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First appearing in August of 2005 when the housing “boom” was in full swing, this article darkly predicted the economic crisis that now dominates our
headlines. Even as I first penned these words, the financial “professionals” at Countywide, DiTech, Citicorp, Morgan Stanley, Bear Stearns, Lehman Brothers and so many others were pumping out Option ARMs
like popcorn and selling the loans off to other unsuspecting investors and hedge fund managers. If I could see the collapse coming, surely these professionals could see it as well...and that speaks volumes about the integrity, honesty and long term motives of our banking industry, firms who tack on the words “security” and “trust” to their DBAs without a second thought. -JS
Have you noticed
that there seems to be a lot of doom and gloom out there on the web these days? Lots of people are getting this inner feeling that something bad is about to happen, just around the corner. Some are worried about Al Qaeda’s purported suitcase nukes and the dire warnings we get on videotape every so often. Others have their inner sense attuned to some imminent disaster, an earthquake, sea water temperature increases killing off plankton in the Pacific, melting permafrost in Siberia over an area the size of Germany and France combined, the emerging avian flu, the space shuttle about to blow up again. Whatever it is, it seems to be out there, stalking about like some werewolf on a foggy night while you take your evening stroll in the woods.
 Some of my friends call me “Nostra-Johnus,” because I love to speculate on things like
this. At the risk of becoming yet another prophet of doom and gloom, I nonetheless feel compelled to tap you on the shoulder about a problem on the near horizon that could soon
be all too real. It doesn’t take a genius to come to the conclusions I will draw in this article, just someone willing to take a serious look at the world now, and think ahead a bit. There
are others who have seen it, social prophets like Jim Kunstler, or industrial prophets like King Hubbert, Matthew Simmons and more. These men are not out there crying wolf for
the sake of hearing their own voices. They have simply opened their eyes and seen they way things are in our world now, the direction they are heading, and the inevitable
consequences that are already starting to make their bearish appearance.
What am I talking about? Some asteroid hurtling toward the earth? The next big earthquake or tsunami? A
mega-solar flare that will engulf our planet or saturate it with x-Rays? Tripods striding through our cities when
Mars makes it next close approach this fall? No, the thing out there that many are seeing isn’t up in outer
space. It’s not going to be born of solar shenanigans or deviously plotting aliens in their UFOs. It’s not the sort of thing you hear on the Art Bell or George Noory shows. Nope…
But it’s out there, say the prophets… And you’re gonna meet it.
In this article I will try to echo some of the many things the economic, social and business prophets seem to be
warning us about, and consider what might happen here in the US if even of few of these dire events actually
occur. Oh, you can google the prophets directly. Just type “economic collapse” as a keyword set and you can
spend an evening reading all sorts of scary stuff. The essence of what I found in my own search for gloom and
doom, however, boils down to a kind of “Perfect Storm” brewing in the economy, and the strange way the US seems to be trying to deal with it.
I’ve been chewing at the corners of this thing in my articles over the last few years as I tried to make sense of
our insane foreign policy. A headline on MSNBC would seem to get the story started well enough: “Wall Street
slumps as oil surge continues - Trade deficit rises sharply in June amid pricey petroleum imports.” Sidebars talk
of the “pinch” at the pump American drivers, wedded to their cars more than their spouses these days, are
starting to feel. Well I hate to break it to you, but the “pinch” is going to get nasty in the months and years
ahead, a real numbing squeeze on many in this country. Oh, you wouldn’t know that now, not today; not as we
all get ready to wind up “Peak Driving Season” this summer. Have you traded in your SUV lately? Nope, the big
hulking machines are still flying off the showroom floors, (n 2005). Driving less? Probably not. Hate to pull in to
the pump and look at those gas prices? What other choice have you got? See any hydrogen fuel cell cars on the lot?
It’s inevitable that gas is going to be more and more expensive. People know this, and they have managed to
budget around it over the last five years….barely. In October of 2001 the price per barrel of light sweet crude was
an abysmal $18.70. Today (August 2005) it flirted with the $70 mark, more than triple the 2001 price, and up 46
% from just one year ago. The markets, in fact, have surged up $10 on the price in just ten days. Some analysts
blame it on speculation, others on weather in the gulf or refinery woes. The fact remains: if a little bad weather
and a refinery fire can send our system into overdrive like this, just how sound is our energy outlook these days?
Is that what’s out there? It that what’s coming? Is it a drastic energy spike this fall, with record heating oil bills in
the east and record profits for the big oil companies who are now holding inventory they bought months ago at a
fraction of the price they will soon sell it for? I suppose that’s part of the story, a very big part, for energy forms
the bottom plank of our economy and “American Way Of Life.” Without it we would be little more than an
overweight medieval society. Cheap energy has driven our auto and transportation industries, provided steady
current for the explosion of home consumer electronics, driven the amazing development of the Internet, with
countless millions of little web based businesses selling everything imaginable. It has all been running on
relatively cheap electricity. While California’s energy rates took a steep climb in recent years when Texas based
energy companies rigged prices and bilked over $5.6 billion from consumers, elsewhere the cost of AC/DC has been fairly tolerable. But that may change soon…sooner than you think.
Matthew Simmons has been warning the oil industry for years: the dependence on Saudi Arabia as the endless gas station for America is suicidal. For one thing, the Saudi’s became very secretive a decade or
so ago and won’t let anyone outside ARAMCO survey their oil fields to determine how much oil is really in the ground. This is because OPEC got together one day and decided that member pumping quotas would
be based on “proven reserves”—and virtually overnight, before the meeting ended, every member state in the organization miraculously
found 20 to 30% more oil than they thought they had! No outside audits allowed please. Simmons argues, with over 30 years of technical experience in the industry, that the Saudi’s
have far less reserves than they claim, and 90% of the oil they pump is coming from the five largest and oldest
fields under Arabian sand…all now requiring sea water to be pumped in daily to keep the well pressure up…all
capable of a sudden and precipitous decline in useful production. While the Saudis tell the West not to worry,
(what else could they say?) Simmons feels that a major oil shock is inevitable. Are we seeing the leading edge of “Peak Oil” in our daily headlines these days?
OK…so it’s a fair bet that energy, in all its various forms, will cost us more and more in the years ahead. Out
here on the California coast I have not had to use any energy to heat my home since February, and probably
won’t turn on the little gas heater again until Halloween. I live a mile from the Pacific Ocean and therefore need
no air conditioning unit. But elsewhere people run the AC non-stop in the hot summers, and they still have a
thing called “winter.” In spite of all this talk about global warming and melting permafrost, receding glaciers and
rising oceans, it will still cost folks a bundle this Winter to heat their homes—and that on top of the “pinch” at
the pump that is soon going to start to feel like someone has a real healthy handful of your ass—pinch indeed.
But the thing that’s out there is far worse than high gas prices and a utility bill that is likely to slim down Santa
this year, and for years to come. Part of what’s out there is the net effect of what high energy prices will do to
our economy as a whole. In the extreme case, a completely different “American Way of Life” will become the
norm in this country. America, the land of plenty, the land of opportunity, the bastion of freedom and individual
rights… America, the land of falling prices at Wal Mart, the boardroom antics of Donald Trump, Survivor mania,
steroid ridden baseball, one day sale events at the shopping malls and limitless fast food—well, America could soon see a big change coming.
