off former wealthy. Losing something we think we have is a lot harder on humans than never having it in the first place. Lots of killing sprees and suicides initially.

The fairly poor, or those who generally live beyond their means due to low discount rate, would have increased their fitness relative to those who had lived modestly and saved. The odd alliances which now make up the two major political parties would probably see their constituencies change radically, but that'd be almost an afterthought.

It'd be difficult to maintain any sort of stability without near-totalitarian control, probably. But the direction the instability took would be interesting.

2) Could we continue the current socio-economic system via pursuing something else other than accumulation of digital wealth? Or would the creation of a new currency just start the whole leveraged relative-fitness amplitude accordion all over again?

Currency resets might tend to reset societal expectations about the wisdom of saving money at all, and shift things back to accumulation of physical wealth, slaves, etc without the fragile proxy markers. But some would still be "gaming" the system, whatever it was.

Of course, if you have a good totalitarian setup, you can socialize basic needs and try to convert the tertiary economy to quatloos, drugs, and BJ IOU's. Might depend on how good the drugs were... how's that Soma formula coming?

3) In such a scenario what would be some unexpected benefits? Some unexpected drawbacks?

Well, a fair number of people will shoot a fair number of other people, as seething resentment becomes commonplace. The young will gain in relative power over the old. High discount rates might reign supreme, hindering any general attempt to do proactive stuff.

So Nate, how do YOU answer these questions?

I only put up questions on Campfire that I think are important but don't know the answers to...;-)

Globalization would largely halt under above scenario, at least for a while, but I don't think we'd be starved for energy to rebuild, with lower aspirations perhaps - I don't think it would precipitate a die-off as many predict. Lots of unknowns though...

The Soviet Union had a modest reduction in population something like from 295m down to 280m over like 8 years.
I think that the Soviets were operating in 1/2 failed mode for a few years before it all went ballistic though.


I strongly suspect that you know the right questions-some of them at least. ;-)

I am sure that it is theoretically possible to maintain stability-after a fashion.With a big helping of luck we should be able to keep the water and electricity on.We should be able to keep the population fed and warm -after a fashion.

But we live in a world where most of us depend, ultimately, on the discretionary income of others for our paychecks.And most of us produce nothing of intrinsic value.If this thing plays out according to your scenario,damn few of us will be getting our hair styled on the one hand or earning our living from tips by serving dinner to the formerly rich on the other.Unemployment might rise to sixty or seventy percent or even higher.Most of us would not be able to find enough work in the underground economy to survive.If the govt cannot retain enough cntrol to ensure food, water , and essential energy (winter heat mostly plus agriculuture, police, etc.) rationing tings will go mad max in a hurry.

My personal prediction is that such a "reset" will trigger WWIII and that long term martial law is the best we could hope for. If your reset doesn't get us into the next big one resource wars will.One way or the other, bullets are going to fly.

Can we continue the current system....?

I believe only biological laws actually determine our course in the last analysis.Perhaps the most easily understood way to express the two most relevant ones in this context is to label them "change " and "us or them ".

We may be the most adaptable and opportunistic species ever.We have moved into every part of the earth, eaten nearly everything not actually poisonous,enslaved plants , animals*, and each other.

Built cities, invented gods, hunted and gathered, traveled in space, lived fuedally, lived as capitalists.Capitalism combined or enhanced by technology, universal education, and ff has made even barely literate laborers richer than the kings of old.

Only human nature has stayed the same while all this happened.

Apparently capitalism as defined today is not the same thing as free enterprise and the definition includes ever expanding credit as an essential element.Money, digits if you please, is only a marker or medium of exchange and a store of value.Being able to store it in a bank or a mattress is very handy indeed, much handier than storing next years heating oil or next months groceries.And it sure is nice that everything does not have to be bartered in order to conduct trade.

Capitalism and fiat money are not going to be around fiorever any more than fuedalism or divinely anointed kings.

I can visualize a new currency based on a basket of essential resources that could not be inflated or deflated away-the new five dollar bill could say and mean it that it is redeemable for a bushel of wheat, a gallon of 87 octane, or fifty kwh.

I certainly see that explosively fast growth is dependent upon ever expanding credit but I can't see that free enterprise and some steady slow(er) growth is not possible without constant credit expansion.Somebody who is paying out a couple of thousand bucks annually in consumer interest could be buying and paying for a couple of tousand bucks more blue jeans and movie tickets.It seems to me that real sustainable growth comes from greater efficiency and new technology more than from finance.

But we will definitely just do the whole thing over again, although the outward form might change. The game never does.I have a nearly illiterate friend who once said in respect to same essential question, paraphrased : If you took everybody in the country and divide up all the money and property equally amomg them , in three generations things would be back to more or less the same distribution of money and wealth as we have today.I believe he understands people better than most professors.

Benefits and drawbacks-hmmmn

We might take advantage of the opportunity to make some structural changes such as breaking the backs of certain powerful professions and corporations-we might send people to med school while paying them a modest salary and reasonably expect them to look after us later for the same modest salary.We might be able to shoot nearly all the lawyers during the confusion.We miggt realize that money spent on a water treatment plant benefits everybody in town but a baseball stadium benefits primarily the league and the fans at everybody's expense.

The more intelligent people would realize and remember for a while at least the lessons involved regarding enjoy now pay later on the societal scale.Fir a while we might actually steer clear of ponzi schemes on the grand scale.

The drawback is that we would forget everything we learned in only a generation or two.

The ultimate benefit, if we don't throw it away by nuking the northern hemisphere into the dark ages, is that a crash might just take care of the overshoot problem.People with no money won't burn much gasoline or waste much food and they will lower thier thermostats in the winter.If any one consumer prioduct will be available and affordable, it will be birth control.Not many women will want a large family-I expect the "lots of kids old age insurance policy" meme is probably lost beyond recovery at least for the time being.

How likely in the next decade?

I jump in and talk doom if that is where the thread is, and recognize that doom is quite possible-perhaps even probable.I am however a declinist as far as the rich countries are concerned.

I really don't have a clue as to the odds other than that everything I know points to the possibility of this scenario working out EVENTUALLY are high, unless an outright collapse occurs first as the result of losing a war or some environmemtal Black Swan..A good portion of the boomers will still be working for the next decade, and the real energy crunch might not hit any sooner if the overall world economy remains an invalid.The govt may be able to put off the ultimate day of reckoning by inflating the currency for a few years before it hyperinflates and becomes worthless or the whole house of cards tumbles due to unemployment.

The real question, and one I've not seen an answer to, is who owns all this debt?We owe the ss, medicare, and similar obligations to ourselves of course.We know that the Chinese own so much in t bills, etc.But how is the ownership of the debt distributed thru out society?Just who would be busted, exactly, if the big banks go bust? If Fannie and Freddie go bust?Answers desired in terms of no bailouts please.Let's face it-if Warren Buffet loses 98 percent of his net worth in electrons, he won't miss any meals.

One thing has always been obvious to me-all that ira and roth money being pumped into the markets week after week could never be redeemed for real goods and services.The productive capacity to turn all those electrons into real goods simply doesn't exist, and if it did, there is no body out there able to buy up the secutities at the precrash prices, or even current prices, unless the money is created out of thin air-and that trick is about worn out.

A new hierarchy would probably look like a European socialist dream if democracy and civil order prevail.Otherwise we will be like Corsica under the mafia or worse.We might be like the Russians in the old USSR. I can't really see anything in between these extremes on the left being likely at first.We could also devolve into a right wing warlord society.

Planning for such an eventuality is probably not possible other than having a secret martial law regime ready on paper-things will move too fast.Remember the military litary dictum that battle plans rarely survive fifteen minutes contact contact with the enemy.Having ample strategic reserves of oil, grain, essential metals minerals, etc , on hand would be a lifesaver.

When I read this campfire I got prickly hair reaction and a cold ball in my belly.This seldom happens to me even though I often get into situations where this reaction ia appropiate .You are not out to lunch.

OFM- you do jump into doomerism and repeat your oft stated belief in the inevitability of unrestrained warfare. I don't share that point of view. There is no wealth to be gained by anyone in the kind of warfare you seem to almost advocate.

I see Nate's questions a lot more simplistically and have wondered about them for several years. What would happen if, all of a sudden, nobody owed anybody anything? All debts erased. Political economy started from scratch.

He didn't really put it that way and he clouded the simplicity by introducing "patriot dollars" which suggests a sort of resetting and trade-in the old dollars concept. There is plenty of history of this sort of thing and it never seems to really upset the social order much. But if all debt just suddenly disappeared then we would truly have a new world order. Although I have toyed with the idea I still cannot even guess how things would shake out. For certain though people with up side down mortgages and huge credit card debt would jump up and down for joy.

Of course there are very few winners in large scale wars, most often none at all. I certainly am not advocating war-I am simply PREDICTING it.I predict war for the same reasons others predict dieoff or killer flu -I see it as the natural consequences of natural processes proceeding naturally.

Somewhere in the middle of my long comment I asked who really owns this debt? This is NOT simple and while I could care less if some bank ceases to exist if it's stock belongs exclusively to plastic surgeons, divorce lawyers, and assorted big time social parasites of a similar stripe, what happens to my resources if for instance I recently sold you my house owner financed?

Now I am a peaceable but loud little doggie who only barks from his own porch,never venturing into the street , but if you advocated such a scheme and I got screwed out of my money you must understand my attitude if I come around and burn your house(my former house) to the ground-preferaby with you in it.Preferably with a couple of your friends who helped get the jubilee enacted(rhetorical you , rhetorical I of course)

In times gone by there wasn't much of a social order to upset -economies were localized and simple and the majority of people didn't own anything of any consequence and never expected to own anything.

Personally I would not lose any time going out and joining the most radical and reactionary political organization I could find if after living my entire life responsibly and paying as I went I woke up one morning and found my nieghbors who had borrowed to the hilt are suddenly free and clear and wealthy.

All that would be necessary would be for the party platform be one that ensured ME a free ride as nice as the one enjoyed by the folks whose debts are wiped out. MUCH Nicer actually-cause the guy whose debt is wiped has already got a long head start on easy living at somebody else's expense.
I will be getting on that gravy train late-BUT I WILL GET ON, BELIEVE ME. (rhetorical I and me intended)

I find it inconcievable that anyone rational could expect people who have scraped and done without to take such an occurence peacefully.This in and of itself would be enough to either start a civil war or ensure the take over of national politics by some group mean enough to get what it views as justice for it's members.

Various people hammer away at some particular problem as the key to the future.For some it is population, others disease, others peak oil,others farm land, others deflation, inflation, .......

I'm a systems type thinker , a darwinist, and a great reader of history.

All these problems have some traits in common-they tend to get worse over time, they tend to synergestically reinforce each the others worst effects,etc.

And the usual result when the pressure rises to the pop off point is war.ALL the big problems historically lead to the same result if something doesn't relieve the pressure -war. War is the usual and ultimate pressure relief valve.

I don't like it-it's just the way it is and anyone who is seriously interested in planning for the future needs to remember-when the problems just keep on getting bigger, which they always do , given time, nature's way of relieving the pressure is war.It's about time for another one.

The fact that we have a large chunk of the world's most powerful military on the ground "fustest with the mostest" in the Middle East is probably -paradoxically-the reason we aren't already fighting number three.We are willing to deal with the status quo as long as we get the oil.

