To Live and Die in Syria


Nietzsche once said, “when you gaze long into a computer screen the screen also gazes into you.” Maybe he didn’t put it quite that way, but he would have if his timing was better. Attempts to deflect the screen’s unrelenting gaze by deploying ranks of gray squiggles from one side to the other seems hardly worth the effort. They march, nothing changes; the screen is too stupid to reason with … If this is the end, it is boring.

The world’s product at the dawn of the millennium, at the apogee of human development and economic power is banality. “Take it to the limit … ” croons the singer, “one more time.” You have to wonder how ridiculously low that limit is? Whatever minimum is required to gain each of us that fraction of a second’s worth of notoriety the screen has allotted for all but a select few. Democracy in the Modern World gives each man the same right as every other to be a guest on Springer.

What happens when nobody watches? The Russian military just bombed targets in Syria claiming to destroy terrorist bases, instead they murdered unlucky Syrian civilians.

People ask, “Isn’t Syria a long way from the Russia?” The answer is that the Americans are even farther away and that Russians must follow the Americans closely or risk being left behind. “Behind what?” Nobody has a good answer other than Moscow wishes to be a ‘Great Power’ and Great Powers attack other countries, the farther away the better. Because the Americans are engaged in ‘humanitarian bombing’, the Russian are compelled by Christian charity to offer humanitarian assistance as well.

Russia is an ally of the Syrian government, or rather, Syria has been a long-time client- and purchaser of Russian military hardware, all of it paid for with hard-currency proceeds from oil sales. The Russians don’t want to surrender their Syrian trade so they’ve set out to out-bomb the Americans, to murder their own clients and hope for the best.

“The supreme art of war is to subdue the enemy without fighting.”

— Sun Tzu

Looked at from the Russian perspective, bombing appears to be a low-cost activity for everyone except the Syrians, whom nobody cares about. There is little to lose by bombing and potentially some gains. In today’s bereft political economy, any (potential) gain is a good one. Bombing Syria = gambling with house money!

The Russians bomb the Syrians as so many others have bombed before; ‘dehousing them’ as Lord Cherwell, Winston Churchill’s mad-science adviser liked to say. There is never any end to it; today’s bombs is followed by bombings tomorrow and the next day and the next, nothing changes except the death toll. One side wins for a minute then the other side catches up. It never ends, this maddened war of all vs. all.

At least Churchill had a plan. Such things are unfashionable these days, what matters more than anything is attitude and that we have plenty. Americans bomb because we are exceptional, we falter elsewhere but bombing is what we do better than anyone else. The Americans will bomb their mothers if there is a dollar in it. There are British bombing, Canadians, also French … the Turks have bombed and bombed and bombed some more; the Jordanians have bombed, and lost a pilot; so have the Israelis along with Qataris, Bahrainis, Emiratis and Saudis, who in addition, are bombing Yemenis. Those without bombers but with excess populations to squander such as the Iranians and Lebanese are seeding Syrian graveyards with foot soldiers. This is on top of the Syrian government which has been bombing, gassing, torturing and shooting its own citizens for years. Almost at no time since the Vietnam war has there been so much bombing — at such an exorbitant cost — to so little effect.

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

— Sun Tzu

Causes of Middle Eastern conflicts are complex and structural; they include galloping overpopulation, resource draw, drought and peak oil, the unquestioned belief in efficacy of mechanical military and reformist ideologies that have taken on lives of their own. Much of this is excluded of the conversation, instead there is purposeful ignorance: the bombing process is an end in itself. To the bosses, ratcheting up the violence will solve everything.

Take it to the limit: four years of ratcheting the violence have reduced Syria to an extremist- infested ruin. Assad long ago dribbled away whatever writ or political reach he might have had outside of a shrinking circus of deluded/self-interested cronies. Nobody has any idea how to win the war or how to stop it … how or even whom to negotiate with. Assad has become too weak to gain a victory, his exit would only reduce by one … the number of competing gangs of robbers and murderers who have papered themselves over with religion … who are absent any organic political capital.

The governments supplying funds and arms to the contestants — the US, Russia, Europe, Saudi Arabia, Turkey and Iran — have so- far kept themselves clear of consequences to their recklessness. So-far … yet, the Syria war spreads to Turkey and to the doorstep of Saudi Arabia; where does it stop? The warrior’s impulse is to expand the scope of the destruction until something important breaks; but everything that matters within Syria is broken already. The absence of strategy taken to its logical conclusion reduces Syria and its neighbors to uninhabitable wasteland; this isn’t policy it is insanity.

Russia Cannot Save Assad.

Russia enters with its handful of airplanes and mercenaries, bluster and threats, as if the problem is a shortage of these things. Moscow accuses the Saudis of waging a price war against the Russian oil business; the real war is to be laid at the Saudis’ feet! According to theory, magic will take place: the Russians will bomb, oil prices will rise and Western Europe will again be dependent upon high-priced Moscow fuel supplies. With the flow of fresh funds, the dilapidated Putin regime will gain a new lease on life.