What’s wrong with the economy, you may ask indignantly? The president trumpeted the addition of 207,000 jobs
last month. The market has it’s ups and downs, but it has been on a fairly good trend of late. Dell is rolling out
$400 PCs for the “Back to School” buying binge, you’ve just put in a new garage door with the money you pulled
out of the soaring equity in your home value—and bought a new trailer, a comfy memory foam bed, some new
dining room furniture, that washer and dryer that gets your clothes so clean, a new PC, and you have your eye
on a new TV set, because they’re going to be switching the signal soon to an all digital format and you need to
drop $2000 on a new plasma rig and get it mounted on the living room wall before the next DVD release cycle.
What could be wrong with that? That second vacation home you went out and bought is still sitting up in the
pine trees waiting for you next year, yes? The new van outside will run for years before you need another car to go with the two already parked in the driveway. Things are just fine, eh?
For the moment. But here’s what’s wrong. This economy is not running on real earned dollars, but on credit,
from home equity loans and credit card companies. And credit based purchases are nothing more than massive,
accumulating debt. Look at the incredible run up in debt in recent years--300% higher than it was in the 1950s and 1960s, and higher now than it was during the Great Depression, now a staggering 11 trillion dollars.
Things are fine? Just like they are fine on a train before it hits that ugly, jagged boulder that has fallen across the
tracks. They are fine on a river right before you hit the falls. Well all of this apparent normalcy around us is a
mirage, I’m afraid. The American economy, say the prophets, is headed for real trouble, deep trouble, and
sooner than many may think. The signs are everywhere: look at the incredible rise in “housing values.”
Can that go on? Of course not. The huge chunk of the money that is driving our economy these days has
come from those nice big re-finance loans as people borrow against the ephemeral, over-speculated appreciation of their home. Americans have been using their homes as ATM machines, refinancing to fund the non-stop
spending that is the heart of our economy. CNN reported: “From 2001 through 2004, Americans took $330 billion
in equity out of their homes, according Freddie Mac. In 2005 alone, they pulled out another $160 billion.”
That may be chicken feed compared to the $1.67 billion increase in the national debt per day. (The government
runs up that $160 billion in debt every two weeks!) But all that home equity cash has been flowing back into the
economy to keep the wheels turning. It has helped consumer products industries, home improvement business,
contractors, building supplies, etc. Rumor has it that Bush cut a deal with Greenspan, promising to reappoint
him if he could keep interest rates low to fuel the “recovery” from the millennium stock market crash and 9-11,
helped mightily by all that cash circulating because of these equity loans. You’ve seen the ads on TV: cadres of
bankers competing for your business, frustrated accountants whining that they’ve “just lost another loan to
DiTech.” This market has grown by 1000% in recent years, (yep, one thousand.) The banks see the debt load
people are carrying, and they are busy replacing unsecured credit card debt with home equity loans, secured by
your house, and often slipping in higher interest rates and fees averaging five times the norm, with kickbacks to
brokers who deliver these customers. It’s the new squeeze on the Middle Class these days, replacing all those
Ads in the run up to 2000 when white haired Peter Lynch and others sucked money into the stock market,
exhorting yuppies to “Roll That Money Over,” and everyone was becoming an instant expert trader with slick
advertising pulling in hordes of money on $9 stock trades. Look what happened to all that yuppie money when
the speculative bubble of the market burst after Y2K and fell 60%. The prophets tell us that this Housing Bubble is going to burst as well.
The bubble has also had some negative effects that will be the seeds of its undoing. In Phoenix, for example,
housing prices climbed over 40% in one year! The rising value of homes has been wildly inflated, driving up rent
prices with it. A typical two bedroom apartment in California will now rent for $1200 to $1500 or more, and the
people living there can’t refinance it for some quick cash when they need it, so they are feeling a little “pinch” as
well. The housing bubble, like all speculative market bubbles, is bound to burst. Home prices are increasing far
faster than personal family incomes, so the banks have tried to lever people into home loans “creatively.” This
means more and more people have variable rate mortgages that go up when the interest rates go up, and many
more have no money down deals, or worse, “interest only loans,” which are a total disaster in bad times. They
depend on a rising housing market for quick property flips. But what happens when that market falls? When
prices come tumbling down, all that imagined value in the houses will evaporate, taking the perceived wealth of
millions of American and converting it quickly into more debilitating debt, higher interest and mortgage payments
, and a cascade of defaults and bankruptcies, which are now at an all time high. Rising bankruptcies are like
those little rocks sliding down the hill just before the big landslide…and it’s coming. How will Mr. and Mrs. Everywhere in America weather it?
This generation of homeowners has never lived with the ugly thought that the value of their home might plummet,
but that is a very real possibility. Just as analysts warn we are now at peak oil, some say we are now at a peak
in housing prices, and they will start to come down by leaps and bounds. What happens when the assessor drops by to appraise your home the next time you need cash. You get a shock. You bought it at $300,000,
watched it appreciate and appreciate to over $700,000., took money out here, to fix this and buy that. Now the bad news comes in that because of the bear market for housing, your bricks and boards are only worth $375
,000 again, and you owe lots more than that—you owe on the stuff parked in the driveway, cluttering up the
garage, and glowing with that lovely electronic hue in your living room. You try to put it on the market at $400
,000—but there are just no buyers. Gasoline at $4. a gallon or more, (a real possibility within a year or two), is “pinching” like never before. Look at the Bay Area prices today!
Here’s how another “prophet” ( Jim Kunstler) describes it in his weekly blog:
“Many are amazed at the levitation of a financial system with no remaining reality-based understructure of value creation. Zero-percent
financing. Loans to anybody with a pulse. Instant conversion of hallucinated house value appreciation into speedboats and Hummers, college kids declaring bankruptcy on graduation at unprecedented
rates, the explosion of "creative" financial instruments conjured out of the promises of millions to pay back money that they will never earn
… I sort of left out the pretend money that Mr. Bush's government itself affects to disburse, and the bond racket linked to that affectation. …
Now, it's my personal opinion that we really are headed for crash central this fall. The price of oil is entering uncharted territory. Natural
gas has virtually tripled in price since 2003. People are beginning to fear that the heating season will be brutal for
those in the employ of Wal Mart and worse for those in the employ of nobody. Magical as this phony-baloney
over-leveraged economy has seemed, whatever remains of real life will be affected by higher gasoline prices. I
know it sounds absurd to say that, because so far Americans have seemed to absorb a one year price doubling
without complaint. But we're hostages to motoring, whether we like it or not, and when the price of gasoline goes
north of $3 a gallon (coming very soon) yowls will be heard even in the soundproofed sanctums of Karl Rove's west wing headquarters.” - Jim Kunstler
(Author of “The Long Emergency”)
The crunch is coming. It’s going to start with gasoline, driven up by rising oil and bad headlines from overseas,
and it will ripple right on through the economy from transportation to things like the housing bubble, then business, then employment, and then we get a recession, which could deepen into a nasty depression, no
matter what Mr. Greenspan thinks. He’s been nudging up interest rates to try and ease the housing bubble off
gently to an economic “soft landing.” The banks have been shoving up interest rates as well. But while
Greenspan has the good manners to move things in quarter and half point increments, the banks have been raising interest rates in huge chunks. Every week I hear from people who have read my article entitled “Bank Robbery.” And they are complaining that their credit card interest rates have just been spiked from a relatively
modest 14% up to 24% or 29%, and one even reported 34% last week! In every case they claim they pay on time, month after month, but the banks have gouged them just the same. Gee, I ask myself, what do the banks
see coming out there that has them money grubbing like a pig rooting for truffles? Could it be that they see what the prophets have been seeing?