No previous world power would play nice the way we are;England,France, Germany, Spain, Japan,Russia, etc, would have simply took over and took the oil.
We've gotten soft hearted -which is GOOD.
But we can't play whackamole everywhere or forever.

Our days are probably numbered....... as the worlds boss at any rate.

yes. unfortunately... war for certain imo.

then? just resource wars; or regional nukes; or bigger exchanges including US dirt.

in a version of i believe 'mysterious island'- i couldn't find a online link[not the 1961 version] captain nemo is developing a nuclear bomb to prevent war due to it's destructive power. this is seen as 'not clear' thinking in the movie plot. of course one could argue the movie was accurate for the cold war period- as it was to some extent.

i don't think it likely that the above will hold when as u say -the 4 horsemen ride. orlov says not to worry about nukes as the loss of complexity [i believe due to oil depletion, primarily?] will mean nukes are not a major concern. hell, not a whole lot that worry, even if needed, can do anyway. let's hope he is right.

the above is the one concern i have which leads me to wish for oil depletion to outrun, or at least keep up with, financial collapse. maybe if we have some swan knockout lot'sa oil we get there. gosh what a bad, maybe better thing to wish for.

"I jump in and talk doom if that is where the thread is, and recognize that doom is quite possible-perhaps even probable.I am however a declinist as far as the rich countries are concerned."

u seem inconsistant here. why do u take this declinist position given history- as u say above. what conditions get us to keep u'r scenario as primary? what would be different, why? thanks.

Hi Creg,

I think the really down and out third world will continue pretty much as usual in those places where they are not yet dependent on imported food fuel and fertilizer, etc.

Developing countries caught in the middle (without adequate resources within thier boundaries and large populations ) which are already dependent on international trade for thier survival are probably toast..With declining production of ff and other mineral resources, plus the population issue, plus a big time bau crash , I see these countries as in very desperate straits-they won't be able to sell enugh of whatever it is they sell to pay for the food and other imports they must have.Lots of localized (I hope!) wars will result as they realize thier very survival is at stake.

The OECD countries for the most part are rich enough that once thier citizens are forced to face up to the facts of the coming reality, they can squeeze out enough easy living fat to survive and make the transition to a new bau based on conservation, efficiency, and renewables-if everything goes well.

If for instance here in the states you still have work and income and are willing to give up the second or third car, that would free up enough money to remodel a typical house into a near zero net energy consumer over a period of ten years or so.

We seem to think that we can't afford a HVDC grid that would enable us to get twenty percent of our juice from the wind but if such a grid costs a hundred billion( a figure I have seen in several places) that's an amount in line with what we spend on beer and soda pop and potato chips and similar junk ANNUALLY. A few hundred bucks per capita for ONE year is all it would take to buy that grid.

So it's not as if a collapse is a NECESSARY consequence of resource depletion and population growth-at least in the richer countries.The naysayers don't want to admit it but we are already well on the way towards solving most of our most pressing environmental problems in the well developed West , excepting co2 pollution.If we were to close our borders, and we can keep our economy on an even keel, the US population would stabilize and begin declining within a few decades, and in Europe this is already happening in spades.

So we might have to live thru a few decades of times that are tough compared to the last few decades-this is what I call decline.Others see it as *necessarily* getting continually worse.

I can see it getting better after a few decades.

I jump in and out of the doomer scenario because it may come to pass and because I have opinions and some relevant information to offer within that context.If I'm wrong I learn why when somebody jerks my leash up short.I'm getting old but I still change my mind about things occasionally.;)

And although I don't really believe in teowacki here in the states in terms of it being LIKELY, I take the POSSIBILITY seriously enough that I spend a lot of time and energy and some money-which is in short supply around here-prepping this old farm for the possibility.

I look at these efforts as self insurance.

thanks mac. i see the distinctions u make- 3rd world, etc. & believe that is good clear thinking.

we are also in complete agreement that at least in the wealthier countries our problems are purely social/political/personal not technological or engineering- i. e. we could solve them- ff depletion/financial- if we would take the needed steps; close our border,etc.

respectfully, i think u may be underestimating our really really bad habits, especially in larger cities. way too many are dependent on the gov to 'provide'. then another group will have their 'day' to take on our gov whether it is making 1/2 way ok decisions or not; even u note u'r anger as a conserver if there is a debt jubilee. maybe we can get past these problems after a couple of years or so; but i think it will be hellish for a while & our gov needs to not make any huge screwups.

we live near a metro area; semi-rural. we have had a rash of breakins- 5 i know of in the last several months- & the first set of thieves got caught after their second breakin; & our area is not particularily hard hit economically. thankfully we have a lot of dogs- several very large, & protective.

the above is going to get worse; but if that & cutbacks/lean living u mention were the worst of it i'd be more where u are.

thanks.hopefully u are closer!

OFM- I get what you are saying about burning down your old house that I no longer have to pay for. It's the sort of reasoning that suggests a debt jubilee would never happen. But suppose it was really clear to you that you would no longer have to pay your new mortgage or your medical debt or your credit card debt. It might work out well for the individual. It clearly would not work out well for large institutions, very rich people. That's why such a change seems very unlikely. The propaganda, arm twisting, political BS would fly so thick nothing would be clear.

You are wrong about the inevitability of war. I read a lot of history too. There is a big difference between organized warfare among nations and violent social chaos. Organized warfare requires organized, stable nations. The causes of war may be debated but wars are not caused by internal poverty and disorganized governments. Riots in the street are not nuclear war.

Wars actually seem to have become less violent and bloody over the last two hundred years or so. We cry today over a dozen dead soldiers in Asia. During Vietnam we cried over a couple of hundred dead soldiers in a week. During WWII we cried over a couple thousand men dead in a single battle. During the Civil War we cried over twenty thousand dead at a crack.

Israel, I think, would love to bomb the hell out of Iran. We can't let them no matter what because any fool knows oil would top two hundred dollars a barrel in a matter of days.

We cry over a few dozen soldiers.

Do we even think about how many die and suffer on the other side?

How many wedding parties bombarded and killed does it take? How many children, nannies, mummy's and daddy's do we have to kill before we take notice?

Hi Oldchuck,

I don't see war as INEVITABLE-but I do see it as very likely.

I don't have a mortgage or a credit card or medical debt.If there are going to e giveaways where do I get mine in this jubillee scheme?

As far as wars becoming less violent and bloody over the last couple of centuries, I totally disagree.

Single battles since the the time of American Civil War, which was the first modern war, have frquently resulted in more killed and wounded, both in and out of uniform,than most entire wars of classical history.

But you do have a point about Americans at least having a hard time dealing with casualties-I put this down to a silver lining of the dark cloud effect of television, which in most respects imo is a drug worse than alcohol or herion.The tv addiction rate drwarfs that of all licit and illicit drugs combined by a factor of five or ten at least.

Wars are fought for many reasons-poverty is indeed not often a PROXIMATE cause of war getting started but it is a condition that contributes mightily to people being easily convinced to take up arms.

Political leaders and thier generals always go to war sooner rather than later, before economic collapse destroys the ability to fight.

>> wars become less violent
>> During WWII we cried a couple thousand men dead in a single battle ...

Are we talking about the same WWII? Or do you just mean that wars are less violent for the US?

Read for example about Operation Barbarossa, where the Russians lost in a couple of battles more brothers, fathers and friend than the allies in all of WWII. But no tears for those over 1 000 000 fellows, I guess.

"OFM- you do jump into doomerism and repeat your oft stated belief in the inevitability of unrestrained warfare. I don't share that point of view. There is no wealth to be gained by anyone in the kind of warfare you seem to almost advocate"

Haiti. Believe it yet? This is the same scenario discussed but in FF. granted with a population that is already unstable in its attitudes, but it don't believe that it invalidates the argument for aggressive competition for survival under conditions of limited resources. As i understand it this is a genetic imperative.

> The real question, and one I've not seen an answer to, is who owns all this debt?We owe the ss, medicare, and similar obligations to ourselves of course.We know that the Chinese own so much in t bills, etc.But how is the ownership of the debt distributed thru out society?Just who would be busted, exactly, if the big banks go bust? If Fannie and Freddie go bust?Answers desired in terms of no bailouts please.Let's face it-if Warren Buffet loses 98 percent of his net worth in electrons, he won't miss any meals.

Depends upon whether we see hyperinflation or not. At this (deflationary) stage, a lot of that debt is being defaulted on, and that trend will only continue. Contracts will become seen as increasingly worthless (which will have the added benefit of reducing the total number of lawyers). In many cases, creditors will become far more likely to accept some payment and write off the rest, because the alternative is getting none of the payment. In essence, the value of the goods or services so bartered consequently ends up dropping as a result, especially with origination demand pressures also low.

A lot of banks are now in a situation where they can't foreclose any new houses, because once foreclosed, those asset shift back onto the banks' balance sheets at a lower value, which reduces their capitalization. This means that, until a lot of those banks fail (not just get bought out by a new bank but effectively fail as businesses outright), people living in those houses effectively are living rent-free, and the confused state of mortgages (where in many cases the original holders of those mortgages no longer exist and the mortgage agreements themselves have essentially disappeared) implies that in many cases existing homeowners who default may very well end up in homes once valued at a significant fraction of a million dollars for perhaps $100,000 in invested equity.

How about companies and CREs? Virtualization means that you no longer need large physical plants, strip malls or office parks. If everyone's working from home or the local coffeeshop, why build a large office building? There's going to be a lot of empty asphalt, and the Detroit solution - bringing in the wrecking ball and letting it revert back to wilderness - may become more and more frequently seen. That debt of course will also disappear. On the other hand, it also means more demand for farm hands. (I don't believe the Internet will be uninvented between now and then, though access outside of tech zones will become more sporadic.)

What about social obligations? I'm 46 years old. I expect that social security will be non-existent by the time I "retire" in twenty years, though its likely that the concept of retirement itself will have pretty much disappeared by then as well. The Boomers will be the last generation of retirees. The system will have realigned, probably violently, between now and then, and chances are that it will be a more local problem at that point, and likely will be resolved in ways that work best at the local level.

OFM, you asked
"The real question, and one I've not seen an answer to, is who owns all this debt?"

Unfortunately, a lot of this debt is held by insurance companies and pension funds. If all the debt gets wiped out, your insurance company won't be able to pay if your house burns down, or a young father's life insurance won't be paid to his kids.

Likewise, if almost all paper "wealth" evaporates, so will my pension. In my case I'm expecting that to happen, and am making alternate arrangements as fast as I can. But plenty of people will be blindsided, and will react the same way as you would if your owner-financed house sale was "forgiven".

As a final data point, I work in a public school system. The sense of entitlement, of both students and some staffers, has to be seen to be believed.

Put me down for social disorder, maybe Mad Max bad in inner cities.

I would kick in this observation to number 1. Security is what we're seeking: Security comes from Power. Power comes from Wealth. Wealth is a relative phenomenon--not an absolute one, meaning, to have Power hence Security you don't need to have a lot--you've only got to have more than others. Not a huge amount of Power, just more than is within your social group, then you'll be fine. There are many kinds of Wealth expressed in various Currencies. Paper money is all the rage right now, in others parts of the world so guns, or drugs, or sweet potatoes. I think the tough question is to sort out the various exchange rates in purchasing power between these various varieties of Wealth. When that's sorted out, I expect the other questions will self answer.

Diversify, diversify. . .

Wealth comes from Power.

Indeed they do self reinforce.