What the Russian government does not understand is that prices of petroleum have declined because customers everywhere are broke, not because of the Saudis. Broke includes the Europeans, they cannot afford to borrow, as such they cannot afford to buy fuel. There is no rescue for Russia or for Putin either. Killing Syrians does nothing to solve the price problem; bankruptcy propagates stealthily in the background while Russia is on the road to becoming another scummy militant group.

The Russians can die in Syria and spirit Assad out of the country and nothing else. Russia will not win because they do not know themselves; they believe in fairies, in the demeanor of the their dictator, in the efficacy of Sukhoi 24s and vacuum bombs. They do not understand an enemy they dehumanized before they even arrived, reduced them to spots on a map. They cannot win because there is almost nothing left to win … perhaps a neighborhood or two in Damascus and resorts on the coast. Russian outrages cannot exceed what the Syrian army- and security forces have already inflicted on a far greater scale. If nothing else, Assad has been the Kremlin’s most assiduous student in cruelty. Four years of unrelenting combat have bled out Assad’s army; casualties are replaced by Hezbollah militiamen, Shiite Iraqis and Iranians. These mercenaries have nothing in common with Syrians; nor can they can gain anything from whatever transitory success they might win. Despite Hezbollah’s formidable reputation, the group has been modestly effective against their irregular adversaries and only in the territory immediately adjacent to their home bases in Lebanon. The Iranians are despised as carpetbaggers by Assad’s officers. The Russians are riding on the coattails of the Iranians; Like the Americans, British and the rest, the Iranians do not know much about either their allies or enemies and cannot be bothered to care.

The war is of a piece with decline and collapse. Syria’s demise is little different from that of an Alzheimer’s patient, the end is a matter of time. The agony is one unwinding among many others, with more to come; the refugees are the first of many more to come; the droughts and floods with more to come, the unwinding of foreign exchange- and credit marketplaces … the decay of politics into factionalism, of ‘liberty’ becoming license; all of this and more to come. Syria is what collapse looks like, what our post- Peak Oil ‘World of Less’ will be unless we wake up right away and become lucky.

In a sensible world, the fighting would end with negotiations and power sharing. Patrons would withdraw and exiled Syrians would return to rebuild their homes. This is not a sensible world: ending this war requires facing reality about limits and jettisoning defective geopolitical narratives and outdated, malfunctioning ideology. The likely outcome is for fighting to continue to a logical conclusion and impose its own reality. The danger is that nobody can outline the absolute limits to the conflict, it could end in a nuclear exchange or decades of grinding cruelty and destruction spreading from Syria-Middle East to the rest of Asia including Russia, then China, Africa and the rest of the world.

Wars and militants are externalities of our Western lifestyle, no different from air pollution and credit exhaustion: costs are shifted to ‘others’ such as Syrians who have their own costs to shift. Westerners refuse to connect the dots between our toys, our resource waste and our conflicts. Motorists fund Islamic militants by way of agents such as the Saudi government that supports them. Wars are expensive, combatants need funds, cutting them off by using less fuel puts militants out of business. A ray of hope is the ongoing collapse of oil prices. The price decline since last summer has slashed the combatants’ budgets in half. As prices decline further the ability of countries to engage in ideological ‘hobby wars’ fades. Both Russia and America wobble at the lip of economic ruin, not much more bombing and killing on our parts is needed to send both countries over the edge.

Economies today are saddled with obsolete ideology that aims to manage the costs associated with surpluses. The industrial-capitalist economic system cannot manage shortages: in our new world of less, industrial governments are instantly obsolete … they are disconnected from reality. Like the militaries they command they do not know themselves. Managers pretend while actual work is left to technicians who provide the service platform upon which the ideologues dance. Managers deny fuel- and resource constraints; deny climate change, deny the effects of pollution, the contamination of food supply, they deny the loss of habitat and the extinction of millions of plants and animals; the effects of overpopulation on resource provender, credit costs and more. Managers insist that the hair-brained ideas of long dead economists can pull value out of thin air like rabbits out of a hat … out of borrowed money or from the barrel of a gun. Citizens look to the governments with fluttering upward-turned hearts … they see malfunction, murder, incompetence, lies and corruption. Governments repeat errors because they succeeded ‘once upon a time’, back in the ‘good old days’. Fast forward to the present and nobody knows what to do except bomb.

We have less in the way of resources, we must learn how to cope. The Syrians are teaching us the consequences of denial. Syria’s cupboard has been stripped bare. The survivors are left to cobble together the political arrangements needed to make do = ‘Conservation by Other Means™’. One way or the other our politics must change, the question is how difficult the transition will be. From here on out there is no growth to allow recovery from wars or other disasters, destroyed countries will remain so, it is important to learn not destroy in the first place.

64 thoughts on “To Live and Die in Syria

  1. Reverse Engineer

    Steve! You’re ALIVE! 🙂

    Syria is of course a depressing situation, but the Syrians can’t return to Syria and rebuild their homes even if the bombing stopped tomorrow. It is agriculturally played out and has suffered the worst of the climate change and drought problems. The territory simply cannot support the population.

