Saturday, November 20, 2010

End Game: Why the Status Quo Is Unsustainable

The s

tatus quo models of "growth" and credit expansion inevitably lead to collapse.

The status quo models of "growth" and credit expansion inevitably lead to collapse.


Frequent contributor Harun I. has captured the essence of why the status quo is intrinsically unsustainable. Readers often do a better job than I can in explaining a profound feature of our world, and Harun's commentary is devastating in its logic and clarity. (CHS: Emphasis is mine.)

Our problems began in 1913 when the Fed and therefore de facto centralized planning was established. And every generation that ignored the fact that counterfeiting money and lending it at interest is a scheme that has catastrophically failed in all previous attempts deserves what eventually befalls them -- results equal intentions.

The problem with maintaining inflation at 3% is that it compounds until the curve approaches vertical. This exponential growth will eventually outpace real productivity and therefore, at some point, fake prosperity has to be created through expansion of fiduciary media (credit). What this implies is that what is happening today could have been and probably was predicted well before 1913. But once again politics trumped reason.


The effects being experienced today had to materialize. Mathematically there is and can be no other outcome. Ceteris paribus, as real productive activity decreased, credit (fiduciary media) had to be expanded at exponentially increasing rates until exhaustion. Exhaustion occurs at the point where the curve approaches vertical where infinite credit or money has to be injected infinitely. This is impossible and is why all efforts thus far have failed.


Mish is absolutely correct when he observes that credit is being destroyed faster than it can be created.


Those demanding that you tender solutions do not understand that: 1) The 106 trillion dollar gorilla in the room cannot be satisfied. What is so egregious is that the Boomer generation saw or should have seen it coming. Instead of tackling a very difficult problem they chose distraction by bread and circuses.


That the most technologically advanced country in history could conceive that sending worthless pieces of paper to China so that they could buy worthless Treasuries so that we could continue to purchase "things" that required real human effort and natural resources is either collective insanity, rank stupidity, desperation, or just plain old greed.


And now that we have engaged in this type of activity for decades and the comeuppance is upon us we demand solutions to avoid the inevitable consequences of ineptitude and apathy.


Means testing will cost billions we do not have, will be implemented ineffectively, and, on scale, will prove ineffective at deflecting the 53 trillion dollar asteroid the size of Rhode Island hurtling at us at a few hundred-thousand miles per second.



The situation is untenable. That an insolvent government (starting from a 106 trillion dollar deficit) and facing global peak resource utilization, will somehow effectively manage to administer to a huge retired population whom have no savings, assets that they will only be able to sell at a loss and pensions denominated in a worthless currency, as a line of thought, is at best, imprudent. I take no pleasure in stating, and do so without any hyperbole, that you are about to forget about Katrina.


2) This Grand Cycle top is unlike any other faced by mankind. We are at peak everything; peak oil; peak food; peak water; peak industrialism; peak credit; but not peak population. There is and will be no excess capacity for growth. The very mechanisms that have allowed homo sapiens to reach such high levels of population density are at or near exhaustion.



And there is no Plan B. Those depending on technology to the rescue do not understand that by the time the Trident Submarine was put into production its design was 20 years old -- and obsolete. This type of government performance is not encouraging. Very long term there will be no return to what has become to be known by the Boomer and current generation as status quo.



What will have to happen is a return to using precious resources not for consumerism with all of its built in waste (planned obsolescence, disposable everything) but for producing absolute necessities.

This may all sound grim but if you remove the adjective, it simply is.

I have not read Mr. Kunstler's book but the title cuts to the heart of the matter -- we have entered a long emergency.

Thank you, Harun, for summarizing our shared situation.



Here are a few books which address the intrinsic limits of the status quo:


The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century


Early Retirement Extreme: A philosophical and practical guide to financial independence


13 Bankers: The Wall Street Takeover and the Next Financial Meltdown


The (Mis)behavior of Markets


The Fourth Turning


The Great Wave: Price Revolutions and the Rhythm of History


The Shock Doctrine: The Rise of Disaster Capitalism


Overshoot: The Ecological Basis of Revolutionary Change


The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization


Manufacturing Consent: The Political Economy of the Mass Media


Collapse: How Societies Choose to Fail or Succeed


The End of Work


Survival+: Structuring Prosperity for Yourself and the Nation


The Collapse of Complex Societies


Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy


ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism


Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse


Planet of Slums


Reinventing Collapse: The Soviet Example and American Prospects


Depletion and Abundance: Life on the New Home Front


Coercion


Globalization and Its Discontents


The Coming Anarchy: Shattering the Dreams of the Post Cold War


When Giants Fall: An Economic Roadmap for the End of the American Era


Fiasco: The Inside Story of a Wall Street Trader


The Dollar Crisis: Causes, Consequences, Cures


The Party's Over: Oil, War and the Fate of Industrial Societies


The Coming Generational Storm: What You Need to Know about America's Economic Future


The Sovereign Individual: Mastering the Transition to the Information Age


Who Rules America? Challenges to Corporate and Class Dominance


Financial Armageddon: Protecting Your Future from Four Impending Catastrophes


The Long Descent: A User's Guide to the End of the Industrial Age


Horsemen of the Red Hand: Book Two of the Operation SERF Trilogy


Governing the Commons: The Evolution of Institutions for Collective Action


Deschooling Society


War Is a Force that Gives Us Meaning


Empire of Illusion: The End of Literacy and the Triumph of Spectacle


Cornered: The New Monopoly Capitalism and the Economics of Destruction


Radical Homemakers: Reclaiming Domesticity from a Consumer Culture


Dirt: The Erosion of Civilizations


False Dawn: The Delusions of Global Capitalism


Get Ready!: Preparing for the Coming Catastrophe


Peak Everything: Waking Up to the Century of Declines


China's Trapped Transition: The Limits of Developmental Autocracy



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