But in the interest of the conversation, all things being equal, between two guys that go to blows, it's the one who ate the biggest breakfast that will win. That big breakfast is Wealth.

In the interest of reductionism..........The guy with power ate the other guys breakfast!

Ah, you're just dicking with me. LOL.

3) In such a scenario what would be some unexpected benefits? Some unexpected drawbacks?

What happens to debt?

In effect, the major changes would be the wealth loss to existing creditors,...

What about all of the existing current mortgages (or debt that hasn't been defaulted on yet?) Is that debt forgiven? Do millions of people get to stay in their homes? No digital currency=no way to pay the rent.

I'll rewrite it to be clearer - there would be a new digital currency but all previous debts would be wiped clean - it has happened before (e.g. Weimar Germany - the billionaires that still were wealthy after currency reform were the ones who had translated their marks into real assets, etc.)

good advice. "translate your dollars into real assets" now secure and protect them. This can only be done by taking physical possession. Sounds like a formula for War Lords. Afghanistan?

Maintaining title to any assetts you are not able to physically defend might be impossible.

There will always be something that approximates govt, even if it is just a dozen or two dozen tough guys running a nieghborhood for thier own benefit.

Unless large scale civil authority holds anybody with a large stash od valuables will certainly be robbed unless he can create or join a band of his own sufficient for defense.

Better plan on joining the strongest band in the nieghborhood and then sharing and sharing alike, hopefully.

1) Would it be possible under such circumstances to maintain social stability?

2) Could we continue the current socio-economic system via pursuing something else other than accumulation of digital wealth? Or would the creation of a new currency just start the whole leveraged relative-fitness amplitude accordion all over again?

#2 depends on #1. When the new currency is put into play everyone of fixed income, ie: retirees and welfare, would have to get a stipend, or an account created to kick-start the economy. "everyone gets p50,000 (50k Patriots), and away we go!"

Unless our economy goes through 1 or 2 generations of pain, it'll be BAU. Some social instability will be neccessary for this to work for long.

This new currency will be fiat currency, of course.

Everybody line up for your digi-currency wrist chip implant that is only redeemable at the bottom of Maslow's pyramid and unlimited Soma for all!

Welcome to the Brave New World!

"great is truth, but still greater, from a practical point of view, is silence about truth." Huxley

"(This includes the unfunded future liabilities like Medicare/Medicaid which are unlikely to change much because they are already NPV'ed."

I think this is not appropriate--because you are not including future assets.

So what is the cost of debt service as a percentage of world income?

"If you've got to use language like that about a thing, it's ninety-proof bull and I ain't buying any!"
Big Daddy, "Cat On a Hot Tin Roof"

So what is the cost of debt service as a percentage of world income?

That is a good question and one I'm working on. If you add up the various components world debt (not double counted) is ~250 trillion - maybe a bit more. World GDP is ~50 trillion. So global debt is 500% of GDP. Using 6% average rate (including long duration, lower credit quality etc.), debt service would be 15 trillion which is ~30% of GDP. But this will be increasing as a)low cost energy depletes and b) we pay for current GDP with more debt. I haven't outlined this analysis yet on these pages but rather jumped ahead to questions like above. If we had a decade left of 30:1 EROI oil or had costly oil but little debt we'd be able to dig our way out of this. We have neither. Any economic recovery with real legs will be met with triple digit oil very quickly, which unless something dramatic happens will mean more debt for US, Europe, Japan and China.

"That is a good question and one I'm working on. If you add up the various components world debt (not double counted) is ~250 trillion - maybe a bit more. World GDP is ~50 trillion. So global debt is 500% of GDP."

To which I would say not bloody bad! Essentially, it means the world produces 20% of it's debt per year? I have a lot of friends who borrowed money before the "big crash" that couldn't say they were as "underleveraged" ! :-) We should say that if we take those numbers of 30% of GDP going to debt service, we can use the time factor and stretch out the debt if need be.

People often say "our kids owe this money..." (whatever money they happen to be talking about at that time), but that is clearly not true...the truth is that in theory all future generations owe the money until it is either paid off, renegotiated or defaulted on, so the debt stretches out, your kids, their kids, and their kids right on into infinity owe it (in theory at least), which brings us to a deep philosophical question...would your great, great, great grandfather have worried about debt if he could have seen let us say Manhatten, jet aircraft, high speed automobiles, etc., or would he have said about the whole modern world "sorry, I have seen the vision of the 'Things To Come' and they simply won't be worth the debt? Interesting thought....the debt has been converted to the world we see...is that world worth it?


As oil becomes more scarce and interest rates go up due to less investors willing to borrow, the % of GDP as debt service increases pretty quickly.

Thanks Nate for another provocative post. The numbers of world wealth whether as expressed as total estimated value of all the non digital stuff like houses, roads and cities, piles of commodities and all the junk in everyone's closet and garage is then jumbled with fiat paper to give a category called I suppose, capital or assets or whatever you care to label it. On the other side are all the debts and promises which include goofy digital derivative promises as well as promises of SS, medicare, pensions, annuities etc and the like. A medicare promise of 30 or 40 trillion or a state's promise to provide $100K/year for a San Francisco fireman for life should not be combined willy nilly in two columns of assets and liabilities because such a comparison has one column of stuff and the other is merely digital vapor. Society wont cease to exist when you can't get that $20,000 hip replacement you were promised, or when that SS check stops coming or that money you spent on a CDS to protect you from a sovereign default in Zimbabwe isn't paid. The folks who can fix things and garden and if necessary eat insects, bark and grass will cope. Folks like Lloyd Blankfein may ultimately not do as well.

Folks like Lloyd Blankfein may ultimately not do as well.

Unless they are still making Monster Movies.

Knowledge,skills,friends = real wealth

food, shelter, clothing, healthcare= real wealth

the problem is firearms will allow me to purchase food, shelter, clothing, and maybe even health care from you on credit.

Knowledge, skills, and friends are not for sale.

Not advocating anything here, just well aware of the elephant in the room. You know, the one with the .50 caliber. . .

the problem is firearms will allow me to purchase food, shelter, clothing, and maybe even health care from you on credit.

Watch out for the food, some of it is poi.... never mind.

And health mon ami...;-)

Knowledge includes how to take care of your health and how to self-treat minor health problems and prevent major chronic health problems.This is possible without attending medical school.In my opinion,we could reduce health care costs very easily if people were better educated about their health. When you understand how the body and the mind work,it is easy to know what you have to do to stay healthy.

I do not think the bigger creditors will go silently into that night.
They will fight to keep their dues due.
I wouldn't be surprised to see debt become redeemable in labor, as well as hard assets.

Debt slavery.

Imagine that, we could all be sweating to redeem our debts to the guys who made the mess in the first place.

In another context (I think it was The Automatic Earth) I read that the current crisis can have but two outcomes: runaway inflation or deep deflation. Under inflation, everybody loses out, and everything goes haywire. Under deflation, the richer moiety of society lose less than the poorer - the rich keep their assets, while the poor lose what little assets they had, and business grinds to a halt.

So for the rich, deflation would be less catastrophic than inflation.
But none of the rich want to be the first to see the value of their assets crash, so there is a strong incentive to keep the mill running, and there will be serious competition : none of them want to descend the scale, but as the middle class is bleeding into the underclass, so will the upper class start to bleed too(Has anyone seen Mr. Cage?).

Any form of debt forgiveness will be violently fought over, I would wager.
The sanctity of property and the payment of debts is deeply ingrained in all our moral systems. Athens in the third and fourth century BC had arguably the most progressive democracy ever constructed: every citizen had access to the assembly, very few officials, and those were voted every year. There were no judges, no prosecutors, no lawyers, but large juries (50, 500, 5000) who were chosen by lot. These jurors had to swear the following oath on taking office: 'I will respect property, and I will not forgive debt' (a paraphrase, of course).

So I will not be at all surprised if we start to see new and inventive ways of making debt redeemable quite soon. As well as some serious juggling of hot potatoes among creditors.

Happy the age, happy the time, to which the ancients gave the name of golden, not because in that fortunate age the gold so coveted in this our iron one was gained without toil, but because they that lived in it knew not the two words 'mine' and 'thine'!
-- Miguel de Cervantes, Don Quixote, Part I, Chapter XI

Thank you. Beautiful quote.

He was wrong of course. We knew (and fought over) what was mine and thine since before we had tools. But we also have always had public land, god's land, taboo land. As long as we were few, most things were nobodies', or everybodies', and we had but a few things we could call our own.
As we have grown many, more and more of the earth and its resources become private property. As human society allows non-linear scaling of richness (about one in four has double the other three, all the way up to Bill Gates (or whomever is the richest guy today), the division of the loot becomes extremely unjust : the winner takes all, the rest starve. Put Bill Gates next to a random sampling of one thousand humans, and the total revenue of the thousand humans would be no more than a rounding error in Mr Gates' revenue.

We have a situation, where per capita resources are rapidly shrinking, while a very few hold most of the cake. A very, very tense situation. Cutting a slack piece of cloth takes a little energy. If however, the cloth is near maximum tension, piercing it once will probably rip the cloth in twain, releasing most or all of the tension.

'It's hard to predict, especially about the future', so I won't regale you with a lurid scenario of our coming doom. I don't know what will snap first, nor what will snap next, nor how hard those snaps will be, nor what effect they might have on our behavior.
But I do know this : our globalized system of systems is under increasing tension in every part. You can hear it creaking all over the place : gas, oil, the middle East, China, the lost fleet in front of Singapore, rising unemployment and debt defaults all over the world, and so on and so forth. We will have a lively roller coaster ride, all the way down to the ground. That, at least, I am certain of.

And who will enforce all this?
And who will want to redeem a physical asset that is really a wasting asset in other words a liability?
We are already seeing the banks holding off on foreclosures now because they would have to pay taxes and upkeep on the properties.
No, I don't agree with your assessment and I also don't think for a minute there will be forced debt serfdom.
There will be widespread revolt if anything like that happens.
We are going to see the parasitic class give it back the fraudulent gains or they will end up dead or hunted for the rest of their lives.

This situation has become so out of whack that it will not end any other way.

I agree.

I've an interesting take on that one in an on the ground sense I might offer. My silvaculture project is going very well and will show profitability this year. 3 year start up from virgin soil. Others have caught wind of the project and have contacted me and have offered--ahem, offered- me the opportunity to RENT their land from them(this is Hawaii, by the way) and put in the same project on their land, splitting the revenues. This has happened a couple of times and shows how clueless many are. Are they kidding? No just clueless thinking they've got themselves an asset. I agree with others, a lot that considered an asset will only be a liability at the end of the day.

Porge we need another guy like you in my nieghborhood -you would like it around here and we are probably as well situated in terms of climate, water supply, good farm land , etc, as anywhere-and not too close to any really big city.

In quite a few ways, debt servitude is already rife.
Indebted countries are obliged to redeem their debts by cuts in social services and wages, and the sale of assets.

I quite agree that the situation is quite out of whack, and that some form of class warfare is probably inevitable.

I do not know what shape future events will take, but expect the unexpected.
The worse that we know could happen to us, happened in the past, and we have mostly forgotten those past catastrophes, even though the last big event was often quite a lot bigger than the biggest one before. I am quite certain, that the next big disruption will be one or more degrees larger than anything humanity has ever seen.

Don't ask me how it will happen.

