Thursday, March 05, 2009

What Does The Future Hold? Financial Overshoot.

In the following video, we have Bernie Sanders grilling Ben Bernanke on $2.2 Trillion already loaned to unknown banks. Not $700 Billion, but $2,200 Billion. Bernanke points out that so far, the taxpayer hasn't lost a penny on these loans. He's smug in doing this because he's our high prophet of finance and knows that you can't see a loss on a loan for which there is no payment schedule defined. If payments aren't due, then no one can be late in paying them. Thus, even if the money is never repaid, there are no losses. We haven't lost on the deal, because we haven't asked for repayment yet. So we will likely never ask. Still, 2,200 billion of our dollars has been given away. Right now, I'll declare that a loss in my book. Ben can call it what he wants.



Back in 1999, on forums that no longer exist, I began formulating a mental model of what I thought would happen financially, Post Peak. These early thoughts shaped my later understanding of what Peak Oil would mean on the ground. What has surprised me is things have followed this model so well, so far.

Essentially, I broke down my thinking on this as to what the big players would do as the financial world broke down around them. I looked to the USSR and Perestroika for insight. I realized that the biggest financial players had the clout and the resources to fight dirty and to direct politics to make a long series of short term decisions to save their bacon. Each of these decisions were likely to have long term negative consequences. But they would allow these institutions to survive another business quarter.

Essentially that's the plan. From business quarter to business quarter, the behemoths must survive and be protected at all costs. Further, they must try to grow. If they don't grow, they die. The nature of our fiat money system requires growth in business and growth in the money supply to cover growth in debt, fueled by usury.

So in 1999, I worked out that the biggest banks and biggest industries would get a series of bailouts, giant contracts, and favorable but evil legislation passed, to keep them alive. We haven't seen the legislation really hit hard yet. But I still predict that Congress will be passing legislation aimed at destroying small businesses in the years to come. So far, they've been trying to cripple small businesses, they will become more overt in the near future. Walmart must survive at all costs. Mom and Pop shops must die, so that Walmart may live...

So fast forward to the present. The bailouts are here. The behemoths have grown to large for the world to support. Yet they must grow. The talking heads on the media, proclaim this at every turn. We must divert the planet's resources to feed these dinosaurs, and as we do, their hunger increases and they need more and more.

And as we sacrifice our economies to feed them, we go hungry, our economies dry up and these monsters are losing customers. As they lose customers that are unable to survive the sacrifices they are making, they need bigger bailouts to cover the losses.

This is Financial Overshoot. These behemoths have grown so large and their appetites so huge, that they have destroyed the economy that supports them. They are lumbering on, feeding on whatever they can find to sustain them a little longer. For now, they are surviving off the fat, the goodwill and trust in the world currencies. Soon, they will have exhausted that and they will lash out in their death throes and destroy anyone that get's in their way as they go down.

What we are evolving to is a business climate in which the customers and citizenry don't matter. The system is moving to a state where government and behemoth businesses coexist to serve each other, while sucking the life out of everything that exists on a smaller scale.

I worry that this stimulus plan will evolve to be the only business anyone can hope to participate in. If you can't get into that chain, you'll be unemployed and hungry. The government does not have the resources to replace the private economy. But it does have the power to suck the private economy dry. As the government competes with private industry it will outbid everyone. Materials will run short, and run high in pricing. The government will buy them at increasing prices by printing money from thin air. Private industry that would use those materials to generate profits, will go bankrupt.

A large portion of those materials will be gasoline and diesel fuel.

From this state, a black market will evolve as government agencies become increasingly corrupt and their resources used to buy materials and 'lose' them. Organized crime will take advantage of this and as everything falls apart, all levels of the government will cease to function as we're accustomed to it, and a private citizen will have to pay extra for every service that they are now accustomed to getting for free.

As we get to real dark side of this process, trouble private enterprises will likely be seized by local governments and given to 'business associates'. The big behemoths that destroyed so much, in their struggle to grow past the planet's capacity to support them die ugly deaths. Lawyers, judges, and cops will prosper off the sale of justice. In Argentina these days, cops pull people over to ask for 'tips'. If you don't tip, you can find yourself in trouble. Soldiers will likely be augmenting police, then get hired out to protect neighborhoods and businessmen as they do in Argentina.