The social and economic prophets tell us it’s coming: a collapse unlike anything we Americans have ever experienced, and one that may make the great depression seem mild by comparison. You see, the depression in the 1920s still had the boom years of oil
ahead as a long term godsend to raise us all back up again. But we won’t have that this time, because all of that oil is sitting under sand where the people grow ever more resentful
of America and the oil-hungry West, and it’s running out. All we have now are the years of decline and scarcity, and soaring energy costs. And Osama is still out there too, selling
poppies to buy nukes. The US Army is exhausted and “overextended” in Iraq and, after
three years, can barely manage to keep the road from Baghdad to the airport open. China is drinking up every
last bit of surplus oil that comes on the market, and India is next in that hungry line. The House of Saud is on
it’s last legs, and can’t seem to ramp up production to bring down price any longer. The dollar is falling and
China is buying them up in droves to help finance our national debt and prop up this unreal economy. The Chinese tried to buy Unocal lock stock and oil barrel last month, and will soon get testy when they find these
American dollars can’t buy what they want, because we won’t sell it to them. In the meantime, the trade deficit
reached $58.8 billion in June of 2005—that means we are buying more and more cheap plastic stuff from China
to put on the shelves at Wal Mart, and they are buying virtually nothing from us. And to make all that cheap
stuff, jobs have been flowing overseas. Almost every telemarketer who gets past the do not call list these days
will have an Indian accent, and so will all the tech support reps you finally manage to get through to when your
computer breaks down. 207,000 new jobs in America? The sad fact was that 80% of those jobs were in the low end service sector, while we graduate fewer and fewer engineers each year.
What do we make in this country anymore, except movies, fighter jets, easy finance mortgages and fashion that
is exported overseas to be mass produced by hordes of Chinese and shipped back just in time for the Thanksgiving blowout sale event? What will we do when the world finds out it no longer needs anything made in
America at all? Is that what the $58.8 billion trade deficit portends?
OK, you will admit that a recession is likely, and wince at the thought of a depression, but could it really happen
? Could the combination of record household and government debt, rising interest rates, soaring energy prices,
the bursting housing bubble, a falling dollar and a little nudge in the right direction from Osama all conspire to
create that perfect economic storm? Could it all just collapse on us here in the largest economy on earth? We’re
a nation that barely bats an eyelash as we spend $487 billion on defense each year, and that represents but a
twinkle of our supposed GNP. (And it exceeds the total spent by all other nations on earth combined, by the
way). You think it couldn’t happen here because we’ve always found our way out of a crisis, and things always
go back up after they fall. Not so… Just ask the Roman Empire, or more recently, just ask Soviet Russia. It
wasn’t Ronald Reagan and a 600 ship navy that forced the “Evil Empire” to collapse. As Bill Clinton might have said: it was “the economy, stupid.”
Writer Dimitri Orlov made some interesting observations about the fate of Soviet Russia in an interesting article you can read on fromthewilderness.com: “What happens when a modern economy collapses, and the complex
society it supports disintegrates? A look at a country that has recently undergone such an experience can be
most educational...During the pre-perestroika "stagnation" period, due to the chronic underperformance of the
economy, coupled with record levels of military expenditure, trade deficit, and foreign debt, it became increasingly difficult for the average Russian middle-class family of three, with both parents working, to make
ends meet. (Now, isn't that beginning to sound familiar?) Of course, the government bureaucrats were not too
concerned about the plight of the people. But the people found ways to survive by circumventing government
controls in a myriad of ways, preventing the government from getting the results it needed to keep the system
going. Therefore, the system had to be reformed. When this became the consensus view, reformers lined up to
try and reform the system. Alas, the system could not be reformed. Instead of adapting, it fell apart.” It fell
apart… Call it the domino theory in reverse, attribute it to Star Wars and Ollie North if you wish, but the fact remains that the collapse of the Soviet economy was very sudden.
Part II: Could it happen here ?
The crash that is coming here will be far more pronounced and far more devastating than that which afflicted
Mother Russia. The market crash that made mincemeat of people’s stock invested pension plans at the turn of
the millennium was but a foreshock. That little trembler was offset by low interest rates, which started the
housing bubble and primed the credit craze that is about to burst. According to the prophets, the crash that is
coming this time will see no easy financial solution. Interest rates are already spiking up, to try and slow down the economy gently and prevent inflation. The brakes have run bare, however, because the fundamental
problems in the economy can no more be regulated by the Fed’s interest level tweaks than the oil market can
be controlled by Saudi production. Interest rate hikes will not help the household debt problem, but simply make
it worse. The Saudis won’t be able to stop rising oil prices, and the Fed will be powerless to prevent what is
going to happen in the financial markets as well...Could that be why Greenspan is finally moving on? The collapse will be continually fueled by unprecedented energy costs, combined with a crash in the credit markets.
It will start with oil, then gasoline and heating for our homes. In time it will be the electricity that wavers on and off, like it does each day in the newly liberated Baghdad, then water and food.
How necessities will eat up more and more of your budget and stop discretionary spending.