"I do not think the bigger creditors will go silently into that night."

unfortunately i think this is correct; so no debt jubilee until we are as orlov says, 'watching this unfold thru our busted out windows'.

about the only better possibility i see is a'Churchill-like' & very powerful leader getting preemptive re these $ problems- a 'good' dictator so to speak.


i appreciate u'r language of 'a reset'. the concept has struck home.

Debt forgiveness or debt payment transference are the big questions I have now. This site is directed around Peak Oil and an energy scale down but as we now know the role of economics (which technically has always been a big factor to peak oil)is playing a bigger part.

TOD had a link the other day to this article on the end of retirement. (http://transition-times.com/2010/01/07/the-end-of-retirement/) The article discussed how these large banks would not be possible with each cheap/abundant energy. If you were to combine peak oil with a collapsing dollar what would you get? I ask this because I feel debt enforcement would become very tricky and possibly dangerous.

I recently bought a farmette in a small Midwest town (moved from a large Midwest city). The bank that controls my mortage is a top 5 bank which coincidentally doesn't have any locations in my current state. If "biz as usual" was interrupted (no montly billing statements, no pay-online, no bank accts) how would this bank come get it's money? Are they going to dispatch calvary on horse? (I figure if the govt took control over all gas and then gave it to banks to enfore debt we'd have riots) Even if they had human capital in this state, how would they pay them? Would these folks, in leui of paying their own debt, have the time to come hound me when the grocery stores are empty and they have to grow their own food? Lastly, there are plenty of corporations in debt. Wouldn't it be more pratical to go after these places first, with their large commerical properties and more valuable capital (scrap metal on the machines that make toothbrushes has got to be worth something)

I ask this because I have concerns about how concerned about debt payment should I be. As for this campfire I feel that what we resort to if the dollar fails would depend on what else goes on, much of it we can't predict for sure (nuclear engagement, bio-terrorism, FEMA takover, crop failures). I can only view this in the context of the repercussions of Peak Oil as a whole: get smaller, get slower, get skills, get local and watch your back.

The banks don't want the properties.
They are relying on consensual cooperation from the masses.
Sooner or later this whole farce is going to seize up and then it is as you described every man for himself (or group if you have prepared).

Debt forgiveness or debt payment transference are the big questions I have now. This site is directed around Peak Oil and an energy scale down but as we now know the role of economics (which technically has always been a big factor to peak oil)is playing a bigger part.

TOD had a link the other day to this article on the end of retirement. (http://transition-times.com/2010/01/07/the-end-of-retirement/) The article discussed how these large banks would not be possible with each cheap/abundant energy. If you were to combine peak oil with a collapsing dollar what would you get? I ask this because I feel debt enforcement would become very tricky and possibly dangerous.

I recently bought a farmette in a small Midwest town (moved from a large Midwest city). The bank that controls my mortage is a top 5 bank which coincidentally doesn't have any locations in my current state. If "biz as usual" was interrupted (no montly billing statements, no pay-online, no bank accts) how would this bank come get it's money? Are they going to dispatch calvary on horse? (I figure if the govt took control over all gas and then gave it to banks to enfore debt we'd have riots) Even if they had human capital in this state, how would they pay them? Would these folks, in leui of paying their own debt, have the time to come hound me when the grocery stores are empty and they have to grow their own food? Lastly, there are plenty of corporations in debt. Wouldn't it be more pratical to go after these places first, with their large commerical properties and more valuable capital (scrap metal on the machines that make toothbrushes has got to be worth something)

I ask this because I have concerns about how concerned about debt payment should I be. As for this campfire I feel that what we resort to if the dollar fails would depend on what else goes on, much of it we can't predict for sure (nuclear engagement, bio-terrorism, FEMA takover, crop failures). I can only view this in the context of the repercussions of Peak Oil as a whole: get smaller, get slower, get skills, get local and watch your back.

It's a little cold tonite, so the campfire feels good...

I just got back from looking at some property. I sold a house back in '04, and bought an apartment with some of the proceeds and stashed some cash which has been earning about 1.1 % averaged over the last 5-6 years. One of my concerns is that I need to deploy this cash soon, very soon, in something that will hold value or perhaps approximate inflation or ideally, ovide income or a place to stay.

So I think I am going to deploy a good sized chunk in some land where I could live, grow food for myself and perhaps a market and potentially be able to help family (maybe a friend or two).

I think I found the right property though it is 150 miles from where I live now. The timing is concerning me, deflation/inflation, debt jubilee, and this campfire post makes me think sooner rather than later since we have entered the twilight zone back in '08.

So I hope we don't have a digital conversion this year to Bernanke bucks or whatever. My view is we are riding a stepped waterfall blindfolded and we've been fairly level for a while now (10 months), so we are probably closer to the next step that we are from the last.

And kudo's on the Crash course recommendation. I became aware of and watched it over 3 nights this past week and actually wrote notes (I doodle notes to everything to help me process) but actually took notes. He has good suggestions for looking at things and some useful decision/analysis tools to help you think about your situation and goals. I wonder if Ben has viewed the course... ( I hope not cause then anything goes).

Hi Cumulonimbus -

Is the Crash Course available on-line or does it need to be purchased ? This is the first I've heard of it and I'm definitely interested in checking it out...

Thanks !


thanks porge !

The question I would have would be, "How would you maintain international trade in such a scenario?" If you can maintain international trade after almost every country defaults on their debts, then there is as least some chance that things within individual countries holding together fairly well. But if countries decide not to trust each other (which seems like a reasonable decision) and limit trade to situations where they know specifically what goods are being traded for what other goods, then we have a problem. Or if each country starts grabbing assets to compensate for the ones lost in the debt defaults, that would be a problem.

There would also be a huge problem within each country, deciding who gets which real assets. Is it the people who live in houses (renters), people who "own" them but owe money, or the many mortgage holders? A similar problem will exist on commercial property, including farms and farm equipment.

My guess is that each country (or perhaps smaller unit) would start over with a new government system. Each government would issue its own script. The script will not be interchangeable, and this will be a huge problem, especially initially. Standards of living will drop everywhere. Eventually the situation would get better--barter and close alliances would replace lack of interchangeability, but we would never make it back to the level of trade we have now.

People would be so occupied with producing food, and trading for basics, (and perhaps fighting over who should have what resources), that jockeying for power would be a minor issue--except in relationship to specific things needed--girl friends; food; water; shelter; heat.

I think social hierarchy is something that will fall out--but it will be one of the least of our worries. Food, water and shelter would be much higher on the list. Your idea that our jobs will remain is unlikely. Maybe some will, but our need for imports is so high that most of the resources needed to support our jobs are likely to disappear within a few months or a few years at best--computers for example, and even electricity.

So your scenario doesn't really make sense to me.

The question I would have would be, "How would you maintain international trade in such a scenario?"

If history is any guide, you wouldn't. At least for a while. This is how fiats eventually die. This is a no analog situation though when most of the developed world is on such fiat. The key point though is we really aren't bankrupt - not even close - just based on the amount of digits that people think they own are we bankrupt.

It's going to be interesting. I think the best strategy is to have local groups at least entertain the above scenario as plausible and have contingency and back up plans for what to do if it happens. There are many other outcomes but doing that, and reducing demand work in just about all situations.

And yes, under the above scenario where the US$ and possibly many or all of the major currencies succumb to reform, much of the high level trade would go away, which is why import substitution, as much as it sounds like devil-worship, should be the order of the day at least so far as basic goods are concerned. Then again, it depends on ones objective...

That's well put. It's also a correlative observation that while violence will ensue, it's unlike that there will be outside meddlers to finance it. I expect that there will be a good deal of violence. . .but in a world where revolutionary sorts must purchase their own ammo that might be a short lived flash in the pan.

There may well be "peak munitions" too.

So I hope. And trust the moat.

I cannot agree with your notion of "peak Munitions" causing only a short lived flash of violence. Guns and ammo last for decades with proper storage (an elderly friend of mine fought in WW2 and his first task was to boil the thick grease off his rifle that had been in storage since WW1).
I possess a machete, dagger, axes, knives and the knowledge of how to make explosives and other means of violence and I'm a civilian in Australia. I'm sure ex military and gun owners in most countries would have access/knowledge far in excess of what I have and have stored their weapons in readyness.
So violence can last for ever (and its easy to make more weapons/ammo) as long as you are not relying only on advanced missiles and jets.

1) No
2) The latter scenario.
3) More social interaction, pos. & neg.
4) Very
5) Barter
6) None
B) Not out to lunch.

I think the old way of doing things will only die out in a complete collapse. All the Business as usual (BAU) must become obsolete to then force people to agree that a whole new system must replace it. Once fiat currency is abandoned, then people no longer will trust paper money and simple barter will become the mode for transactions. I'll give you this basket of apples for that hand saw, etc.

What I find fascinating about this type of transition are the following questions:

1. The new system won't support this many people, so how is the population reduced?

2. As technology (using energy) did more for people, each subsequent generation did less physically and stayed indoors longer. So how do the young make the transition to doing more manual labor?

3. Healthcare insurance is too expensive for 47 million americans now, so when we are all poor during the transition, how do we get medical help? I suppose we barter for it, but are there enough baskets of apples to offer to get a simple operation? And what are Dr's going to do with massive piles of stuff they get paid for in barter? Will they simply refuse to help people because they cannot become super wealthy in the process of providing their service?

4. How do we keep water running through the taps when the electricity goes down? We all need copious amounts of clean water, right?

5. Will real estate near wind farms be the most valuable because it is the last area to produce electricity?

6. What is it we teach our children in school? The history of pre & post peak oil?

I am sure that all remember the aftermath of a few LA cops beating up a drunk, and captured on cell phone video? Rodney King ring a bell? What is bubbling under the surface? What would happen with a reset? Well, I wouldn't want to be anywhere within 100 miles of a large city in America. That's going to limit people's options just a wee bit. The arms being packed down there scares us all.

In the world of disillusioned entitlement, in the world of new bonuses for bank boys that used tax bailout funds to play in the sandbox another year, I cannot imagine gullible trust in a new system/currency would be forthcoming.

I chuckled at Nate's post about the 'rather be an electrician', as if that is some kind of weird opposite option to the university tread mill so well marketed by the vested interest groups. Tomorrow, my son turns 26. Last year he was off work for 4 months and still made 120k 'on the tools' (up at the tar sands). This year, with all the new projects coming on line, there will be no time off, whatsoever. 5 years ago I recommended electrical rather than university. Why? because whatever energy source available, it is easiest to convert and transport via the grid. There will always be work; windmills, tidal, run of the river, nuclear.....and he can always go back to school and specialize and do so with a great paying summer job! I have a masters in leadership and training and it resides in my file cabinet. Toilet paper is more useful. My carpentry skills, well, this weekend I jacked up an old shop and put in new foundations for a repaired building 10' longer. Who will be more valuable when the reset happens, a builder and electrician or a real estate agent and house speculator? Banker?

We need to talk about resets and change, but more importantly, we need to realize that the more complex our society becomes, the more vulnerable it is. Maybe JHK is a little extreme, but surely this bankrupt economy full of technical marvels is headed off a cliff. I love the TOD website and spend many leisure hours reflecting on your shared ideas. However, we must move beyond speculation and individually prepare to the best of our abilities. These preparations should be shared with friends and family. These plans should be for friends and family.

Ah, what to do? perhaps that could be a new campfire thread? I would love to hear what others are doing. Why reinvent the wheel?

Gail just did this, but if I remember correctly it was more New Years resolution than a sharing of best practices/plans.