Nothing the government does on a big scale will be maintainable. The government will start a lot of huge projects, designed to save the economy, then abandon them as resource prices rise faster than budgets can compensate. Any military actions to lock down cities will likely degrade. The conspiracy theories on camps to house civilians in, may or may not come to fruition, but I doubt it will last. The fears that the military will confiscate guns, may come true, but not long after, black market trafficking in military weapons and ammo, will make the lack of guns a non-problem.

I applaud those of you trying to make a difference and forestall these coming events. But I fear you're shouting at the tide. Each step in our downfall, will be guided by short term self interest. No one with a long view and an understanding of history will be allowed near the reigns of power. First of all, they'll all be called tin-foil hat conspiracists. I know this from experience as a couple of years ago, when I insisted this housing bubble would end in bailouts, I was called a tinfoil hat wearer by most people I discussed this with. Anyone predicting any major event since 2000, before it happened, would and was labeled a loonie. Anyone now who can see the long term trends will be labeled a loonie, or unrealistic as long range planning, suggests strategies at odds with the ideal short term fixes.

And the best way to insure long term survival is an intentional effort to decentralize our economies and government. Tin Foil Hat wearers like myself and many others have been pointing this out for decades. Distributed systems, societies, electrical grids, computing networks, ecologies, etc... work better than centralized ones, during a downturn. When problems arise, distribution of power makes a system more robust than centralization. Ideally at this time, we'd let the morbidly obese banks fail. We'd cut power and spending in the Federal Government. We'd give the states more power over their funding and destinies. We never would've done the damage to the National Guard that we did in Iraq.

Though our world will be forced to evolve to a more decentralized state, we will waste resources fighting the trend. Our way of life is after all, non-negotiable. We will not negotiate and work with natural laws, we will fight them, and force nature to bring us down in her own, very interesting but painful ways.

But for those of you, fighting the good fight. Don't get yourselves arrested. The system will need scapegoats. Our world has had enough martyrs.

And to add another data point, here is a report from Democracy Now. It details how the financial industry has bribed/lobbied politicians to the tune of $5.1 billion, in order to get us into the current mess.

New Report Follows The Money Trail Behind Deregulation Part 1/2


New Report Follows The Money Trail Behind Deregulation Part 2/2

10 Comments:

At 4:25 PM, Blogger an average patriot said...

Supposedly the future is total collapse by 2011 if a so called saving war long instigated by Bush doesn't pop up first.
Most do not know but our real debt is 54 trillion (google) if you want.
It varies of course but bailouts were 10.6 trillion before Obama and Geithner got their 3 trillion. Sadly it's all worthless and this is just beginning. Future you ask?

 
At 12:25 PM, Blogger Brother Tim said...

I too, have prophecies on the future and am accused of having my tin-foil hat on too tight. Here are but two of them:

1) The Dow will drop to 5,000 or lower.

2) A violent revolution will be birthed on American soil, mid-wifed by class warfare. It will make the first Civil War look like a schoolyard scuffle.

Think neither can happen in America? Hide and watch!

 
At 2:26 PM, Blogger MeadowLark said...

I admit I didn't finish reading this.

The first paragraph was enough to get my blood boiling again.

Although Brother Tim, I might disagree, because as long as our "rich uncle" continues to provide "bread and circuses" via television, we're likely doomed.

Sigh... :(

 
At 3:24 PM, Blogger an average patriot said...

Brother you know I agree with that but I think the bottom will test 4000 but settle at 4500! Take care Bud hope all is well!

 
At 5:19 PM, Blogger kuato said...

Anyone predicting any major event since 2000, before it happened, would and was labeled a loonie...

They always ridicule us but never apologize later when we are proven right. People think I am joking about hiding survival supplies in a secret underground lair. I'm not joking. The survivors will live like moles.

 
At 8:54 PM, Blogger ExRanger said...

Weaseldog said,
But for those of you, fighting the good fight. Don't get yourselves arrested. The system will need scapegoats. Our world has had enough martyrs.

I could not agree more, stay under the radar, don't attract attention and tend to your garden. Things are going to come to a head this summer and it will be dangerous out there. When enough like minded people have nothing left to lose then watch out.

 
At 12:00 PM, Blogger kuato said...

Keep a low profile, amen deacon blues.

 
At 12:09 PM, Blogger kuato said...

Some music 4 U

 
At 2:44 PM, Blogger Dave Dubya said...

Good post. Many of us share this vision. Never have so many been so right and so ignored.

We were once the "lunatic fringe" but no one says that about us anymore.

 
At 12:38 AM, Blogger Publius said...

Wow. Great post.

 

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