    This is true for many other neighborhoods, and the Bombs will drop soon enough there also. That is modernity’s answer to getting rid of excess population of useless eaters.

    RE

  2. Volvo740...

    Excellent post Steve! Thanks! Bombing useless eaters also costs money. And it consumes quite a bit of oil. Clearly these operations benefit the MIL complex. And they run the machine. But we’re on this train where we take from the poor and give to the rich. And it turns out that has implications. Oil prices will go down if we do this. Consumers everywhere are broke as Steve says. Not something you read in NY times! In that world we’re in an oil glut.

    Exactly how they will deal with this is going to be interesting to see. So far it looks like they have not compelled Shell to drill in the arctic and fracking to continue at max pace. But tar sands – melting the bitumen is still extracted – perhaps until the Canadians start freezing in the winter and realizes that some of that gas would be nice to use for other purposes.

    Oil and gas is everything. I can’t see a world with 7B that comes even close to functioning as it does today on coal alone. We’ve all looked at the depletion curves from Campbell and Aleklett. They go way out. 2050. 2060. 2070. They don’t factor in consumers economic situation. That much is clear. They don’t factor in drought. It looks increasingly like those graphs are very best case scenarios. And the very same graphs are at the same time denied for their ‘pessimism’. Surely we’ll find more.

    The game for the elite is now survival. Buss words such as ‘safe houses’ circulate on the web. Underground cities. Southern hemisphere. New Zealand. Will it work. Where is the web site where I sign up for a safe house spot? If there was one, what would the price be?

    The crisis is of course already here in the US. But not in the form of bombs. Occasionally they bring out the machine guns, but even that’s rare. No, it’s just hungry tummy. Kids with tears. Maybe they actually do understand what’s going on? We call it food insecurity. What a great name. That sounds much better than starvation.

  3. ellenanderson

    Meanwhile at home – our very own congress-critters let the 50-year-old Land and Water Conservation Fund (coming from oil and gas revenues) expire on September 30th. Looks like they may pass the TPP and lift the oil export ban. Wow – talk about going in the wrong direction! Where did you say the elites are planning to live? Underground? They had better start digging.

  4. dolph

    This is an interesting post and as far your last point, Steve, not destroying, well, better to hope for something else.

    We humans create and destroy, that’s what we do. If what we create risks falling into another’s hands, we’d rather destroy.

    There is of course nothing left in the Middle East but permanent war and ruin. The curse of oil, and the refusal of the Islamic world to enter even the 18th century. In a sense, WW3 has already begun.

  5. Pingback: To Live and Die in Syria | Doomstead Diner

  6. iguanaisland

    Living in Japan, which just passed historic legislation to be able to join all sorts of wars, I can say that Steve is right to connect war and economic collapse. The big companies and banks, and government people involved must have seen the future implications of slower and slower (and often negative) economic growth here. Auto sales are down down down, everything is down, down, down….15% of houses are empty and many many office buildings are also empty. So—what to do?? Confer with the Americans who whisper “join us in the bombing campaigns”. Selling weapons, flying “missions” etc…I’ve come to believe that what it all boils down to is the “demonstration” project for the people back home. A demonstration of power and might by a government that must see its power fading as the large corporations that fed it all these decades are also fading (but may be able to be propped up by some weapons sales!!) Twilight falls on the fossil fuel project, twilight approaches at the edge of the horizon…..the small humans start panicking and running in different directions. But it is really like darkness in the sense that it is a material change that we can absolutely not really do anything about.

  7. iguanaisland

    Didn’t someone say stock markets have two modes “greed” and “fear”?…and I suppose that is just generally true of humans in any situation. If the economy is “expanding” we are all greedy and it is buy buy buy…increase the population and grow. If, however, the future economic situation doesn’t look good, then there is no “stable” option (there is no stable option for the stock market either). The “market” (bets on the future general economic situation) tanks and sure enough, the real tanks emerge. Why? Because the elites have to continue to eat and they live in cities. So war becomes an economic necessity to pump money and resources into the cities. There is no way to tell everyone “whoa! This has all been a little episode! This has all been a few hundred years of aberration! This has been a little hiatus from the ordinary! Let’s work together and cooperate to fix it” No, there is no, no way to say this because evolution is an outgrowth of competition (i.e. we are functioning according to game theory, a sort of “Prisoner’s Dilemma” type of situation) and if someone says “let’s cooperate”, another person will come forward and say “he’s a liar, pay me to protect you with an army.” And everyone will just choose the second strategy.

    1. steve from virginia Post author

      The Forex market is big and noisy so it is very hard to see the forest through the trees. I have a feeling we will know that dollar preference has us in its grip only by looking backward … when it will be too late to do anything about it.

      1. steve from virginia Post author

        These countries need dollars so they sell what assets they have that will give them the dollars they need.

        The dollars are then used to repay dollar debt and to buy local currency in forex markets, to bail out finance institutions, etc. This causes exchange rates to tilt toward the dollar so more foreign currency is needed to buy fewer dollars => more intervention and more Treasury sales => more demand for dollars in a vicious cycle.

