Through the hellhole
As a leading futurist organization, we are frequently asked how can the world, or the U.S., avoid economic collapse. People who ask that are usually disappointed when we answer, we can't. The only opportunity we had to do that passed after WWII. It didn't just pass. It was overrun by a stampede of crazed investors screaming GROWTH!! By that of course, they meant growth in the value of their own investments, never mind that it might be along a path that leads to global catastrophe. There is no resisting that kind of stampede.
There is nothing new about speculative frenzy. There are many instances of it in history, which have generally ended badly. They are not always discussed in those terms, but that was often what was really going on.
Consider the French revolution. It is usually taught as an eruption of violence that occurred in the late 18th century, but it was actually centuries in the making. Only a generation before, French King Louis XV famously said "Aprés moi, le deluge." "After me, the flood." Meaning that he foresaw the coming debacle, nut was unconcerned as long as it did not occur until after he was dead. It came in his son's lifetime, and Louis XVI lost his head on the Guillotine., along with thousands of other "aristocrats".
Could Louis XV have avoided the French Revolution? In principle, yes. But his base of political support was the aristocracy. He would have had to do something like tax them, so that to avoid losing their estates to taxes, they would have had to turn to the lowly pursuits of crafts and trade to make additional money, and in doing so, created opportunities for the peasants, craftsmen, and merchants that might have led to the industrial revolution first appearing in France rather than in England. But a tax in his time would probably have acted too slowly. Perhaps in the time of his father Louis XIV.
The main thing Louis XV illustrates is the concept of the generational discount rate. Everyone discounts value at some rate over time. That's why a sum of money today is worth more than the same sum ten years from now. It is the basis for loans and annuities. What Louis XV was doing was discounting the interests of future generations at a rate of 100%. If he had cared about his children and grandchildren, but not beyond, it would have been at 18% per generation. Anything less than 18% values more highly the interests of future generations beyond this and the next two by more than that of this and the next two.
We can conjecture that when the Framers of the U.S. Constitution wrote of posterity they were attempting to draft a constitution that would provide for generations beyond three, although they would not have understood the notion of generational discount rate.
Resources for Earth humans
There are mo truly renewable resources. Only resources that keep coming, until they stop. For a human in the Earth system, a resource is a subsystem that holds a certain amount of "free" or available energy. That means energy available to do work. It is only a resource if one has the means to extract the available energy from it, either for sustenance, or to acquire more available energy.
In the Earth system there are only two sources of available energy. the sun, and the supernovae that created most of the heavier elements that comprise most of the mass of the planet. The major component of these are the radioactive elements that are gathered in the Earth's core, whose decay make the core hot, and are responsible for volcanoes and volcanic vents. We can also count the minerals that can dissolve and provide nutrients for life. We can describe the users of such energy as sun-eaters, core-eaters, and rock eaters.
Available energy moves down a gradient from its source to the larger universe. As it moves down, a value called its entropy, the measure of disorder of the system, increases. It also increases when we extract the available energy, using it to either keep the entropy of our system low (while increasing it faster everywhere else), or to acquire more available energy from somewhere.
Grow or die
Each day one has a choice whether to consume one's available energy, or to save part of it either to consume tomorrow, or to invest it in acquiring more available energy. One can use available energy to acquire more than that amount of available energy, in which case one is operation at a profit. Otherwise one is operating at a loss. Operate at a loss too long and the enterprise, which could be one's own life, fails, which is economic collapse for it.
While it is possible in principle to operate in a steady state of no growth or decline, in practice it is almost never sustainable for long. One either grows or dies. Since no one wants to be part of an enterprise that fails, that means one wants to always grow, and the faster the better. In any system of enterprises in which the average growth rate is zero, some are always failing, while others grow at the expense of the others. That is why enterprise is necessarily competitive.
And there is a tendency for the rich to get richer, since the richest tend to have a competitive advantage over the less rich.
Grow and die anyway
The supply of available energy is not the main limiting resource in most sectors. The problem can be understood by examining the growth of actual animals and plants. They do not in general grow to use all available energy. They stop growing well short of that point. The limit is internal manageability. A lifeform can overgrow its capacity for internal management. The result is usually death. But animals and plants generally have internal controls on their growth that prevent that. Human financial institutions do not.
have yet to see a Nobel awarded fro a breakthrough in manageability theory. Or for that matter, good papers on internal manageability as constraints on the growth of metabiota.
How might collapse come?
It is sometimes said that the problem is not too much debt, but too much easy money. It is both, since it is easy money that makes too much debt possible. The 1931 collapse came from the failure of a single bank, the Creditanstalt of Vienna, Austria. The 2008 crisis came from too many bad mortgages, and the problem was not solved. It was only made to appear it had been solved. The deck chairs were moved around on the Titanic. It could come from collapse of Italy, Spain, or Greece. More unsolved problems.
No one knows how it might start. but it could spread rapidly, to the entire planet. No one has a solution, other than to print fiat currency, and pay off debt with worthless banknotes. That is when we might begin to see governments fall, and be replaced by dictatorships. After that, things could really get out of hand.
Buy physical gold?