Food? In America, that Horn ‘o Plenty? The average grocery bill for little ol’ me, a guy who really doesn’t buy all
that much, is a little over $100 bucks per week. That works out to $450 or more a month. For those with more
mouths to feed it can be much higher. Add in the rent or mortgage inflated by all those equity loans, the rising
utilities, the interest on those credit cards and guess what. Over 80% of Americans are just managing to squeak
by these days on their average annual salary of $32,000. Then there are kids to buy clothing for at the one day
sales, tuition for school, and books and supplies. Now start cranking up that gasoline price and see what happens. If there was any money left over, (and the record debt and all time low savings of most households
says there isn’t) then that money will soon vanish as you try to keep the car on the road. When Americans
don’t have lots of disposable cash and credit, when they suddenly owe more on their house than the day they
bought it, when they can barely manage to put fuel and groceries into the budget, how much do you think they will have left over to spend at Robinson’s-May? (Now defunct and folded into Macy’s)
And the little secret that most people overlook is this: it’s what you have left over for Macy’s and Wal Mart, K-Mart and all the rest that makes the wheels of our economy turn. It all
runs on the assumption that there will always be a well off middle class in America that has plenty of disposable cash left after meeting necessities—cash to spend on a dinner on the town
, a weekend trip, a shopping spree at J.C. Penney—a typical Big Box retail outlet where the entirety of the American Dream is “all inside.” That’s what the housing bubble was created
for—to prime the economy with easy, unearned cash, and to try and convert some of that massive unsecured debt out there to secured debt. But while interest rates were at 3% for
banks, they continued to shove out consumer credit at 19% and higher to keep the little guy spending. What
happens when that vast middle class takes a good hard look at their credit card statements and says—I just
can’t pay Chase Manhattan 24%, and Citicorp 19% and keep using the plastic to buy stuff? Answer: they stop
buying, out of necessity, because they have to use the money for other things now, like gasoline and food and
utility bills and medical expenses. Just you wait until Christmas 2005… until Christmas 2006… each year it will
get more and more difficult to keep up the buying, and pay those credit card bills that suck $7000 or more out of
that average $32,000 annual salary while reducing the principle owed on the cards by only $700. The banks have
hooked people in with teaser rates, balance transfer offers, and then jacked up the interest rates to levels that
prevent them from retiring the debt. If they had kept these interest rates at fair levels, and moderated credit limits
, then perhaps we would not have the record household debt today--and the grave problem it will precipitate. Now
they have their foot on the interest pedal as a break against this rising debt—but this will backfire. Soon,
Americans will be forced to simply stop buying “stuff,” and the wheels will slow, and stop.
The banks, and their gouging, criminal interest hikes, have made it impossible for the average American to retire
or even adequately manage their debt. Now, and not coincidentally, the minimum payment due on millions of card accounts will be raised from 2% to 4%, (or doubled,) just after the new bankruptcy laws take effect this
October 17th. For hundreds of thousands of people, this is an increase they will just not be able to pay. They
are already barely squeaking by making their minimum payments, in fact, many budgets have that payment
level factored in, and people are counting on that relatively low monthly payment to justify their use of the credit
cards at all. But even if they really don’t have the power to manage the debt they carry, the banks have been
loading them up with more credit by extending their card limits, then inundating them with balance transfer offers
and short term low interest teaser offers. Many people have credit lines that exceed their annual income! Yes,
the lenders are every bit as responsible as the consumers for the huge debt people carry these days. All that
credit spending created high revolving balances and enormous interest earnings. Now the banks will reap the
whirlwind of their short sighted greed. Consumer spending, that driving engine of our economy, will be the first
casualty of the impending financial and economic crisis when the 25% to 35% of cardholders who carry high balances get hit with this news--the minimum payments due on revolving credit are scheduled to double between
November 2005 and January of 2006. It will almost certainly take them out of the buying market as they struggle to come up with the money for these higher payments in years ahead.
As Mark Summers of inequality.org writes: “While All Americans now face a greater risk of catastrophe from an
economic setback such as unemployment, a health crisis, or spiraling debt, the working poor live especially
close to the edge. Many rely on what Gosselin terms the “plastic safety net,” using credit cards to pay the bills
during slack employment times or to see their way through medical and other emergencies.” In fact, the Demos survey shows that an increasing number of Americans rely on credit cards for those unexpected life events, car
problems, minor medical issues, or just shortfalls in income. When these people face a real emergency, all
discretionary spending on plastic will cease, because they will be swiping the card at Ralph’s and Vons for food
instead, and maxing out their limits--and when rising energy prices for transportation and utilities combine with
the declining housing bubble, the pain will spread from the working poor, up through the middle class of America
in no time at all. As more and more of the family earnings goes to necessities, there will be less money
available for Robinson’s-May and Wal Mart...Falling housing prices will devour home equity and stop that little
pump primer, and the high credit card interest rates and doubled minimum payments will freeze spending there as well.
 Because so much of what we buy and sell is completely useless in the
world that coming, it will be forgotten as we turn our hard earned cash to necessities. And all these businesses that now sell this crap are going to fail, laying off every person they employ. When times got bad
in Russia, how much do you think the typical Russian family spent on consumer electronics, on ornamental fashion and cosmetics, on home improvements, on an insurance policy? When the economy starts to
tank, all those businesses, selling relatively useless luxury items or financial services, will collapse. It will spiral down that way, reaching a bottom somewhere, but energy will never be cheap again, and there
won’t be a healthy, economically sound world outside the US to help us out of the depression, as the well off West helped out Russia when
that society collapsed. Still don’t think it could happen here? Take another look at the chart that appeared on CNN this month. (Left) It’s already started.
How it will happen here
How will this financial crisis in housing, credit and the stock markets become a collapse? Here’s how the
recession will begin after the artificially induced housing market collapses, as it must, putting a crunch on
financial services. It will then move to the transportation sector, with the airlines getting into deeper and deeper
red ink, and long distance haulers, the truckers that move virtually everything in this country to market, getting
into real trouble. Virtually everything you eat travels at least 1500 miles in a truck before it gets to your grocery
store. Most of the guys that haul it are independent, hard working, blue collar workers with a family and a rig.
They pull up to the pump each and every day to keep their wheels turning, and it’s going to hurt them bad when
gas moves to $3.50…$4.00…$4.50… $5.00…The truckers will simply have to pass that cost on to you, and
“shipping and handling” costs will move commensurately upward, so don’t count on the bounty of the Internet to
keep the economy going. Why pay for cross country shipping if you can buy something in town?
When the transportation sector starts to falter, the hospitality industry that feeds on it will fail as well. While we
may be “free to move about the country” as one popular airline ad reminds us, who will be able to afford it?
People will start traveling less, and the hotels and restaurants that depend on all that movement will start to feel
the hurt. If you run a business that needs discretionary tourist dollars, start looking for a new line of work…now.
After hospitality services the pain will start to trickle into the retail market. The Internet, already squeezed by
high shipping costs, will see another dot com bust, as all the little mom and pop web sites out there, most with
minimal traffic now, simply fail to be productive at all. So ISPs, who count on the never-ending expansion of the
Internet, the endless line of new hosting accounts and e-commerce cart setups, will slowly see their customers
going off line. No more mom & pop web sites selling some useless trinket on the Internet, (though E-Bay like web sites may see a boom as people use them to barter in the new economy that will arise).
After Internet retail feels the pinch, it will not be long before the wave of trouble hits the brick & mortar retail
businesses. When things get tough, will you be running out to buy a new sofa? A piano? A new TV? Nope.
Retailers will find it costs them a bundle to get inventory shipped in due to the escalating transportation costs.
They already operate on very narrow margins that will be stretched even thinner by the energy cost spike. This,
plus a growing shortage of buyers, will mean they can completely forget that all consuming “beat the week”
nonsense, as they struggle to exceed last year’s sales mark. Typical consumers with credit cards about 80%
maxed out will be unable to use them during the coming “holiday seasons” because their minimum payments,
which may have been between $300 to $900 a month will now be $600 to $1800 a month. That means about 25% of buyers will be restricted to cash on hand--no more credit--and there is very little cash available in those
households. These people will either drastically restrict buying, or just not buy at all, and have a “traditional”
Christmas instead. The stores will react with deep discounts and sales to attract buyers, but people will have
little choice. When you need all your money to pay Visa Card for things you bought over the last five years, to
pay high rents inflated by overvalued property, to pay an electric bill that gets delivered parcel post, well, the
one day sales will not look so tantalizing any longer. Sales associates and middle managers will start to be laid
off in the retail sector, and find it very difficult to get a new job in the “service sector.” Who’s going out for a latte and a manicure when you need firewood and food instead?