        What happens is there is a lot more dollar debt than actual dollars, as debt is retired, dollars evaporate. Eventually there is a squeeze = a scarcity premium is attached to dollars which causes hoarding … also in a vicious cycle.

  8. ellenanderson

    How will we know when the dollar preference has us in its grip? By that I mean, when will we know it is time to look backward? Am I just restating the “when will things change” question?
    Everyone is worried that OPEC nations will suddenly start accepting something besides dollars, right? But how could that possibly work to their advantage when everyone is holding central bank paper that is tied to dollars? It would be like actually triggering collapse wouldn’t it? And who would be the first to choose that? Because of sovereigns taking on all debt this really isn’t the model we anticipated of musical chairs where the first ones to sit down get the most anymore, is it? It seems to me it is more that when the first one tries to sit down all of the chairs disappear.
    The financial system may continue a lot longer than anyone thinks unless something in the real world actually forces a giant “mark to market.”

    1. steve from virginia Post author

      Yr very astute. Most currencies are second- and third order dollar derivative. The strength of the dollar has been the ability of US to consume, the consumption-enabling firms are collateral for the dollar. Fuel and other resources cannot be collateral because the fuel is ‘used up’, wasted for nothing.

      Other currencies don’t have that kind of collateral so they must hold dollars in reserve, instead. The US is also a credit provider; credit provision by itself is a form of collateral. Credit cannot be accepted and unacceptable at the same time. Credit providers are US/Wall Street, UK/City of London, Japan, Germany/Frankfurt and Switzerland. None of the world’s other countries are able to provide credit … even for themselves. As such they depend on the providers for better or worse. This, by the way, includes Iran, Saudi Arabia, Russia and China.

      Germany is a country that enables waste on a continuing basis yet it is tied into awkward relationships with ‘inadvertent conservationists’ within the eurozone. Greece and Italy are conserving whether they want to or not due to EU/Berlin policies; German firms such as Volkswagen are taking it in the neck.

      The ‘new dollar’ is backed by the fuel rather than the process of wasting fuel; what we are trying to see is a change in perception. In our world of less, the only way to keep collateral is to not use up the fuel. We will see actual shortages but sustained low prices compared to previous highs … like we are now but with the scrim of ambiguity set aside.

      I’m working on another article that will have more about this, next.

      1. ellenanderson

        So when perception changes in a meaningful way (if it changes in time) we should see central governments trying to direct the use of fuel resources. They could choose the military, farms and health care and we assume they would but could they at that point? Will the change in perception destroy central governments?

      2. steve from virginia Post author

        When the system cannot use access to credit to ration fuel and other resources, the government will assert direct control, ‘To keep us all safe’.

        Authorities won’t be able to ration in order to squander: the two concepts — ration + squander — are diametrically opposed. Credit = perception of the ability to borrow into the future. Without adequate credit the US won’t be able to import from overseas, domestic supply would be all that is available. Authorities would be quick to determine that this supply is all the US would possess for a ‘significant period’ and cut the daily ration. Instead of 10 million barrels per day of domestic output for us to waste, we might have 1 mbpd for us to conserve. The military would claim all of those million barrels, they would battle irate motorists … nobody would think of the farmers and food distribution which would cause a crisis.

        Keep in mind, the military is always thanked for their service but never farmers or grocers who are never thanked for anything.

        How the government would react going forward or what form it might take afterward is hard to say. First rule of government is to shift blame for problems away from itself onto others, so 75 years of squandrous over-development and car-first lifestyle would not be easily come to terms with.

        Of course, the government would likely grasp at the straw and ‘help’ the government of Venezuela … to keep that country ‘free from terrists … ‘

    1. steve from virginia Post author

      No doubt about it.

      It seems whenever a good chart gains some traction it gets ‘muddled with’ same as EIA historical petroleum data. Theoretically, ‘Fred’ will allow a user to combine the two debt components and add GDP … but no luck so far.

  9. ellenanderson

    From Zero Hedge just now: “The $50 hedges also illustrate how shale firms have been able to keep drilling at lower and lower costs thanks to efficiency gains and focus on the most productive spots; a year ago, break-even costs were seen nearer $70. As a result, producers are moving more quickly than ever to catch what may be a fleeting price recovery. In a push that started Tuesday and continued through Friday, U.S. producers have locked in new production in greater volumes for 2016 and 2017, according to three market participants who watch money flows.”
    Who is taking the other side of these bets?

  10. Tagio

    “Who is taking the other side of these bets?”
    We can’t have a decent crash until we have tapped the last “greater fool” & Dog alone knows when that will happen. I notice that when I open up Z/H these days, from time to time I see ads to invest in oil companies. This is a recent development. The adds hype the fact that they are using “new technology,” as if those words alone are enough to trigger the neurons that convince me that that I am going to make money. More interestingly, the ads say they are open to — 401k investment! I suspect that is the last supply of greater fools out there.

    1. steve from virginia Post author

      Daily barrels per well have been steadily declining, so much for industry ‘efficiency’. Of course, average includes legacy wells at the end of their productive life. More wells in total = increasing number of the older, less productive wells.