Take a time machine trip back to 1950ish small town America and notice what the occupations are.
If that isn't good enough(if things go to the next level down of disruption) then get back in the time machine and head back to pre- 1900ish America..or Europe.

You will see more repair and local production and Quality work made to last a life time.
You will also notice much more redundancy which translates to resiliency.
You will also notice people that rely on each other locally and a tight knit community.

Integrating the age of instant information into the above solid foundation should only make things better.

In addition I bet you will notice less Angst as well.

Hey man, I grew up in "1950ish small town America". Lotta angst as I recall. Lotta ladder climbing and bigotry too as I recall.

Those were the good old days. These are the good old days.

Fair enough as I am too young to know it on the personal level as you do.
I was thinking more along economic terms as in local economies were important.

No utopia I guess.

I'm missing a few things. Would my mortgage go away? If I had cash in the old dollars, is that cash now worthless? If I go to the ATM, is there nothing in my account? If there is, what comes out of the ATM? Is the old currency not convertible at all?

When you say this is possible, are you saying you think it's possible like the possibility we may have a hurricane in Michigan next week, i.e. not impossible; or possible like the possibility that oil prices will spike above $100 next year, i.e. > 5% chance?

It seems like the situations I've heard of where something like this happened, the elites were warned a few days ahead of time. So it mostly hits the middle class. However, it seems like in those cases the debts weren't wiped out, but converted at some exchange rate. The old cash was convertible at some poor exchange rate.

Doesn't seem very likely to me soon, but you know this topic better than most people do.


ahh, your making an interesting distinction that is of extreme importance: Are we talking about a "market event" that is very hard to easily control very much like the mortgage collapse, wherein the finanical panic was spread by many investors, shareholders, bondholders and finally commentators and investment advisors....

OR is what Nate talking about an old fashiod "scip change", that is the calling in and disallowing of one type of money for another one, which could be done with no warning, and the decision made by only a handful of people?

This is where the game of guessing gets VERY, VERY DANGEROUS.

If this type of guessing is done only by a small group of energy geeks (and admittedly, that is what we are) it's no big deal, it's just one band of catastrophist worry wart...BUT

If this type of conjecture were to begin to race through the economy, then you could have a classic panic driven collapse as deposits left banks, hoarding of money, gold, silver, and other goods, and a liquidity locking of the system from the bottom up accelerated like wildfire throughout the economy.

Warren Buffet once said that "trust is like oxygen, when there is plenty around no one notices it, but when it dries up it creates real danger...

For the foreseeable future I consider this the absolute greatest danger to the economies of the developed world in the short term. We still have to get our relationship with our financial institutions and systems re-aligned to the survival of the modern world, but that will take years, decades.

In the short term the public is close to being as skittish as a long tailed cat at a rocking chair contest...if one lets out a shriek the panic would be on...it is a clear and present danger until we get some confidence back in a LEGITIMATE financial sector.

If even a marginal number of the public at large believed FOR ONE MINUTE (IMPORTANT, it would matter whether it was actually going to happen or not) that their currency, investment accounts, CD's, bonds, 401K's, IRA's, even the cash in their pockets could be "reset" with no warning it would set off a financial hysteria so great as to make the great depression look like a walk in the park. The fear of a "reset" currency destroys the failth in ANY financial instrument or investment. It would be the kind of suicidal action by what would have to be essentially a "dictator" of some type of mental illness, and would take probably a half century or more to recover from, if ever. Even the widespread rumor of this type of "reset" of the currency in one surprise order would do things to the developed economies that peak oil could never in our worst nightmares hope to do to us. (and remember, I am normally the optimist around here!:-)

I have said it before, peak oil and energy depletion concerns me, and should concern the modern nations of the world, but we can create nightmares with no help from peak that can easily exceed the horror of "peak". And astoundingly, the appetite for just such an attempted suicide seems to be present in the circles of U.S. power and influence. (I will discuss a more positive set of outcomes in a later post here, but for now, be very careful of panic, either sowing it or being bought into it.



IMO inflation (which Ben is clearly trying to reignite by "Quantitative Easing") is a stealth reset, one that favors those closest to the money creation process (defense contractors, bankers, etc). A case can be made that the Fed has been doing a rolling reset since 1913, designed to transfer wealth from savers to bankers.

The reason that gold has been moving stubbornly higher despite the current deflation is that a few folks are already running for the exits...

Yes, absolutely. The more I think about this puzzle, the more two things come to mind. First, this is one of those posts that makes me wish Ilargi and Stoneleigh were still around. Second, why not just inflate our way out of it? It seems like a much cleaner, simpler way to deal with things than setting up a banking holiday and issuing new currency.

Come to think of it, all the monetary resets I can think of came after bouts of inflation. Has there ever been a reset like the one Nate brought up that didn't come after inflation? I think the one argument for a reset without inflation is the one Ilargi would make; that if things are deflating fast enough, you get the liquidity trap conditions in which the central bank *can't* create inflation. I've always thought that was nonsense. Bernanke is absolutely right that if it came to it, they could just run the printing presses full tilt and airdrop money. And that would be perfectly legal. No violating the constitution (though Ron Paul would beg to disagree), no mobilizing the national guard, nothing. But you get all of the "benefits" - debts are erased, foreign governments' reserves are wiped out, etc.

I suppose the one argument for doing it the way Nate's pointing out is that almost no one would see it coming. We'd all wake up one day to announcements that all banks were closed. A few days later, they'd announce what they had done, and it would be over, except for the formerly wealthy people who didn't get the insider information early enough. Of course, no one would save a dime in a bank again for a decade or so, and few loans would be issued for a decade or so as well. Really it seems like inflation makes a lot more sense.

BTW, someone up above said that the wealthy get hit harder in inflation than deflation. Would the near-wealthy (assuming the really wealthy got out before this reset hit) be better off with a reset or inflation?

"Your legal right to redeem money is denied" (Zerohedge)

By the way, if above currency reset scenario happens it would happen (as it always has in the past) after massive inflation, which I think is eventually, not now, in the cards.

If even a marginal number of the public at large believed FOR ONE MINUTE (IMPORTANT, it would matter whether it was actually going to happen or not) that their currency, investment accounts, CD's, bonds, 401K's, IRA's, even the cash in their pockets could be "reset" with no warning it would set off a financial hysteria so great as to make the great depression look like a walk in the park.

Roger, as I wrote earlier this month I totally agree with that sentiment which is why I'll not be articulating further detail on the energy/debt nexus on these pages but want to discuss solutions/mitigation. To have thought experiments about these issues isn't going to foment the masses. The bad news about theoildrum is that despite the quality of analysis it never even squeaked into mainstream policy discussions. The flip side of that is people can still have high signal to noise discussions here about a broad range of topics without fearing 'risk of foment' etc.

"If even a marginal number of the public at large believed FOR ONE MINUTE (IMPORTANT, it would matter whether it was actually going to happen or not) that their currency, investment accounts, CD's, bonds, 401K's, IRA's, even the cash in their pockets could be "reset" with no warning"

Lots of people have been seeing their savings "reset" in the last decade or so:

Dotcom bubble burst, Enron, market drop, foreclosures, Madoff's and other ponzi pranks...

I think a growing number of people in all generations are figuring out that the game is rigged and they have a vanishing level of faith that their savings or social security...will be there for them.

There is a movement over at huffington post to move assets out of big banks. This could be one part of a general move to remove more and more money from the central parts of the financial system. But most are basically stuck participating in a system that is mostly set up to screw them.


re 'a reset'. as i said above this term has been instructive; but to me only in terms of energy compared to money[way too much 'printed'].

i think this implies at least order or even preemptive measures.

very very unlikely.

central bankers work well together so far[generally] inflating essentially; but when the system spins out of control it'll be each for themselves.

so i believe we might jump to 'patriot' dollars after a global financial collapse- only then;

so 'collapse' is the best term- since it won't be planned or preemptive or orderly.

I think in the US such a reset of the system would be more of a problem than in Europe. From a US christian perspective the rapture is the end of it all. One of the first signs of the rapture is the tribulation. This is when all money becomes worthless.

I'm not sure how many Americans believe in the rapture but I can imagine they are going to freak out big time if this reset was to happen.

"I'm not sure how many Americans believe in the rapture but I can imagine they are going to freak out big time if this reset was to happen."

yeah, maybe, but even atheists, Muslims, Buddhists and Hindu's care about the money...:-) The sheer sense of hysteria would be non-denominational...



Look to Sth America.

The Argentinean economic crisis provides a rich group of possible scenarios.


This bankrupted the Middle class and destroyed the hopes and dreams of many.

In a Peak oil future, the options for Argentina in those days will be harder for many countries.

The wealthy will always work the hardest to ensure their wealth is preserved or at least their standing at the top of the tree.

The growth in the shadow economy will grow.

Kidnappings of the rich and wealthy is a real possibility. The Getty family and the Hearts. No wonder the Goldman Sachs crew have recently looked to safety in hand guns.

People have to develop all those useful skills and look to developing skills of the Invisible economy.

This exactly how many in the 3rd world live.


It would be different that Argentina - the international trade system functioned fully when Argentina went into crisis - if it were US, Japan, Europe debts that were cancelled that wouldn't be the case and borders would close (at least for a while). Also, in theory at least US could produce its own goods for a very long time, other than high end inputs and components. We do procure over 80% of our own energy which most countries can't claim. On the downside we in the USA have incredibly high expectations about the future and our own rights and privileges vis-a-vis what Argentina had going into currency reform, which I think is a BIG problem.

But Argentina was a glimpse yes - and they turned out OK - was rough for a while, but things readjusted.

Argentina had a politically literate, well educated small population, living in one the most resource rich countries on earth.
The Us is politically illiterate, marginally educated, but still has some intact resources, and a lot of weapons.
Don't know if we can adjust, but it is possible.

1) Would it be possible under such circumstances to maintain social stability?

It would be dependent upon the trust that could be engendered in the new scrip - that is to say, were the scrip backed by oil, gold or similar resource (rather than upon the future potential revenues to be derived from the state), then it is likely that you would have sufficient to maintain momentum between old and new political entities (though you'll likely lost the old political entity with the demise of the old currency). If the scrip was fiat, then no - local media of exchange will arise, the society will devolve to the level where such media could provide sufficient trust and coverage, and it's likely that there will be a major period of instability until the latter arises.

2) Could we continue the current socio-economic system via pursuing something else other than accumulation of digital wealth? Or would the creation of a new currency just start the whole leveraged relative-fitness amplitude accordion all over again?

Some form of currency is necessary - barter systems work well for localized economic cells, but break down once the number of participants becomes too large or the transaction fail rate rises too high. However, in an environment where you have multiple currencies, then transactions can occur in the currency that all participants in each transaction are most willing to trust. Over time, this will tend to lead to a power law distribution (let's say arbitrarily with a factor of 80%) - one currency will tend to dominate (say with 80% of the transactions), a second will end up taking 16% ((1-.8)*.8), the third will take 80% of that (3.2%) and so forth. Note that there is nothing that says that any of those currencies are in fact local to a given currency distributor - think dollars in the pre-collapse black markets of the Soviet Union.

Concerning leveraging - that phenomenon - deriving both from fractional reserve banking and market speculation - emerges as a function of risk management, where risk in this case is defined as the likelihood of default on a given credit allocation. No loan is completely risk free - the debtor may die, the debtor's house may be caught in a hurricane, the debtor's business may fail and so forth - but so long as the lendee is in fact the provider of the loan, there's strong inventive to be conservative in giving loans.