People had physical gold in 1933. The government ordered all of it to be turned in. Gave them $35 an ounce for it. But try to take your $35 to a bank and get an ounce of gold for it. Forget it. A lot of people buried their gold then. Much of it is still buried. That's what treasure hunters look for.
Try to spend any of your gold or silver? Forget it. Federal offense.
Bitcoins. For a while, perhaps. Until the government decides to confiscate them as well.
Find a piece of fertile land with clean water on it far from a city? Most of those are already owned and not being sold.
Keep firearms and ammunition? The government will just order those turned in. Try to resist? Do you really want to die defending your rights against hoards of swat officers? They are not going to arrest you. Just kill you.
The economy runs on debt
Almost every major transaction in the modern economy is financed. Most enterprises have become so dependent on easy money for financing that they couldn't self-finance if they wanted to. That means food from farm to market. Fuel from mine or well to power plant or filling station. If the financing fails, so do shipments. Suddenly, supermarket shelves go barren and electric companies turn off the electricity. Without electricity, the water systems fail. Governments could step in to order services to continue, but that wouldn't last long.
If fiat currency becomes worthless, you won't be able to buy anything with it. Riots would probably break out, and the government would declare martial law. Soldiers and police might get stuff, but the rest of us would be out of luck.
An early indicator would be if the government to order banks to confiscate all savings accounts, and pay for them with bank stock or Treasury bonds. It might also order confiscation of most of checking accounts as well, as happened in Cyprus.
What might happen to us
There was a document posted to the FBI website, Project Megiddo, which we copied before it was taken down, that presents a chilling plan for rounding up undesirables, including blacks and Hispanics, in the event of civil disorder. The document was vague about the fate of those people, but we can assume the worst. There are also persistent rumors of lists of dissidents, including the red list of those to be killed immediately.
During the dictatorship in Argentina, critics of the government were detained and never seen again. They were called the desaparecidos (disappeared ones), and none of them have been seen again, nor have mass graves been found that could account for them. The rumor is that they were taken in cargo planes out over the South Atlantic, stripped, weighted, and thrown out the planes. A weighted body would descend and be consumed by abyssal scavengers so that no trace is found. It is said they learned their methods from U.S. intelligence agencies, and called it "feeding the fish", alimentando el pescado. See "Painful search for Argentina's disappeared".
hat is not to say the U.S. government will do such things to American citizens, but the signs are ominous.
How these events might play out has been the subject of many movies, science fiction novels, and prepper speculation. We don't meed to repeat it here.
Enter the joulenote?
Much depends on how those in power react. The prospects are not encouraging. I don't find much thinking among them about what could happen or what we should do about it.
If financing ends and fiat currency is no longer accepted, then we have limited options, although the powers that be might not know what they are.
The critical move would be to nationalize energy holdings, oil, coal, gas. etc., and issue certificates convertible to units of available energy, probably measured in megajoules or gigajoules. They could be distributed through a kind of modified EBT card that would enable people to purchase minimum amounts of food, energy, etc., to get the economy moving again and meet the basic needs of people. Once this new currency took hold, it would not take people long to figure out how to use it. The unit of money might become known as a joulenote.
But all this would need to be done quickly, before mass starvation sets in.
Energy is already traded internationally in terms of its equivalent in gigajoules. See this. Introducing energy currency down to the consumer level would not be such a stretch.
The threat from political Islam
It is estimated that perhaps 7% of Muslims see world domination as both a good thing and attainable in the near future. If the West collapses economically, that number could greatly increase. They are already seeking to dominate through infiltration and subversion. A weakened West would present an irresistible target.
In a training video taped while he was a U.S. Army sergeant at Fort Bragg, NC in 1987 Al Qaeda spy Ali Mohamed openly states what has now become the goal of ISIS: the creation of an Islamic state.
This is a direct quote from Mohamed in that video first reported in Peter Lances's HarperCollins investigative book TRIPLE CROSS in 2006.
“Islam cannot survive in an area without political domination. Islam itself, as a religion, cannot survive. If I live in one area, we have to establish an Islamic state, because Islam without political domination cannot survive.
“We have what we call a dar ul harp, which is the world of war, and dar ul Islam, which is the world of Islam. Dar ul harp, the world of war, comprises all the territory that doesn’t have Islamic law.
“So if I live in an area of Egypt, for example, or in the Middle East, I will consider it dar ul harp. I will consider it the world of war, because actually it doesn’t apply the Islamic law one hundred percent. As a Muslim I have an obligation to change dar ul harp to dar ul Islam and establish Islamic law. It’s an obligation. It’s not a choice.”
To that danger must be combined the likelihood that many of those will acquire nuclear weapons. Suitcase nukes are already in danger of getting into their hands. If they do, we can expect them to use them to compel our submission. That might even work for some countries. It won't work for the United States. If we start losing cities to the cries of Allahu Ackbar, there will be an irresistible demand to annihilate the entire Muslim world, perhaps using autonomous robots. That would be a tragedy unprecedented in history. But it is one we need to prepare for.
On the other side
Can we emerge into a better world on the other side of the hellhole? Yes, if we make the right decisions about our systems of governance. I have tried to set forth such systems in the Model Constitution and Bill of Immunities.