      Hard to say whether there will be enough cash left over after the onrunning debacle is done to plug the obsolete wells. The largest product of Bakken oil enterprise could wind up being contaminated water in western North Dakota and ‘massive’ methane emissions.

  11. Bill Sodomsky

    Perhaps a bit off topic with regards to this post, but I just had to weigh in after reading your latest comment on Wolf Richter’s blog. I don’t bother commenting on his site because the last time I did in defense of something you said, he wrote me a snarly response and wouldn’t post my comment. I simply stated that his writings on matters of energy NEVER address the issue of EROEI or the fallacy that oil creates wealth. He’s like the rest of the Mavens who ignorantly think that oil prices must go up due to demand. When I referenced the fact that he should study up on energy deflation the lights went out on my correspondence.
    Which brings me to my point that no matter how many times you state the obvious, no one (not including loyal informed EU followers) either wants to address the issue or, says something as stupid as the whole collapse of oil prices is some sort of nefarious ploy by the Big Boys to acquire some players for pennies on the dollar. It seems to me that it’s going take a complete obvious collapse of markets before the public really wakes up to this nightmare. As good as you are Steve in stating the obvious, virtually no one wants to swallow down on this. So… when in your estimation will the public get the message? How long can the bankers extend and pretend by issuing more and more credit?

    Thanks Steve for all that you do and have done!

    1. steve from virginia Post author

      It’s frustrating b/c in the back of everyone’s mind, they know the party is over, they just can’t handle it.

      Destruction has been set on overdrive, hoping something — military Keynesianism, negative interest rates, zero-point energy, Soylent Green, super-container ports — will bail us out.

      The bankers from Mars could have helped had they arrived 20 years ago, but now it’s too late. Bankers from another solar system are needed now … the first thing they would do = melt all the cars. “POOF!”

  12. ellenanderson

    Chiming in with my thanks too, Steve. I have fought the car culture all my life as I watched the Interstate Highway system gobble up the landscape and spread pollution everywhere. But I never really put my money or my life where my mouth was.

    I don’t post on other blogs because I consider their moderators dumb and untrustworthy for the most part. But I was tempted to register and post on Zero Hedge when I read about the death of Peter Schiff’s father. I don’t have the courage to be a hero (well, heroine) the way he did but I am thinking about his family. May he rest in peace. Shame on all of us who allow this destruction to continue. Sometimes I think we really deserve what we are going to get.

    1. Reverse Engineer

      “I don’t post on other blogs because I consider their moderators dumb and untrustworthy for the most part”-EA

      WHAT!?!?!?! You consider me “Dumb & Untrustworthy?” I am INSULTED! LOL.

      Anyhow, even if I am Dumb & Untrustworthy, take the new Collapse Personality Profile Survey! 🙂

      Also results up for the Future of Energy Survey.

      http://www.doomsteaddiner.net/blog/2015/10/20/survey-psychological-profiles-of-collapse-results-future-of-energy/

      RE

      1. ellenanderson

        Ha – I forgot about that. But I am registered on your site and I have posted. Lots going on there makes my head swim!

    1. steve from virginia Post author

      In a way, he’s absolutely right.

      ‘How high is too high? A lot lower than you think!’™

      Indeed, prices are too low and too high at the same time. There is too much and too little crude on the markets at the same time. There can be and is … inflation and deflation at the same time.

      We never had to ponder these more-or-less bizarre consequences before, they were all ‘out into the far distant future’. Now? The future has arrived, bringing along with it all those pesky contradictions. Meanwhile, in the background, depletion never sleeps, we need to quit consuming but we don’t know how to do so painlessly.

  13. Volvo740...

    Is there anything special about oil? Unaffordability seem to be hitting electricity also, although consumer prices aren’t down. Some plants apparently have challenges staying profitable. In Sweden they are about to shut in 4 reactors out of 10.

    I’m still struggling to with the deflation v.s inflation but I’m not alone I think. At the surface it seems like you could always print paper money Weimar style until everyone is broke.

  14. Eeyores enigma

    Volvo – Since all money is loaned into existence we can’t print Weimar style. The problem seems to be not too much debt but not enough borrowing. This is why the Fed has the so called inflation mandate, when they see the economy doing good they push banks to lend like tomorrow looks so bright you got to wear shades, then everybody jumps onto the bandwagon they can bump up rates and really rake it in.

    Seems to me the problem today is that nobody thinks that the future looks so bright. In fact even with a headlamp on no one is seeing a future worth borrowing into, except for those wealthy, too big to fail entities and the mega wealthy.

  15. Tagio

    EE, apparently the Fed can print oodles of currency, Weimar style. The Fed has a legal obligation to print physical currency to match a bank’s excess reserves held at the Fed, if needed by the bank. I don’t have a specific statutory reference but see the section, “Currency and Coin” in the following Fed publication: http://www.federalreserve.gov/pf/pdf/pf_7.pdf . There are some who believe that when (not if) loss of faith in the currency becomes pandemic, this is exactly what will happen.