The systemic collapse that occurred in the last couple of years has an immediate proximal cause - the originators of the loan had little direct exposure to risk (because such risk could be packaged and sold elsewhere) and as such had every incentive to make loans and gain origination fees, even if such loans were to high risk parties. This was due to a lax regulatory system that had been effectively paid for by the banks and investment houses in the first place. However, the longer term factors in all of this are energy dependent, as you astutely observe, and as the costs associated with energy continued to rise (especially as countries that originally had been net energy exporters increasingly become energy importers, thus devoting ever larger percentages of GNP to funding energy costs), this meant that expectations of future growth, made when energy was cheap relative to the economy, were far above the actual growth that occurred in the economy.

One way of thinking about that is to imagine a man going into a bank to arrange a loan, arguing that he has a trust fund that currently pays $1000 a month and is increasing by $10 every month. The banker says "oh, this means that he'll be a good risk, we'll extend him the loan." Yet what the banker doesn't know is that the trust fund is itself funded by an oil well, and while that oil well has in fact been increasing its productivity because of technology investments that are finally being amortized, the productivity will eventually peak and then drop. For a while, the man is still ahead of the curve, because even after the well has peaked, he has a reserve built up. In time, however, the reserve gets used up, and the man has only $990 in the bank. This means he has to cut his spending somewhere else (in effect borrowing $10 from the future), and his productivity begins to drop. The next month he has only has $980 in the bank, and the borrowing becomes more severe. For a while it seems manageable, but soon the man is falling behind on his payments, until he is eventually forced to default.

This is what's happened in most of the OECD countries. Assumptions were made that revenue would continue to climb based upon more sophisticated energy production, and for a while, this assumption was safe. However, eventually the assumptions started to go sour because the money being created was far in excess of the energy production that underlied it. To disguise this, ever more sophisticated financial tricks had to be used to disguise the fact that energy inputs weren't meeting expectations, and the FIRE sector consequently became unmoored from reality. There were people in the industry who knew, of course, but figured if they could make their money then get out of Dodge before most people realized what was happening, they'd be safe. This is called picking up nickels in front of steam rollers.

Thus, to get back to your question - a lot depends upon energy inputs and the backing of the currency. A gold-based economy could only grow as fast as the net production of gold brought into the system. An renewable energy based economy could only grow to the extent that the energy production could scale. Once you move beyond that point, you introduce currency inflation, which is another way of saying that you're borrowing from the future.

3) In such a scenario what would be some unexpected benefits? Some unexpected drawbacks?

Something to chew on - several people, on this site and elsewhere, have made the point that population growth has been fueled largely by the growth in oil production and extraction, and that, barring some significant new technology such as fusion coming online), as the oil inputs recede so too will the overall global population, though it is very much likely that there will be an overhang at the point where the population continues to grow while the oil economy is shrinking. The larger this differential, the more dramatic will be the decline when it happens - this is the mathematical description of catastrophe.

This is in fact one of the arguments against a reputation based economy. When you purchase a load of groceries, you are paying, directly or indirectly, for the energy inputs necessary to bring that food to you - the farmer's costs for seed, land and support infrastructure to raise the wheat, corn, soybeans, etc. or to purchase and feed the cattle, pigs, sheep and so forth, the processing costs to mill the grains or butcher the animals, the transportation costs to move these to the supermarket, and so on up the chain. Profit margins, for the most part, translate partially back into capital reinvestment, partially into debt servicing (for instance, dividends paid to investors), partially into administrative overhead, and some into environmental remediation (though usually not enough). Culture enters into it - culture provides motivation, shapes education, and improves the social well being and interactions between people, so that they are not just cogs in the machine, though culture has also been badly abused by the oil economy.

The reputation economy is fundamentally a cultural one, and as such it tends to fall outside of the scope of the world as seen from the oil economy, although it gets frequently subverted by it. If you're an athlete who's good at hitting a small white ball with a metal club, then the oil economy will use you as a means to sell goods, usually rewarding you well. The cultural economy on the other hand has become so intimately tied up into the oil economy that if you commit a string of infidelities on the side, so long as they stay hidden you'll continue being rewarded; however, once such pecadillos are made public, then, regardless of how well you hit the ball in the future, your bad reputation has transferance to your sponsors. It's exceptionally hard to believe that the sponsors behind Tiger Woods had no idea what was going on.

The coming collapse of the oil economy will likely change that dramatically. As energy inputs dry up, the means to create blockbuster extravaganzas drops, which causes less investment into new technology, which in turn means that this technology doesn't get disseminated as quickly. It means that expectations drop at all levels - not everyone can be a world class actor, musician, artist, scientist, which means that ironically it becomes easier for more people to become better community class actors, musicians, et al. Remove money and technological scaling from the equation and ironically one side effect is that it encourages more local talent to remain local rather than being seduced by the money.

4) How likely is such a scenario in the next decade for the USA and other developed nations?

The US is almost certainly going to face some form of disintegration within the next two decades. It won't be a complete collapse, but the stresses that continue to build up now are ultimately going to result in disillusionment and distrust of the authority of the US government, and from there to secession is a very short step. The one thing that may stave that off is a rapid transition to a purely electrical rather than petroleum-based energy system, and even then it still remains a distinct possibility.

At this stage we're probably in for a period of asymptotic "saw-tooth" economic "progress", where a lot of the energy being allocated will go into blowing up bubbles (likely in commodity markets) until they collapse. Each stage reduces the net leveraging in the system until it reaches a new equilibrium. This has the potential to cause massive societal dislocation as expectations are rewired, and it will have added effective of reorienting society around the major energy producing regions of the country while at the same time causing those areas outside of these regions to fade away. There are fourteen primary economic regions in the US, and overall as the Fed becomes more impotent, these will become more dominant. Whether they will become "de facto" nations is hard to say, but they will likely be the ones issuing their own currencies backed with energy resources.

5) What would a new social hierarchy look like? Similar to what it is now?

Nope - flatter, more distributed, fewer layers of bureaucracy, smaller, more virtualized corporations. Full time jobs will become luxuries and eventually things of the past as we slip more and more often into a piece work economy for the most part. As this happens, the relationship between worker and employer changes as well. The 9-5 economy is already disappearing, by 2020 it will be a thing of the past. In the end, this will also spell the death knell of the 20th century command and control type corporation. GM will continue to rot away, a few hot cars and innovative financial instruments no longer enough to sustain such a huge bureaucracy.

6) What sort of plans/framework would be needed in place for when such an eventuality occurred?

Significant buildup of a new electrical grid and the dramatic decline in petroleum based transportation systems. Continued build out of the Internet and the rise of open standards for communication across governmental borders. Shifting away from the 2500 mile diet, and so forth.

B) If I'm seriously out to lunch with this hypothetical, please explain why.

Nope - you're pretty much on track, just don't lose sight of the energy input reliance on any major currency shift.

Kurt - thanks for an interesting and insightful response.

This I hadn't thought about:

Remove money and technological scaling from the equation and ironically one side effect is that it encourages more local talent to remain local rather than being seduced by the money.

The whole idea of how the removal/decline of monetary incentives could improve social capital locally is fascinating to me.

Once the ability to store wealth in a virtual currency disappears, this will increase the value of social capital, and decrease the value of a capitalist system that rewards sociopaths, and even admires them.
Money, aside a medium of exchange, will still be a commodity, but little wealth storage will be involved.


A good post on an interesting thread.

Wherever there is a barter system with in-built credit, then the result IS a monetary system. There are plenty of proprietary systems eg Bartercard, some of which have been around a while. But the most successful by far has been the Swiss WIR, founded in 1934, where Swiss SMEs exchange between them each year billions of Swiss Francs' worth of goods and services on credit terms. They do so not in exchange for Swiss Francs as a fiat (scrip) credit object currency, but rather by reference to the Swiss Franc as an abstract unit of measure, or Value Standard.

The discipline - a framework of trust - is provided by the obligation that participants have to give the WIR security over their property. ie the WIR is property-backed, and this undoubtedly accounts for its longevity.

I advocate the development and extension of such 'credit clearing' to retail customers as well. This requires a different approach to a Trust Framework, and also requires units of fungible currency which are acceptable to trade sellers in settlement.

For the former, I propose a "Guarantee Society" approach (18 European countries have guarantee societies which guarantee bank, rather than bilateral, credit) whereby both sellers and buyers pay an amount - a guarantee charge, plus a service charge - into a pool in common ownership to back their use of a mutual guarantee. For the latter, I propose the 'unitisation' of property and energy through a new approach to investment which uses a partnership-based framework of law, rather than company law or trust law.

The outcome will be circulation of currencies - probably domestically of land-based currency, and regionally and globally of energy-based currency - by reference to an 'Energy Standard' (energy accounting) and a non-hierarchical networked 'clearing union'.

The Peer to Peer Finance route to achieving such networked Money 3.0 is simply for people to agree, consensually, to adopt the sort of partnership-based protocols and enterprise models which are already emerging in use because, quite simply, they work.

Is the Money 3.0 slide presentation suppose to have sound?


There was when I presented it ;-)

But it wasn't recorded, unfortunately.

Thank you Chris;;;

You have just presented what I have advocated for the past 30 years, ie: get rid of interest. I could never figure out how to make it work, you have shown the way.

again Thanks

ps: The slide presentation quit on me at slide 103, and I noticed that there were 113 in the presentation. I still got the gist of what you were trying to say.

And to the poster that asked if there was supposed to be sound. I don't think so,

@Old hermit


This presentation in Glasgow to the Scottish Energy Institute was more recent, and more specific to energy - but equally soundless....

Energy Pools

The one black swan that keeps floating into my pool is that of Nuclear Weapons. It is my belief that in the next 10 years there is a significant chance that one of the Islamist groups will get their hands on enough material to cause carnage. Be it Iranian sponsored, Pakistani sponsored or whatever, the risks rise with every year. Pessimistic maybe, but, there are enough people on the planet who hate the US and it's poodle.......

I remember reading, long ago, an article on bookkeeping in which it was claimed that the books of the great estates of the nobility in England were kept in two largely separate parts. One part was trade shere amounts owed and paid were recorded in pounds/shillings/pense, The other for the real holdings, the castle and gardens, the land on which the local town was built, etc.

The value of things in this second part of the books was recorded in guineas. It was claimed that this had its origins in the belief that these guinea denominate things were not subjected to being traded with commoners. And the holdings of the estate were entailed, so they could not legally be transfered to a new owner. These were longer term holdings that were part of the value of the estate, but different from the bags of gold and silver coins in a counting house.

I have no idea as to the merits of this as actual history of English attitudes toward money, but it has always struck me that lumping together absolutely *all* things in a single system of valuation is problematic. I know it is the absolute, bed-rock *truth* in current belief system of economics and finance, but ...

We all have strong suspicions that there is something fishy in the theory of economics and finance, and maybe the lack of a distinction between pounds and guineas is part of the fishiness. Part of the problem is that the idea of a single universal measure of value is so embedded in our language of economics that we have no good words to use to express questions about how things would change if something big were to change. This lack of words befuddles the current discussion.

In Nate's introductory discussion, I found no mention of how retirement savings and retirement income would be treated in his hypothetical future. Would retirement savings be wiped out entirely? or partially? Would rescue missions, like the current one to Haiti be paid for in old or new dollars? The later stages of 'recovery' in Haiti will surely involve expenditures that are more like "economic development" than "emergency relief". Will payment be structured as debt? Will that debt ever be "repaid"? There are a lot of aspects of being human that are not covered in finance.