The necessities will involve three key industries: energy, food and medicine. Are you a fireman, nurse, or farmer?
Do you sell a product that can provide useful energy? You’re in luck, because your services will be much needed
. Do you sell life or auto insurance? Write mortgage loans? Work in a jewelry store? Sell real estate? Make
some useless electronic gadget? Tough luck. For a while, when people start losing their jobs, it will be a game
of musical chairs. The employment services sector, good resume writers, staffing companies, job counselors,
will see a brief, initial boom, as they always do in recessionary times. But even this will be short lived, because
things are going to go far beyond the normal recession. After the fall begins to accelerate, there just won’t be
any jobs to meet the demand of rising unemployment, and no amount of job counseling will cure that.
Concurrent with this energy crunch pounding various market sectors, there will be a financial crisis. The housing
bubble will peak and decline, and 25% of America’s economic strength is tied to the strength of the housing
market. When housing slips it has a disproportionate effect on the stock market, so if the housing bubble bursts
, stocks will be hit hard as well, by a factor of two. A 20-30% downturn in the housing market can create a 40-60
% downturn in the stock market. The Baby Boom generation, people who own most of everything these days,
will start to pull needed money out of stock equities and mutual funds. Why? Because if they don’t their
retirement nest egg will vanish as the market falls. (They’re going to do this in droves anyway as they are now
ready to cash out and retire, but they will just do it sooner when the bad times start). The mutual funds will fall,
and fail, and bingo…America’s families will see all their retirement financial wealth evaporate rather quickly. The
recent millennium stock crash and the “Dot Com bust” were but mere foreshocks to what is now looming in the
financial markets, a 10 year grisly bear market of enormous proportions. The so called “smart money,” big
traders who know how to leverage a bear market for profit , will suck up the dollars, but it will do them no good in
the world that’s coming. A total market collapse is a real possibility now, not just a “correction” or a long term
bear market. Why should anyone ever need a lick of stock in a company that makes products no one will be
able to afford--luxury items that are useless for human survival? Products that use electricity that will be more and more costly? Bye, Bye tech stocks. Hasta la vista, baby.
Boy...the prophets are getting positively spiteful now. Is it really going to happen? Is this just another one of
those things that are just around the proverbial corner, like the next earthquake in California, or the asteroid
strike that never seems to show up? Is it all just another big fear scare, like the Y2K scam that was supposed to bring the Western computer world to its knees? Don’t ask me.
Ask yourself… be honest… Like that middle class family of four in Russia, are you having trouble making ends
meet? How much have you borrowed against your house recently? Do you like your property tax bill? Is it easy
to write that rent check each month? Do the utility bills hurt a bit? (and you ain’t seen nuthin’ yet on that score.)
How long can you continue to carry that 24.9% interest on the cards before you just can’t pay any longer? Can
you afford to have all your monthly card payments double overnight? Is there plenty of money left over after you
fill up the tank these days? Is your monthly food bill easy to bear? Could you easily absorb the cost of gasoline
at $4.00 a gallon or more...of electricity and heating oil at two or three times what it costs you today?
There will be many, those who make $70,000 to $150,000 a year in the upper middle class, where the pinch will
not yet hurt too bad. But remember, most folks don’t earn that kind of money. They get by on an hourly wage, of
$12, $10, $8, or even minimum wage. They bring home $32,000, $24,000, even $18,000 or less. Added together, it is they who are the heart of the American economy, not the guy in a four bedroom house on an acre in the
hills. They are the reason Wal Mart exists, and they are about to get slammed. For every person that makes
$100,000 in this economy, there are a hundred people who make $25,000. You get my point. It’s the little guy
out there, the people who really need that credit card to buy things, the people who now feel the banker’s knees
on their backs like never before—these are the folks who will be least able to weather the coming storm. This
rain falleth on the poor first, but it will wet the rich man’s head in due time. Just you wait.
The rich man expects his rent money each month, and he expects his bills will be paid in a timely manner lest
he slap on a $49. late fee. All that will be so much hogwash in the economic storm ahead. Now tell me, how
long will the rich men be able to hang in there when people stop paying their rent, and their credit card bills? Go
ahead, slap on the late fee, jack up the interest even higher. Better yet, close those laggard accounts altogether!
They are all unsecured. The billions in revolving credit card debt the genius bankers have created are all loans to
people with no assets. Try to collect on those loans and see what happens. When people can’t pay, what will
the banks do, start throwing people into debtor’s prison? I think not. But the banks will continue punishing
consumers who start to get into trouble, almost as if they wanted them to falter and fail. Their reflexive solution
will be to slam them with yet higher interest rates, late fees and closed accounts. It will all backfire on them.
These people will default, plain and simple. They will have no choice, and no new bankruptcy law is going to
change that. So the bankers know what’s coming, and you’re gonna meet it, my friend—at the gas pump at first, and then at Ralph’s Market, and Vons, and at Safeway too.
Is it true? Is it the end of Pax Americana? Rome took centuries to fall! Yes, an empire can fall slowly, over
centuries, or in modern times, over decades. But an economy can tip into decline with a precipitous speed that
would astound the average marketer. Like freezing water, it reaches a moment when it is only necessary to take
just a little bit more energy out of the system to bring it to a frozen halt. We are now at just that moment. Do
you see it? Hear it? Feel it? It will take very little to tip this ephemeral economy, floating along on low interest
trick mortgage money, credit cards, and the bounty of cheap energy—and when it tips it will fall, and fall hard.
The Humpty Dumpty Stock Market will not be the worst of it. This time the fall will hit home to that typical family of four, burdening the lower class and the mainstream middle classes of America as never before.
And in the middle of these hard times, that old boogie man out there, Osama bin Laden, may just manage to pull off another big terror attack to get things really moving along. Can you
imagine an attack in an American city using some germ or even a nuke?...the government can. If something like this happens at just the right time...say right around Thanksgiving when the retail
sector is rubbing it’s hands with restless anticipation of America’s busiest shopping day...then all bets are off. The collapse the prophets are warning about will quickly run the table.
People will lose their retirement when the mutual funds, things that simply must go up to pay your expected
dividend, go south instead. (Did you know that as much as 60% of the typical American family’s financial assets
is in a mutual fund that will simply evaporate? The rest is in that illusory home equity that will also vanish when
the housing bubble bursts.) People will stop buying things. They will sit in cold rooms. They will wait for gasoline
in long lines again. They will start seeing empty spaces on supermarket shelves. They will lose their jobs. They
will default on their credit card debt in massive numbers, and just stop paying the bills. They will be late on the
rent, or unable to pay it at all. They will default on their over-inflated mortgages. They will lose their homes. They
will beg in the streets. Banks will become insolvent from bad loans. A panic will start. Some people will take to
the streets in the beginning, homeless riff raff, but as the depression spreads they will simply squat, waiting for the sludge of the legal system to try and evict them.