    Hyperinflation is something of a misnomer. It is not caused by too much “money printing” as most suppose, and it is not inconsistent with credit deflation, as most also suppose. Hyperinflation is not money printing per se but the result of loss of faith in the currency:

    “First of all I would like to clear up probably the most common misconception about hyperinflation. What most people believe is that massive printing of base money (new cash) leads to hyperinflation. No, it’s the other way around. Hyperinflation leads to the massive printing of base money (new cash), as government prints like mad to keep up with the collapsing faith in the currency.

    “Hyperinflation, in most people minds, conjures images of trillion dollar Zimbabwe notes. But this image is simply the government’s reflexive response to the onset of hyperinflation, which is actually the loss of confidence in the currency. First comes the loss of confidence (hyperinflation), then, and only then, comes the massive printing to keep the government and its obligations afloat”

    A good but verbose explanation and detailed exploration of hyperinflation, including why this is possible in these United States, as well the correlative topic that most miss, “credibility inflation” (“the expanding confidence in the fiat financial system to always deliver a higher payoff tomorrow than today” and which, among other things, leads people to “store” or warehouse their dollars in debt and which thereby prevents actual price inflation), and which, when lost, can lead to hyperinflation, can be found here:

    http://fofoa.blogspot.com/2010/08/credibility-inflation.html
    http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html
    http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post-part-2.html

  16. Tagio

    EE
    Further to my last post, no one needs to create more money to have hyperinflation. The money has already been created. It’s just that most of is sterilized by being stored in debt instruments — claims to deliver dollars in the future. See the link to the article on credibility inflation in my previous post. when faith in the currency collapses and everyone rushes to convert their claims into hard assets the torrent of all of these stored up claims seeking conversion inti too few assets will unleash hyperinflation

    1. Eeyores enigma

      Tagio – I understand about velocity and the potential for claims to deliver dollars in the future being called but this would only create pockets of inflation as those claims are held by a relatively small # of people, most of it is held by entities. As we are seeing now.

      In order for hyperinflation to have a broad effect on the general population there would need to be a process for funneling a large and steady flow of money to everyone. The opposite is happening.

  17. Volvo740...

    So the preppers have a point to buy food then? Unfortunately it’s only canned beans that store well… But seems like you would need to get $$$ into people’s hands to seriously drive the prices up. Some report indicates ~80% have $10K or less in savings. Is that enough to lead to hyper inflation? It doesn’t seem like it. Or can the 1% buy enough cans themselves?

    As for cars, you know what I drive. And I promise, Steve, that I’ll stop driving when I don’t have a job to drive to.

  18. Tagio

    The question is too complicated to resolve in blog posts by commenters. I am agnostic on whether hyperinflation can or will occur, I was simply referring to some detailed arguments made by a big proponent of the idea that it will occur, and trying to indicate that there are some common misconceptions about how and why it occurs.

    As to the question of what transmission channels are available to make it occur outside of the claims held by the 1%, the primary one is the necessity to import foreign goods – particularly oil, when confidence in the dollar is evaporating and the “solution” is to give people more of them. The government will have to “print” like crazy to support its “lifestyle” – in particular, to buy oil and to maintain itself and its powers. If you are of a “conspiracy” frame of mind, Obama’s March 16, 2012 Executive Order {https://www.whitehouse.gov/the-press-office/2012/03/16/executive-order-national-defense-resources-preparedness }, which gives all agencies and departments authority to funnel as much cash as they need to keep things operational, already lays the groundwork for it. See discussion here: http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

    Naturally, most government workers will have to be paid to keep the government functioning, so that too is a transmission channel. Hell, the food stamp program is a transmission channel. You have to keep people fed to maintain governmental stability.

    Again, I am agnostic on the question, not having given it enough thought or investigation, but I am aware of some of the arguments that it could happen.

    As to whether velocity alone could bring it about, the system has put a lot of gates in place to forestall runs. In the stock market we have the now famous Rule 48. The SEC has required money market funds to impose liquidation gates. Hedge funds now impose liquidation gates. As Rickards is fond of pointing out, if China and other large holders liquidate large amounts of Treasuries, the Fed can require the banks to buy them up with their excess reserves on deposit with the Fed, thus continuing to sterilize (warehouse) those “dollars.” The question is whether at some point confidence in the whole scheme fails enough where things get beyond control.

  19. Volvo740...

    I agree that it’s too complicated. Other rules like rule 48 could get implemented. ATM withdrawal limitations could change. But at least we can agree that capital is real things we have or can harvest/get access to, and money is just a means to distribute claims to said capital. The question is what are real things of value and what are liabilities. I’m fairly sure that the richest own farms with cows in New Zeeland, but I don’t know what that’s worth? What are tar sands worth?

    In some very basic sense an item has value if you can trade or barter it for something that you absolutely need. Like food, shelter or heat/air conditioned room?