All sorts of societal obligations over time exist at this muddled interface.


Very astute observation, and one that I've wondered about myself more than once. You see this argument appear in slightly different forms when you talk about social vs. financial capital - each has different priorities and different standards concerning what it means to be "rich". Perhaps there is more to it than simply borrowing a financial metaphor to describe social systems - if you could develop different valuation measures, and different but parallel economic systems to provide a mechanism for determining the value of transactions within each of these systems (which is ultimately what economic systems are) you could go a long way towards building a more sustainable economic system that could act as a complex pump to balance out both the needs of the capitalists and the socialists (to borrow two VERY loaded terms).

Let me give a plug for a friend http://www.johngaltfla.com He has a fictional story going entitled The Day the Dollar Died about what happened when the dollar failed. I think many will find it a good read. Right now it's at part 12 so you'll have to look back for older posts to find the beginning.


PS. He also has excellent economic information.

Great post Nate.

As you said up thread "this will be the bottleneck" and therefore this is what deserves the focus of much brainpower and action.

Since the largest sector of the economy involves shuffling paper, digital and otherwise, aka the fire economy. Your hypo scenario would mean HUGE unemployment. This little symptom of collapse is what needs to be addressed if we wish to keep the bottle neck from looking like a mostly empty ketchup bottle that has been sitting around with the lid off for too long.

As far as if civilization getting on, I really think this bit about the Austrian town of Wörgl in 1932 reposted by VK over at TAE expresses reason for optimism once we kill the beast;


Since 1975 the U.S. dollar has lost 75% of its purchasing power according to official statistics --ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt -- so it seems that a debt laden society like the USA will ameliorate its debt problems the old fashioned way -- through inflation. 50% inflation over five years would unburden a lot of debtors and enable lots of State Governments to meet their pension obligations (so long as the pensions aren't tied to the CPI). The Chinese purchase of two trillion in U.S. treasury bonds may become the worst financial investment of all times.

Looking back into history there are all sorts of "hard times" people have gone through without major die offs. In this country life did continue in the South after the civil war, despite the fact that so much of the society there had been destroyed. During the 1930s depression, people ate, rents were low, and crime wasn't particularly high.

In today's society there is a lot of economic activity which could be ended and the State could still function, although many individuals would suffer or be incovenienced. I have heard that half of medical expenses or about 9% of GNP is for health care for the last year of life -- and a not very pleasant year it is for those involved despite the amount of money spent. Multiple trips to Europe have become the "norm" these days for many middle and high school students -- the kids would probably not be too traumatized if they were forced to visit the State Capital instead.

In Deep Economy, author Bill McKibben makes the point that, based on various survey data, beyond a certain level (pegged at per capita income of $10,000/year or around 1/4th of our current level) societies don't provide any more happiness to their populations, just more stuff.

Some constraints appear to be very real -- the natural resources are depleting and there will not be enough medical resources to take care of all the baby boomers' medical needs. Those who figure out how to get by with less natural resources and are better able to maneuver through what will become a increasingly strained health care system will be at an advantage.

And when something good does come up, the market will see that it gets rapidly distributed among the population.

Timetobike, I like your handle and much of what you say, but please don't underestimate the depth of misery that was the Great Depression.

"During the 1930s depression, people ate"

Of course, some people ate. But many died of malnourishment (some estimate up to seven million). Some forty percent of the young men who showed up to serve in the military for WWII were found by a country desperate for millions of bodies to be too malnourished to serve.

On a related tangent, Ron Paul says revolutionary change in not too distant future.

“Could it all be a bad dream, or a nightmare? Is it my imagination, or have we lost our minds? It's surreal; it's just not believable. A grand absurdity; a great deception, a delusion of momentous proportions; based on preposterous notions; and on ideas whose time should never have come; simplicity grossly distorted and complicated; insanity passed off as logic; grandiose schemes built on falsehoods with the morality of Ponzi and Madoff; evil described as virtue; ignorance pawned off as wisdom; destruction and impoverishment in the name of humanitarianism; violence, the tool of change; preventive wars used as the road to peace; tolerance delivered by government guns; reactionary views in the guise of progress; an empire replacing the Republic; slavery sold as liberty; excellence and virtue traded for mediocracy; socialism to save capitalism; a government out of control, unrestrained by the Constitution, the rule of law, or morality; bickering over petty politics as we collapse into chaos; the philosophy that destroys us is not even defined.

We have broken from reality--a psychotic Nation. Ignorance with a pretense of knowledge replacing wisdom. Money does not grow on trees, nor does prosperity come from a government printing press or escalating deficits.

We're now in the midst of unlimited spending of the people's money, exorbitant taxation, deficits of trillions of dollars--spent on a failed welfare/warfare state; an epidemic of cronyism; unlimited supplies of paper money equated with wealth.

A central bank that deliberately destroys the value of the currency in secrecy, without restraint, without nary a whimper. Yet, cheered on by the pseudo-capitalists of Wall Street, the military industrial complex, and Detroit.

We police our world empire with troops on 700 bases and in 130 countries around the world. A dangerous war now spreads throughout the Middle East and Central Asia. Thousands of innocent people being killed, as we become known as the torturers of the 21st century.

We assume that by keeping the already-known torture pictures from the public's eye, we will be remembered only as a generous and good people. If our enemies want to attack us only because we are free and rich, proof of torture would be irrelevant.

The sad part of all this is that we have forgotten what made America great, good, and prosperous. We need to quickly refresh our memories and once again reinvigorate our love, understanding, and confidence in liberty. The status quo cannot be maintained, considering the current conditions. Violence and lost liberty will result without some revolutionary thinking.

We must escape from the madness of crowds now gathering. The good news is the reversal is achievable through peaceful and intellectual means and, fortunately, the number of those who care are growing exponentially.

Of course, it could all be a bad dream, a nightmare, and that I'm seriously mistaken, overreacting, and that my worries are unfounded. I hope so. But just in case, we ought to prepare ourselves for revolutionary changes in the not-too-distant future.”

I don't agree with all the Libertarian stuff and he doesn't connect energy as driver of much of what we have, but here is a mainstream politician who doesn't mince many words. We need more of that cloth.

Thank you for posting this Ron Paul link.

Too many Oil Drummers don't know what he stands for.

Ron Paul knows how to keep his conscience clear, but not how to get votes. I wonder if he'll get any satisfaction from saying "I told you so".
Perhaps he'll be the first President of The New Republic of Texas.
(New ROT doesn't work so well, does it?)

Part I

The Deeper Question: So What's Your Problem?

After poking around the details of policing functions, resetting currency and other assorted day to day details, we turn back to the core issue, the issue that I think Nate's post was attempting to touch on and did in fact bump around the edges of,the core issue presenting the most difficult of existential/philosophical/aesthetic questions, being thus:

If you take out the money and wealth, and the hope for gaining money or wealth, what else is there? What makes the economy run? What motivates, what creates activity and how is the activity accounted for, how does a person provide for him or herself food, clothing, shelter? Would said person want more than just food, clothing and shelter? Would we essentially be reduced to working serf's?, our labor accounted for and compensated for by whom? A form of compensated slavery?

Money and the things it buys has been distributed for good and services, and as an extension have determined the status of the citizens of the nation. We are no longer a "class" of people, in an egalitarian nation, class and family origin has become less and less important. We no longer have born elites in the old sense. Using race or gender as a mark of status is clearly viewed as a no-no.

Only wealth and celebrity are now useful as earthly measures of status (that is why people will do anything to get on TV), and there has been no human grouping without some status order, pecking order, whether it be skill (the great hunter), physical endowment (beauty or sexual prowess in whatever gender),or even great reasoning and rhetorical skills. Some have even competed to be most humble as strange as that may sound (Thomas Merton described it ironically in the monestary!)

But money works best...it is portable, it communicates some status just by the amount of its possession, it is a mark of PROWESS, whether gained by legal or illegal means, by thoght, risk, sex or just plain labor, money means the possessor is good at one thing, a thing that does not have to be exactly defined, just possessed: The ability to GET MONEY.

Now, for the sake of Nate's argument, take that away. The status system collapses, the communication collapses (read Marshall McCluhan, the medium IS the message)and there would be no choice but to fall back on some different method to maintain the value of....well, of life in the earthly sense. This was understood during the "attack on wealth" in the radical 1960's: The Beatles who could buy a wealth icon like a Rolls Royce and paint daisies all over it, or the popularity of the Volkswagen Beetle as a "reverse snobbery" statement (read anti-establishment) Even those little symbolic gestures raised chills on the flesh of the old guard. Imagine doing away with the whole system and embracing some type of new....what?

And why? It has been pointed out that the current currency can be reset by inflation, and the inflation/unemployment crisis was far worse in the 1970's than it has been so far in this "crisis".

Debt? We are often told that "The U.S. is bankrupt" over and over and over again until we risk believing it as a statement of fact. But can we know it is true? Can we really know it is not?

The voice of the American establishment, Newsweek Magazine, which has been so instrumental in souping up the economic hysteria, did do the service of pointing out that when it comes to foreign debt per person the U.S. is lower down the pile of debtors than many of the nations we seem to envy...owing less foreign debt per person than Greece, Belgium, Austrians, Irish, Austrians, Italians, Dutch, French, Germans, Finns, in other words, the better part of the Euro community.

If we use the numbers Nate sourced in his post of assets vs. debts for the U.S., we must note some glaring omissions that any business gets to count as assets. Good will (or do we just forgive and dismiss our diplomatic efforts and all treaty obligations by our co-parties over the decades? Are these relationships worth nothing?) The other big asset always ignored in this type of counting is intellectual property...the U.S. does know how to do things.

I am leaving aside our once vaunted position as financial educator and advisor to the world, we can pretty well write that off (and that is no small matter, the U.S. at one time gained billions of dollars and untold influence through the belief by other nations that we knew about money). I am referring to our technical sector, aviation, materials technology, in particular our high tech information handling technology and methods, some of the best in the world. Do we dismiss this as now useless and write it off for financial purposes?

Alvin Toffler, in his great trilogy of the 1970-1990 period, (Future Shock, The Third Wave and Powershift) developed a useful way of thinking about power in it's largest aspect, at least in the earthly sense:
(a)Violence or power (you take it) (b)Wealth (you make it, buy it, trade for it) and (c) Information (you create it by thought and confluencing communication of mental effort). Toffler pointed out that the most important knowledge is self knowledge (this from the ancients, Socretes, Christian meditation, Hindu and Buddhism and even the ancient tribal "quests", peyote or heat lodge experiences) Toffler pointed to the three ancient symbols of the Shinto, the sword (power), the jewel(wealth) and the mirror (self knowledge leading to outer knowledge), and we see it again and again in the symbols of royalty around the world. The west has the crown jewels, the swords {think of the Arthurian legend) but where is the knowledge? As much as many here hate to talke about it, in our Western development it resides in the cross, the preserved and developed philosophies of the monestaries) and the Greek logic system, the "Neo-Platonic" sysem as adapted from Aristotle and the Church fathers.