Law enforcement will be at wits end, which is why the current administration is setting up a department of
Homeland Security. Sure, they are worried about Osama’s boys, but they are much more worried about you!
And the banks that set all this up? They will be holding worthless notes for housing that will require armed men if
they want to try and reclaim it. And these men will be met with other armed men—vigilante citizens trying to
hold on to what little they still have and protect their immediate family. It won’t be long before the banks realize
there is no point in trying to shoot it out for someone’s house. What can they do with the place if they win? The
accountants can then stare at the worthless liens they have and possibly use them for kindling. Many banks, given the massive defaults that could be just around the corner, will simply collapse.
This graphic illustrates the stark contrast between the lives most Baby Boomers have lived to date, and the lives
the children in elementary school today will likely live. The mid-line is where we are today, 2005. The data to the
left is actual, the data to the right is what the economic and social prophets predict, and the red line is oil & gas
production. The green, blue and red numbers at the bottom show the age of the Boomers, and successive
generations as this 100 year industrial petroleum bubble moves through history. I pity the middle-school kids
and toddlers today. I would never bring a child into the world that’s coming in the decades ahead.
The Boomers inherited a world won by the so called “Greatest Generation,” the folks who practically destroyed
most of Europe and Asia in the bloodiest period in all human history. But, to the victors go the spoils, and cheap
, abundant energy was enough to rapidly drive the industrial revolution to fullness, and usher in the age of
electronics and computers. Population surged, but oil production easily kept pace to yield years of plenty. Communism collapsed and the model of Western Democracies and free markets prevailed. Power and wealth
migrated upward and pooled in huge trans-national corporations. The Internet boom continued to fuel the speculation that led to wild run-ups in the stock market, housing and consumer spending, (with associated debt)
. But as the US peaked in oil in the 60s-70s, she looked to the Middle East. Oil soon became a political weapon
with the Arab Oil Embargo, and then the oil wars started: Iran vs Iraq, The Gulf War, and Now Iraq II. These were
but foreshocks to the place where we find ourselves now, at or very near “Peak Oil Production,” where production
reaches a maximum and just barely provides the energy we need. From this point the red line of production falls--but demand will only grow. (And I might add that this peak production is now only serving half of of humanity. 50
% of the planet has yet to taste the fruits of a petroleum based society, and never will.)
Now look at the lives of the kids in school today! Right now we are seeing the US resource grabs, price
spikes in the energy markets, and oil company profiteering, but the roller coaster ride down is just beginning.
We’ll move into recession soon, then experience brownouts or rolling blackouts in power. The stress on finances
and social systems will prompt the government to pass new controlling legislation aimed at maintaining stability,
and the Patriot Act is an example. Efforts at alternative energy development offer the promise of salvation, but
they are too little and will be too late as things stand now. Some time in the next 10 to 15 years we take the
plunge, as available energy plummets and can no longer hold the society together as it is presently structured.
As society fractures, we get real adversity, shortages of vital necessities, rationing, civil disorder, and all the
things I’ve been outlining in this article--and all of this as the children today reach the prime of their lives. While
the Boomers were listening to the Beatles and getting ready to buy their first computers, the kids today have a real struggle for survival ahead for them. The old life model the Boomers followed: School, College, Job, Car,
Career, Marriage, House, Family, Stock Portfolio, Retirement--well, that model is over forever. Only a miracle or
a big population die-off could save humanity now. Some of the prophets predict we will spiral down from the 6+
billion today to a few as 2 billion by the end of this century. The government knows this, and the bankers and rich elite know this too. Got Milk?
Do the ungodly 24-29% interest rates against a prime of 6.5% make sense to you now? Someone is out there,
getting while the getting is good. The banks are feeding on that twenty point spread for all it is worth. But even
money will be worthless in a collapse. Stack up all you wish, it will only be worth what people are willing to trade
you for it. So even the wealthy will realize that their millions will not necessarily guarantee them the safety and
security they believe they are entitled to. If I won’t give you the food I grow in my back yard for any amount of
money—what good are your millions? The rich will realize that they are the new poor, unlike working folks who
have actual skills to trade. In the beginning the rich will hole up in gated compounds, feed off supplies they have
laid in, use their wealth to good advantage while monetary wealth still matters. But this will not be something
that lasts a few business cycles and then goes away. The collapse will be a twenty to forty year affair, perhaps
longer. Soon the rich men will have to come out of their castles and barter with the rest of humanity to survive—we all will.
Scarcity is coming—in credit first, then fuel, energy, food and even water. When this happens the old economy,
running on credit, useless products, non-stop 24 hour advertising, and gasoline, will be replaced with something
else. The motto of a popular cable TV company has summed up the current America nicely: “Get, Watch. Do What You Want!” All that will be over. But it’s not all doom and gloom. As Orlov wrote: “An economy does not collapse into a black hole from which no light can escape. Instead, something else happens: society begins to
spontaneously reconfigure itself, establish new relationships, and evolve new rules, in order to find a point of equilibrium at a lower rate of resource expenditure.”
Part III: New Rules & Surviving the Changes Ahead.
New growth will begin, on one street after another. Then we will see if we really are Americans after
all—people who hold a certain truths to be self evident.
How will things change for us here when the recession becomes a depression, and then a collapse? After the
initial shock of it all, when you find yourself just throwing away your credit card bills and fighting the lines at the
market; after the shelves begin to empty, and you lay in a stock of whatever you can get your hands on, you will
suddenly realize that this will not be a weekend event. The “hard times” will go on for years, not weeks. It took
Russia a decade to climb out of the hole when that system collapsed, and today they have a GNP about the size of Denmark. Here in America, people will have to adapt. They will start trading things of value with one
another as currency inflates and becomes meaningless, and here Orlov has another useful tip for us, and for the people who are busy gouging us now for quick cash profits: “When faced with a collapsing economy, one should
stop thinking of wealth in terms of money. Access to actual physical resources and assets, as well as intangibles such as connections and relationships, quickly becomes much more valuable than mere cash.”
 A new underground bartering economy will develop, and you
may be surprised at the sudden shift in what you now perceive as “valuable.” The trinkets and decorative trim that floods our society, the meaningless drivel on TV, the endless
plastic baubles, will become utterly worthless—as it always has been. People like Paris Hilton will no longer be chased by paparazzi photographers and featured on Pop TV. Who will
care? Celebrity, as a cult religion in this country, will vanish, and all the glitter and glamour of Hollywood along with it. Sorry… no more summer blockbusters at $9 a seat, and a
DVD sale at $19.95 three months later. That $30 bucks will be needed elsewhere.
Commodities that you cannot eat or use for an energy source won’t be worth much—and that even goes for gold. Like any
commodity, gold will only be worth what people say it is worth. It has little intrinsic value in the world the prophets see ahead. When a man thinks a loaf of fresh baked bread is
worth more, what good is gold? And for the rich who think that hoarding gold and diamonds against a better day is the way to go…How old are you? You think you will live forever? This
collapse will take a long, long time to resolve itself, because each year will take it deeper into the energy
depletion that caused it. The rich old man may not live to ever spend his money in “better times.”