    From the wiki: “During the first year of the siege, the city survived five food reductions: two reductions in September 1941, one in October, and two reductions in November. The latter reduced the daily food consumption to 250 grams daily for manual workers and 125 grams for other civilians. Reports of cannibalism began to appear in the winter of 1941–1942, after all birds, rats and pets were eaten by survivors and meat patties, made from minced human flesh went on sale in the ‘Haymarket’ in November 1941”

  20. Tagio

    Does anyone have an explanation why the Treasury is willing to bail out or restructure Puerto Rico’s debt but won’t even consider doing same for municipalities like Detroit or States like PA or Il? Size of the destabilizing effect? Whom it effects? Or something else?

  21. dolph

    Not only is hyperinflation given, it is indeed the only possible outcome with any fiat money.

    The reason is a simple one. You really don’t need to understand anything other than this. Fiat money is infinite while the physical world is finite. That’s it. That’s why every single fiat money hyperinflates, without exception.

    It might take awhile as we have a massive debt overhang and oversupply of virtually everything. But on a long enough timeline, it’s guaranteed that the supply of fiat money, which is infinite, overwhelms the limited nature of the physical economy.

  22. Volvo740...

    Right now it seems like there is a two speed economy. Inflation for the rich, deflation for the poor. Some items both rich and poor need to buy. Gasoline is one of them. Electricity another.

    More and more are becoming poor.

    The debt == money camp argues that since money is lent into existence you need to keep increasing debt. That is difficult. In this game you kind of need to do better than your neighbor to survive. That’s pretty brutal, but I see no other solution. What happens if you suddenly can’t make it? I will find out the day I’m on the triage list.

    If the whole thing is a ponzi what does that imply? Best to get out early? But what does getting out even mean? Buy shovels and cans? Stuff the mattress with cash? Sell XOM and buy AAPL and MSFT *now* before they double in price again?? Can AAPL exist without a gas station around the corner?

    Every day it’s getting crazier and crazier. In retrospect, for me I think the “bad news is good news” was a turning point. Unemployment up – stocks up. Stimu coming.

    But I’m still waiting for my electricity to get cheaper. Hasn’t happened yet.

    Shortages could come in several ways:
    1. Can’t afford it
    2. Can afford it, but not available.

    I really appreciate this forum! Thanks everybody.

    1. dolph

      Yeah you are right, not much you can do. But that doesn’t mean you can’t do anything.
      1) Cash or cash equivalents, like a checking account; but yes on a long enough timeframe they will inflate away
      2) Physical gold outside of the system
      3) Tangible goods of durable and lasting value
      4) Water and food storage/production
      5) Property owned outright and reasonable defense measures
      6) Reduce all other expenses; liquidate all retirement accounts, investments, stocks, bonds; leave equity in business to the wealthy

      All of the above are achievable to some extent or another, and each in its own way represents a hedge against systemic collapse. It’s impossible for TPTB to go after everything I list above.

  23. Volvo740...

    Couldn’t Skynet hold a smaller set of stock inflated until the very end? A secret message to the informed that FB, GOOG or whatever is not going down? Profits no longer matter? Of course the risk is up if you don’t know how they are rigging it, but in principle, since the market is rigged, the elite could keep making money and stay up with hyperinflation while the rest suffers financially and eventually simply dies.

    Thoughts?

  24. dolph

    The elite always win, whether or not the stock market goes up or down. They make money on both sides.
    The trick is the following:
    1) when asset prices are high, convince the masses that they rise forever; you can then dump the assets on them before the crash
    2) when asset prices are low, convince the masses they are worthless; you can then buy them back at bargain price

    As an elite you have infinite zero percent money from the central banks to play this game. Everybody else in the economy can lose everything they have. And if they do, all the better, because they are then forced to go back to work for pennies. And if they can’t work you can pay them disability, probably cheaper. If the scheme ever seems like it’s falling apart, just go to other countries and tell them, buy our debt at zero percent interest, or we bomb you and install a military dictatorship.

    Nice work if you can get it.

    1. Reverse Engineer

      If the Elite always won, then somebody with the last name of “Caesar” would be in charge of the FSoA.

      Civilization Collapses change things.

      RE

      1. steve from virginia Post author

        It’s fair to say there are always some groups that do better than the rest. Elites come and go but the dynamic is persistent.

  25. Tagio

    “The elite always win.”
    This is a bit too tautological because it masks the question, yes, but who are the elite? In the “Long Emergency,” I think we can expect to see a transition from “elites” who hold massive claims to wealth and purchasing power, and their ability to exercise power over others (because others still believe those claims have value and are therefore willing to ingratiate themselves to, and serve, those claimants), to those who will exercise physical dominion and control over resources and laborers. Over the course of time, whether that be six months, two years or 100, the “elite” will transition from financiers to warlords. And the people who are good at administration will transition from serving one set to the other.

  26. Tagio

    Forgot to add: While both sorts of elites are cunning sociopaths of varying degrees, I doubt that the same people who are good at being financiers, whose primary skillset is symbolic manipulation, will be able to successfully transition to being good warlords, whose primary skillset is combat.