Given the above, a statement of hypothosis: If you remove the jewel (wealth) the other facets of power will flood into the vacuum. Raw power and knowledge will re-create the factor of wealth in a very short time. Thinking people (whether we approve of them or not) will create new organizations, new type of markets, new ways of trading wealth, new ways to speculate and trade, and new technologies will begin to give the masses what they want (titilation, freedom of movement, experiences, status items). This is the history of the human race. So why reset at all, why re-invent the wheel? That can be done (it has been done over and over again) but is usually a waste of energy and time, and for those concerned with wasted energy and effort, why? Most folks who worry about resources being wasted like the idea of conservation. Why not conserve the old wheel? Fix it, but conserve it.

Let's talk in the next post about how.

Roger Conner Jr.

Part II

Fixing the Wheel

Having discussed the pointlessness of "resetting" the economic currency order in my last post, I want to take a few moments to discuss some "fixes" to the old order. The idea here is to try to fix it before you tear it down, whether it be a house, a barn, a car, or the old economic order. Now, realizing that there have been so called "fixes" all of the time, we have to ask, what will be different about this one?" In answer, we have to look at new thinking and tools we have available to help us make this fix do some good, and to consider that this is intended to be a bottom up, inclusionary fix, with all of the public, the depositors, the shareholders DIRECTLY involved. This is very rare in the financial system, not occuring in a real way since the industrial revolution or the Marxist revolution. It can be a dangerous force.

First, a word that strikes at the heart of the financial system and its current way of doing business: DECENTRALIZATION.

The group of people who can keep the American banks from ever again becoming "too big to fail" (or it should be said they are given a liscence to fail, they just are "too big to suffer from it") is the AMERICAN PUBLIC.

There are a wealth of Credit Unions in the United States and almost everone can qualify to join one. They are INSURED. They are historically SAFER than the banks on average. They historically charge less. The customer historicall SAVES MORE.

The reason the Credit Union is such threat to the banks is because they essentially break a cardinal rule of capitalism: They DO NOT operate for profit. The profit, after costs of operation, is rolled back to the depositors, WHO ARE THE OWNERS. Yep, whether we say it or not, it is a form of socialism. But it works, because the Credit Unions must compete with the for profit businesses as well as other credit unions.

Next, smaller community or regional banks. These are closer to the area they serve, they keep the money closer to home, they develop needed projects and therefore jobs locally. It is essentially the "relocalization" of money. It must surely be understood by now that nothing can be relocalized if even these tiny steps to relocate will not be taken by the public. If people will not even move their money closer to home, what makes anyone think they will go through the hard effort of moving food production, clothing production and other goods and services closer to home?

Shareholders and funds holding shares in the failed banks ( and Citicorp-Bank of America-Merril Lynch and the rest of America's biggest multinational financial firms are FAILURES, they were just protected from seeming to be such) should decentralize their funds, and lobby their funds, pensions, etc. to decentralize their funds from these firms and include local and regional banks.

This is not a crusade, not because it is the right thing to do. It is because any unbiased observer can see one simple truth, and I will capitalize this: THE LARGE BANKS AND FINANCIAL FIRMS OF THE UNITED STATES ARE NOT RELIABLE CO-PARTIES IN ANY TRANSACTION.

Let's make this clear: The multi national shares are NOT to be trusted, their CREDIT CARDS are not to be trusted, their DEPOSITS are not to be trusted. I am a conservitive at heart, one of the few believers in capitalism and free enterprise on this board, I will say that from almost 4 years experience here. I have been following the markets for years, and have friends and co-workers in the markets and in financial services. They can take the caution or leave it: If you are staying with the big multi-national banks in share-ownerships or in deposits, or in holding their cards IF you can pay them off, you are being groomed for the next robbing. It is very simple.

Now to the harder but coming steps the American people will have to take, (whether we like it or not if we intend to prosper, and MANY will PROSPER):

(A)New houses-FORGET IT. Like buying a new car, you risk giving away a quarter of the value of the property on the purchase. They have been bad for years, and they are worse by far now. New houses, like new cars, are STILL astronomically expensive. Buy selective used houses, best are well built character houses that can be rehabed with local effort (we have folks who have gotten effectively rich (they live in nicer homes than far higher income friends) by buying fine old character homes and having local Amish carpenters restore them to wonderful old style glory.

(B) It goes without saying, NEVER buy a new car off the lot. I am 50 years old and I NEVER have bought a new car. It is outright theft. I love German cars, but this truth applies no matter the make, Gernan, Japanese, American Korean, you CANNOT afford a NEW car. Warren Buffet can do it, Bill Gates can do it. You can't.

(C) On investment, I will NOT give investment advice, or be held liable for it, but REALLY look at your diversity. The so called "perfect pie" approach works, IF it is actually a diverse pie. During this last economic setback, while screams could be heard on the financial "bubble press", I had friends who had the "perfect pie" (one third bonds, one third stocks, one third real estate) who rode it through and made money all the way....but the real estate was close enough they could drive to it (NOT CDO's), the bonds were a mix of Fed, muni and TVA bonds and others with CD's or cash, and the stocks were often not in "companies" in the normal sense but in high cash distribution very public and liquid LLP's.

One last thing: If you find yourself having to lobby for political action, all we need, all we NEEDED was ONE THING: The re-institution of the Glass-Steagal Act, born 1932-died November 12th, 1999.

The Act lived and did it's job from one crash to another. It did only what was common sense...make low return-low risk capital stay in its place, and allowed high risk-high return capital to move to its places(s).

That the banks and financial institutions were allowed to dismantle an act that served to protect the American economy as it went from walking in horse dung to the moon should be on every newspaper, on every television, on every radio and financial website in the land...but it has gone by with virtually no comment. It is the most ASTOUNDING breach of logic and reason in world financial history.

Financial education-the boards of EVERY university and post grad school MUST do a complete review of what it is teaching, what the professors of the schools are teaching and review and possibly remove the current financial curriculum if need be (and it seems to be needed more each and every day. When you hear the shrill howl that "our children need to be financially literate", ask, WHO is going to do the teaching, WHAT are they going to teach them, and WHERE did the writers of the curriculum gain their knowledge? Frankly, most financial education by banking organizations, the FDIC, the Federal Reserve, etc, is rubbish and will do more damage than good until it is improved.

As for the old greenback dollar: My bartender still takes them, the hookers still take them, the church collection plates still take them. The dollar still has a pretty good support base. There are things we can fix before we decide to burn our dollars....hell, you can just send them to me if you don't trust 'um...:-)

Roger Conner Jr


I always read your posts with great interest and always find plenty of food for thought in them.I differ with you occasionally on some mostly minor points or relative emphasis but in general I think you are right on and have on several occasions revised my own thoughts as a result of reading yours.

Do you have a blog of your own or post frequently in other forums?

If so I want to put the addresses in my bookmarks.


Thank you for the kind words. I am willing to admit to getting obtuse and wordy at times though :-) I am working on that.

To your question, at this time I do not have a blog, and for nearly 4 years The Oil Drum has been where I comment, nowhere else. I am working on putting a blog together, I don't want to wear out my word welcome on TOD...I have been buried with writing at my paying job, and simply have not organized the blog. This should be done soon.

On the issue of "differing on some points", I think that most of us here on TOD have our own take on things based on our circumstance and history, but in the bigger scheme of things are closer than we think on the big issues (resource depletion, waste of resources, environmental degradation, etc.) TOD'ers for the most part agree on limits and on the need for change relatively soon.

Thanks again, and if I do not have that blog up very soon, keep pushing me, it is something I need to do even more than I want to do if you know what I mean. :-)


Yes, all good stuff. I think this kind of movement could appeal to many thoughtful people from across the political spectrum. Similar things are being promoted over at www.huffingtonpost.org.

Specifically, here:


Yes, and I want to give due credit to Arianna and Bill Maher, both of whom have promoted similiar programs to the above. Arianna Huffington in her use of IRA (a financial information and consulting firm) to determine what banks are solid, unfortunately cannot deal with a recommendation on credit unions. For that, you have to go to
http://www.ncua.gov/ and learn on your own.

The overall scheme of national diversification should ONLY begin at the divesting from the large multi national banks, however. The possibilities would work outward from there, and gain momentum as organizers saw new ways to diversify and "case harden" the system. These could be interesting times. :-)


I find it completely improbable that any such clearing of accounts across the board would happen. Quite the opposite.

Cancelling debts is contrary to the interest of the elites, and also
contrary to the interest of anyone who has _not_ been living beyond
his means. Not only does it break one of the important tools of keeping
consumer cattle obedient and complacent, erasing debts on such a scale
would break the psychological power of such a tool of domination also.
So remind me why the elites would ever do that?

Beyond this, the elites have already sucked whatever they can out of
the people in debt. The system itself is living beyond its means, and those in a position of power, influence, wealth, whatever you call it,
are certainly not inclined to give up any of their share. No, the target to be mined out and devoured is exactly those poor saps in
the middle class who have been working hard and saving all these years.

They have something to take! and they're not strong enough to defend
it from predation of powerful players.
Before you ever hear anything about debt jubilees, you will hear
more rhetoric against 'hoarding' and trying to paint those productive
and conservative (in the real meaning of the word, not meaning some
democrat-republican american political term) members of society as
being the ones who have been piling up wealth at the expense of all you poor indebted consumers out there! Especially when consumers don't
really own anything meaningful anymore, they won't be too worried
(most of them) philosophically about the expropriation of their
neighbors' property. What does property mean to people who borrowed
everything and paid for nothing? simple answer, it doesnt mean much
at all, especially when it comes to concepts of protecting property
rights at large in society. So, expect instead for the line coming
from the elites to be one of rallying all the consumers out there to
look more suspiciously and hungrily at those remaining productive
people and savers out there. The elites might even toss a few scraps to the crowd as they mine out the last of the middle class, but they
will of course keep most of it for themselves.

As the pie continues to shrink, though, not only from resource constraints but also from bad imbalances inside the big organism of
the modern economy, the thing to look for is the elites moving up the
food chain. Anyone with half a brain will go for the easy pickings
first. Take from the weak, they cannot resist. Don't take from the
strong, because it's not as easy. Right now the weakest folks with
anything left to take are your conscientious productive middle
class folk - those few who haven't already been gutted and stripped
of their wealth. As this predatory activity moves further up the food
chain you can expect to see more traps designed for the upper middle
class folks, the true traditional capitalists who own small businesses, etc. These traps have been getting more obvious, in fits and starts, for the past few years. Watch it continue to move up the
food chain, where you start to see governmental powers being put
to work against classes of people who traditionally felt themselves
immune from such worries- the folks who might be worth a couple
tens of millions, have owned or own successful businesses even not so small, and who still hold the out of fashion belief that what they've
made they have a right to keep without hassle. Who exactly have been the targets of the pressure to force swiss banks to expose their books
about american account holders? certainly not billionaires.. but
a guy who owns a supermarket or two, or a local chain of pizza shops,
or a successful dentist who's built a lerge practice, and so on- people who cannot afford to fight back against the force now being
deployed against them (and even if they win the lawyers will have taken everything).

But the word of the day is cannibalism. It's already been in play
for a while, as the real economy out there has been stagnant or shrinking for years already. What are our best guesses at when net energy peaked? early 2000s? You can definitely feel that the air has
been different for some years already.

Excellent observations and comment.
Too bad you are late posting.
When are we all going to face the fact that no one actually "owns" anything unless they are sitting on it with a gun in their hand?
The key point is that the people being conned and fleeced are the many but they are disorganized andbeing kept so by the lie box media.
If people would only stop watching the "news" and mind numbing crap that is called the TV their head would clear and see the truth.
We need to somehow get organized and take the country back.........and it won't be peaceful.