What will be valuable in the new world ahead for us? First off, people. Your immediate family and friends will be
central in your life. Friends who love you, and will look out for you and take care of you will mean everything. As
Jim Kunstler points out, life will get very local. The routine business flights from LA to New York will be over.
Coal fired trains will be the new long distance transportation system again—if we can keep them on the tracks.
Life will get very local, and therefore the people around you will matter very much. Small groups, families, streets
, neighborhoods, may begin to band together to inventory assets and set up cooperatives where they share much needed things with one another and provide mutual support and protection.
Much needed things? Things like a generator that might provide you power…if you can find the fuel. How about
a home garden that grows vegetables instead of flowers? Anything you can eat will be valuable, and if you can
grow it you don’t have to buy or trade for it. Good wine will be hoarded, and beer and liquor, as in Russia. Clean
water will matter a lot, as disease will follow dirty, unpalatable water in little time at all. Medicine will be valuable,
so the pharmaceutical companies need not worry. Likewise, certain skills will be valuable, and people will start
trading a needed skill for a commodity. Medical caretakers, nurses, EMTs, will be the new guardian angels of
local neighborhoods. The strength and vigor of youth will matter a great deal. Shoveling snow, chopping wood,
tilling a field, takes physical energy, and the young will have a real advantage there. Recycling, now a politically
correct yuppie fad, will become an essential habit. Conservation will be the order of the day, not consumption.
Information will be valuable, not the stupid headline news about celebrity trials we see on the TV today, but
information about where you can find good kindling, charcoal, firewood, food, beer, antibiotics for trade and barter
. A good sleeping bag could come in very handy, and a rain proof tent. Batteries and a good shortwave radio will
help…for a while. Better yet is something that runs by itself, with no need for a power source, like those nifty
flashlights that run when you just shake up the little generator inside them. Photovoltaics will be most desirable,
or a nifty windmill that can harness wind power. Yup, the alternative solutions to petroleum as a means of power
generation will suddenly be very significant, not the under funded, largely neglected fields they are today. People
with SUVs—too bad. The guy with the Toyota Prius will still be able to drive for a while. Buy these energy saving things now. Forget that new plasma TV.
The change of life that is coming to America will make us re-think our lives as never before. It will no longer be a
life of getting, watching and doing what we want. It will not be about climbing the corporate ladder, trading stocks
, shopping at the malls. It will be about feeding grandma, controlling lice and other parasites, finding fresh food
and fuel, purifying water, disposing of waste adequately, getting medicine for the sick—in short, this artificial life
style we have enjoyed since the last depression, will evaporate, and we will live like the billions of other people
on this planet who have suffered this way, who suffer this way even now, while we have ignored them all these years. In this year (2005) humanity reached an interesting benchmark: 50% of the people on the planet now
have access to electricity. So only half of us have brought the energy system to this crisis...what about the other half?
Can the Fall be Prevented?
Oh…our government will strive mightily to prevent all this from happening. What do you think they are over in Iraq
for? Do you really think we are there to set up a Jeffersonian Democracy in Baghdad? But the US Army, as we
have seen these last years, has real limitations. We were once a nation that built 37 new aircraft carriers, a
hundred destroyers, thousands of liberty ships, tens of thousands of Sherman tanks and planes, and all in 3
years during WWII—well, we can’t even seem to provide our boys with flak jackets and up-armored Hummers
these days, three years after the war in Iraq began. The Navy is a bit better off, the largest and most efficient
and lethal force of its kind. For a while they will try to assure us a steady supply, by sea, of foreign oil, to
prevent all of this bad stuff from happening here. But, as I have shown, the oil doesn’t have to run dry for the American economy to collapse, it just has to get very expensive—and it is.
So tell me, when things start to slide over here, will our troops still be waging war “over there?” I think not. There are already plans in the works for the end of Posse Comitatus and the policing of America by the National Guard
when times get tough. (Update: When the looting started in New Orleans, civil rights were quickly suspended
and Martial law declared. Armed gangs roved the flooded streets, taking pot shots at police, who were powerless
to intervene. A third of the New Orleans police force simply fled with everyone else. The National Guard, which
should have been ready to deploy, finally arrived days later, struggling to get food and water to the desperate,
stranded poor. Even that wasn’t enough to restore order, and the Government had to activate elements of the
elite active duty 82nd Airborne division to make a show of force in the city. Soon we saw images of armed US
soldiers patrolling the streets of an American city--and no one raised the barest whisper of protest or even mentioned the Posse Comitatus issue. When law and order fails, and chaos abounds, people will accept
anything to get it back again. But consider this: if the government strained to get resources and law enforcement
to just one city, what will it be like when they are faced with lawlessness in a hundred cities? Face it, there just
aren’t enough troops to even begin to restore order in a time of major economic collapse. America would soon
look like Iraq, where the government is holed up in designated protected areas, where the highways are perilous
to travel, and where the military is only used to clear certain vital areas--while the rest of the country is left to
fend for itself, just as the hapless poor of New Orleans languished for days without relief--only this time it will be years.)
People won’t just be banding together into economic collectives, they will also be forced to form small
paramilitary defense groups to protect their neighborhood from “those less fortunate.” These people will surely be
out in droves, and armed to the teeth, since our constitution guarantees us all a right to bear arms. So, sadly,
you can put another valuable thing or two on your list when this thing gets underway—a rifle and lots of ammunition.
The Politics of Fear
Could it happen here? Anarchy? A breakdown in the rule of law? People fending for themselves and banding
together in new suburban tribes? It has already happened in the lowest segment of our society—for those
outside the endless loop of capital and credit. In the poorer neighborhoods, membership in the local gang is the
central focus of a young man or woman’s life. Crime and drugs figure prominently in those neighborhoods, not
home improvement loans. If the economy does become overstressed and breaks, it will take the existing financial system with it, and a new economy will arise in its place. Concurrent with this, we will see a new
political system as well. Will democracy survive? What would happen if adversity and severe need begins to
drive normal “law abiding” middle class citizens into the streets? What will happen to our legal system—the system the wealthy may be depending on to assure they hold on to their wealth?
Perhaps we could ask the Romanovs, or King Louie of France? Or Mikhail Gorbachev? The revolution that will
shake our economy will also create a new political and legal system in this country, and sadly, it will not happen
without bloodshed. Rich men will try to fight to keep their wealth at first, but it will be a losing battle. For every
rich man there will be ten thousand poor men. Who do you think will win the battle? The system will try to use
the expected contingency plans to protect and preserve the wealth of the elite. But these efforts will come to
naught. In the beginning we will get emergency laws hustled through congress to try and buttress the status quo
. We will then get martial law, (the constitution suspended), and our streets will be patrolled by the National Guard, but it will not matter as time passes.
The US rolled two heavily armed Brigades into Baghdad, complete with helo and lethal jet air cover. They could
do little more than guard the oil ministry when the looting started. Imagine that here in the US--multiplied a thousand fold.