  27. Volvo740...

    There are different classes of elites:
    1. Former US presidents, Gates. Buffet, and that crowd. The Island owners. Can they expect to continue their lifestyles?
    2. The 1%. Not sure of the definition here, but lets say they make $300K a year, and has been for a while. No islands here. Maybe Porches, and a second home.
    3. The top 10%ers. $100K earners. Doing well in their “career”. There are more middle class.

    Like Steve is pointing out I suspect many of the “assets” that group 1 holds are not really assets. But I’m curious how this is going to go down. We all are. And we’re all speculating.

    Warlords seems probable at some point, but TPTB also have to maintain an image that everything is OK. Not an easy thing to combine. Once there is no oil to purchase, then purchasing power is also 0. No oil to purchase will happen long before no oil in the ground. That must have Buffet staying up late these days.

  28. Volvo740...

    Also, from the Hills: “Historically, petroleum has been a primary beneficiary to the economy. The economic activity that it powered was greater than the cost of the petroleum… That benefit is now declining, and by the early 2020’s an increased use of petroleum will no longer add to GDP. It will become more cost effective for society to begin limiting its use of petroleum as the use of petroleum transitions from a GDP enhancer to a GDP reducer.”

    http://www.thehillsgroup.org/depletion2_022.htm

  29. dolph

    Things do seem to have an inertia of their own. People, businesses, institutions, etc. continue long after their usefulness.

    This makes the peak moment so difficult for everybody, no matter what your beliefs are. What do you do if you are living at the end of a system? And this system is global industrial civilization?

    It’s just this maddening repetition, suspension. There’s no catharsis. In fact, the elites have privileges simply for being elite! And everybody defends the system. In fact, their actions prolong the system. Every single person working in the world today is prolonging the system.

    The way I think of it is, play only the games what you want to play, involve yourself in only the things you want to involve yourself in. Ignore everything else. Mass media makes this difficult, it tricks you into believing that everything is your concern, that unless you embrace the totality of the world (see everything, do everything, etc.) then you are missing out. It’s an illusion.

    Of course, you can’t really escape local warlords. There are certain things you have to accept, unless you are actually willing to kill or be killed when the time comes.

  30. Volvo740...

    A comment from http://www.theguardian.com/commentisfree/2015/oct/28/2008-crash-government-economic-growth-budgetary-surplus:

    “Printing money won’t dilute the wealth of rich people owning assets (property, shares, equity). In fact it will make them more rich.

    You’d destroy the middle class – they are either pushed up the ranks (as they bought houses and indebted themselves) or down (savers and anyone stupid enough to hold money).
    Even the BoE concluded that QE mostly benefitted the rich: http://www.bbc.co.uk/news/business-19356665
    As an alternative I’d suggest taxing inheritance and wealth or world wide income. Shut down tax havens.”

    The challenge right now seems to be that we can observe how others are making bank getting into the Ponzi scheme. It can suck at times to sit on the side line with your hard cash. A world where saving is stupid or makes you poor is a very strange place.

  31. ellenanderson

    Fun new book by Ted Koppel – ‘Lights Out, A Nation Unprepared…’
    Apparently he was interviewed on PBS a few days ago and the book was in 9th place on Amazon as of yesterday.
    I haven’t had a TV for years but my impression is that Ted is as MSS as they get. He had access to a ton of big wigs.
    I was interested in his conclusions: ie, The NSA is better than Homeland Security, the military should probably have a larger role in disaster preparedness etc., the Mormons are interesting.
    But the real surprise was the last line of the book. Curiously none of the reviewers has picked this up. But Koppel’s last pronouncement was “The internet is a weapon of mass destruction.”
    Well, do you think doom will go mainstream now, RE?

    1. ellenanderson

      By the way, the book is on Audible for those of us with tired eyes and it is read by the author. I really enjoyed all of it but the stuff about the Mormons. A friend of mine dragged me off for an exhausting day of canning at one of their warehouses. I asked the person in charge whether all Mormons really had a years worth of food put by. He told me that compliance with directives from on high (at least on the East Coast) is typical of all religions – ie about 10%.

      1. steve from virginia Post author

        A year supply of food is about 750 lbs per person. Starvation rations would be about 400 lbs. You have to eat the stored food oldest-first and replace it. Keeping up is almost a full time job.

        A bigger issue is storing water. More likely is municipal water would fail for a longer period than food distribution.

        There is nothing more exhausting than carrying water. 5 gallons = 40 lbs and a person uses almost that much per day: drinking, cooking and personal hygiene (the water isn’t used for washing). A household of three would use 120 lbs of water per day plus food.

        Just some of what we take for granted …

  32. encouragement

    i’m watering the two cows at the moment because they needed to be closed-off from the neighbor’s pond for the season. 50gal/day. i have a shoulder yoke and two flat-back 5gal buckets. if it’s not an otherwise heavy day of physical labor, i sometimes forgo the yoke because the yoke i find isn’t anatomically correct for humans. a body that works, and is worked, wants to work, and gets grumpy when it’s taken for granted. the animals and the land care about my body’s need to work, and i’m grateful for that.

    thanks steve.

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