In the end, the people, out of dire necessity, will take back the land and the resources on it, and possession,
already said to be nine tenths of the law, will become the whole of it. Iraq is a good model for what might happen
here...a paroxysm of looting, clan wars, small local leaders gathering militias. The people living in a house, and
able to sustain and defend that place, will be the de facto new “owners” of that property, no matter what the bank
lien says. There will not be enough policemen willing to do much about that, for they will be trying to save their
own families as well. And the National Guard Police State everyone fears the government will unleash as they
shred the Posse Comitatus laws—well, will our sons and daughters shoot down their fellow citizens in the
streets? I think not. If they should try, the resulting “insurrection” in this country will make the war in Iraq look
like a picnic outing. The heart of our Army cannot find, suppress and curtail the efforts of an estimated 10,000 enemy fighters over there in Iraq. Over here there will be a hundred million.
So no, all this talk about the government suspending the constitution and declaring Martial law and ramping up
the Patriot Act to keep us all in line is as much bilge water as the banker’s lien. They will do all those things, of
course, but they will have no effect whatsoever—mere straws in the bursting dike, when the economy collapses
and takes our normal civil order with it. There is really nothing “the government” will be able to do about things
when “the people” realize the system has failed and they must now fend for themselves. FEMA is a fire
department, but in the conflagration that is coming, it will be as useful as a single bucket brigade on 9-11. So
folks, no more retirement plans, and IRAs, no mutual funds, no hedge funds, no more Bulls and Bears and Bollinger Bands, no Social Security money, no more checking accounts, no more Internet banking, no more
friendly advice from Suzie Orman.
When this happens, and the economy takes the financial system with it, a new America will start to grow in the
ashes. It will be violent at first, until the fire sweeps the old trees of the power elite away. Then the new growth
will begin, on one street after another. Then we will see if we really are Americans after all—people who hold
certain truths to be self evident. We will have two choices: the first is to fight one another for the limited
resources that will be available over the next several decades; the second is to join one another and take care of
one another to build something up here again that is equitable, fair and free. It may not look anything like the
America most of us were born to, but it will be the land of our own making, not something imposed on us by any central government. It is the whole idea of centrality itself that will collapse in the end—central banks, courts,
centralized government, major transportation “hubs,” Big Box retailers and distributors, all will fail and fade away.
Local city-states will grow from the joining of neighborhoods and barrios and districts, who make accord with one
another and begin to set up a self-sustaining system again. All law will be local, and no edict imposed by
congress or Washington D.C. will be enforceable. Years from now, after all this has run its course, it will be the
world the youngsters at the LAN parties today will be living in as adults. (And I might add that they will be well
trained by the endless games, all played out in devastated worlds, as they go from one rubble pile to another
gunning down mutants and tripods. But life is not a computer game. Sadly, theirs will be a generation with a standard of living far below that of their parents. So much for capitalism.)
 “Pandemics Happen...”
All this sounds like quite a challenge, but could it actually happen? Would the system let it happen? Are the powers that be that blind? And what are they planning to do if it does happen?
At this point, this dire speculation could take a turn into the realm of Art Bell and George Noory and consider the things being floated
on web sites today like “www.prisonplanet.com” and similar places. These folks see what’s coming as well, only they don’t think the
powers that be will allow that power to slip from their grasp so easily. They think some hidden, sinister elite out there, the Bliderburg Group, the Illuminati, the Trilateral Commission, The
Skull & Bonesmen, Dick Cheney and the Saudi Royal Family, are all going to get together in the Alps with their fat Swiss Bank accounts and weather the storm, pulling covert strings through
devious agencies like the CIA, NSA, and organizations we’ve never heard about.
Now, about that population die-off I mentioned earlier...Who knows, we may even get some sinister plot, where
government hoarded plague germs are set free upon the land to prevent this from happening by simply killing off
“the people.” Nothing like a good plague to impose quick order on chaos, eh? And they already have the finger
pointed at just the perfect cover story: the bird flu scare that would normally get a few minutes air time and then
vanish--only this time, curiously, the government has found ways of keeping the story front and center in the media. What was our president reading this autumn about the 1918 Flu pandemic? Since the government will
hold a trump card by creating and distributing the only available vaccines, a plague is tailor made for the believer
in a sinister “New World Order” controlled by a power elite. In fact the latest statement by Health & Human
Services Secretary Leavitt on all this was: “The reality is, and you know it -- pandemics happen.” He’s busy
mulling over a scenario where as many as 92 million Americans are sick with a bug that has a 50% mortality
rate. New FEMA Director Chertoff said a pandemic would affect “the entire fabric of our society.” People will stay
home from work and school. The whole flow of our economy would stop, supplies of food and possibly even
water, electricity and fuel would soon dwindle away to nothing. Face it. There are already too many mouths to feed in the world today, right?
Wrong… about $18 to $25 billion per year would feed all the world’s hungry. We spend twenty times that each
year on defense. This perfect storm is brewing out there because of the colossal foolishness of our policies and
priorities. Want to make friends in the world? Feed the hungry, don’t send over tanks and ink pots for the next
election. Take that defense budget and bring some real equity to the world’s suffering. But…if you are a
member of the power elite, and you still want to build lots of Aegis cruisers and nuke armed submarines, and you like your 57 room mansion on 150 acres, and you really enjoy stacking up Krugerrands and watching how
the light of your chandelier plays off the gold while you listen to Mozart and think about dinner, and you don’t
care that your plague germs will kill off a few billion souls, then you just might need some of the sinister ideas
that prisonplanet.com is warning about to make sure that happens. Because when things fall apart, there’s
going to be one massive prison break on this planet, and it won’t take long before “the people” own everything
again, your house included, in very small plots that will make up the new homesteads of the world that survives
the death of Big Oil, and everything it built. Oh it’s out there…maybe not this year, and maybe not next year, but you’re gonna meet it.
Now… How’s all that for doom and gloom?
While I certainly hope all this is fruitless speculation, and that this Perfect Storm never materializes, I cannot
help but feel that we do need something to shake us from this American Dream and re-set our priorities, not only
as Americans, but as a species on this planet. What will it take before we realize that we cannot have this inequity between rich and poor any longer? (Capitalism has produced a situation where 10% of the people own
80% of the wealth in America.) We don’t need three cars, three computers, and five TVs to get by while half the
world has no electricity. We don’t need a $487 Billion dollar military budget while people are starving on this
earth. We don’t need a foreign policy aimed at supply side acquisition and control of an old and diminishing
energy resource, we need a commitment to alternative and renewable energy, increased milage standards and
auto efficiency, improved and expanded mass transportation systems that are not car-centric, more localization
and less centralization in our way of living and doing business. So what will it take? A great economic collapse?
A plague? ... Just in case... I’m going out to rent Mad Max, and I’m planting my vegetable garden tomorrow.
(c) John Schettler, August 2005 Related Articles: The Autumn of our Discontent - Home Wreckers - Bear Market - Dollar Blues - Drinking Sand - Black Friday - Fire & Ice
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