Wednesday, September 24, 2008

Rx: Depression

By the time you read these words they will have been sitting on my computer for most of a week; the chance to attend the annual ASPO peak oil conference in Sacramento was too good to pass up, and I’ll be on the road during the window of time I normally use to compose these essays. It’s an interesting time to be second guessing the future, too, for as I type these words, the world’s financial markets are in chaos. The collapse of Lehman Brothers, one of the longest established brokerage houses in the New York market, followed by the forced sale of Merrill Lynch and the near-collapse of insurance giant AIG, seem finally to have made it clear to the world’s investors that the mountain of unpayable debt weighing on the global economy is a problem that can no longer be ignored.

Just how bad that problem will become is anybody’s guess. Stock markets worldwide are down steeply but, at least as of this writing, not yet in freefall, and massive government intervention in the credit markets has staved off a liquidity crunch. Over the longer term, though, investments supposedly worth trillions of dollars are going to have to be written off, and companies that padded their balance sheets with those investments are now facing a scramble for survival that many will fail. An entire economy built around the exchange of exotic IOUs is coming apart at the seams, and the economic structures that will replace it are not yet in sight.

A growing number of voices are proclaiming that the current crisis marks the beginning of a major economic downturn; the word “depression,” until recently taboo in polite financial company, is even being heard. Now it’s worth pointing out that we have as yet no way of knowing whether or not things will get that bad. The 1987 “Black Friday” crash, which saw the Dow Jones Industrials lose 22% of their value in a single day of trading, was followed by the same sort of proclamations; so was the unraveling of the tech boom in 2000. Both slumps, severe as they were, led to relatively modest recessions. It’s possible – though admittedly not very likely – that the same thing could happen this time.

Yet it also has to be remembered that not too long ago, economic depressions were simply a fact of life. In the 19th century, before government regulation restrained the excesses of the business cycle, major economic depressions happened every twenty or thirty years on average; most people could expect to live through two or three of them. The New Deal reforms of the 1930s, which restricted the vagaries of the business cycle, made depressions a thing of the past; still, those reforms were tossed aside in the deregulatory frenzy of the 1980s and 1990s, and unless they get put back in place, we will all likely have to get used to depressions again.

Counterintuitive though it may seem, furthermore, a serious depression right now may just be the best thing that could happen to the United States. I don’t say this by way of passing judgment, or in the spirit of schadenfreude that seems to surround so many predictions of social catastrophe. Rather, a good many of the dysfunctions that are dragging America to ruin will be immediately unsustainable in a time of depression, and a certain amount of economic suffering now could spare the American people a far worse experience later on. Here are some examples.

1. The End of American Empire

Right now America is as addicted to empire as any inner-city crackhead to cocaine. We support the world’s most bloated military, with troops and bases in more than a hundred countries, in order to enforce a global economic order that allows the 5% of the world’s people who live in the United States to use roughly a third of the world’s resources. At the same time, empires are costly pets, and ours – like every other empire in history – is becoming an economic burden our nation can no longer support; at the same time, the drastic decrease in US living standards that would follow the end of American empire is a political time bomb nobody wants to touch. Caught in that dilemma, the United States seems determined to follow the usual course of past empires, allowing its imperial commitments to drag it down.

A depression, however, would force the issue. In the midst of economic collapse, the United States would be no more able to maintain a global military presence than Russia was after its own collapse. The troops would have to come home – not just from Iraq and Afghanistan, but from the whole far-flung web of US military bases – and resources now being drained by the incubus of empire would be available for more constructive tasks, such as preparing for the onset of peak oil.

2. Energy Availability

A serious depression would also have predictable effects on energy use. The economic troubles of the 1970s and early 1980s, mild as they were by depression standards, played a noticeable role in causing energy use to drop sharply during those same years; when people don’t have money, they don’t spend it on unnecessary energy, and they are also likely to take conservation measures that cut into energy use even further.

By many estimates, we are only a few years from serious decreases in world petroleum production. Any significant response to this crisis will, ironically enough, require more fossil fuel energy – it takes energy, after all, to manufacture insulation, rebuild railways, and make wind turbines, and most of that energy will have to come from existing sources. If energy prices spiral out of sight, many such projects will be out of reach. A depression, on the other hand, will force down demand, keeping prices from rising and making it possible to build for the post-fossil fuel era. Public works projects such as the Depression-era Civilian Conservation Corps could also be directed toward energy conservation and renewable resources.
3. From Offshoring to Onshoring

Another likely result of a serious depression would be the rebirth of a domestic manufacturing economy in America. Right now the US economy produces very little but debt; that’s the way the tribute economy of America’s global empire works. The results have been profitable not only for the political classes but also for the middle class, which gets to buy all the consumer goods it wants without having to pay what it would cost to hire Americans to make them; the poorer two-thirds of the population, by contrast, has been hammered by predatory economic policies that replace well-paid factory jobs with minimum wage positions flipping hamburgers.

The global economy that made offshoring possible, though, will be an early casualty of a serious depression, and when the US either defaults on its national debt or hyperinflates its currency – and it will have to do one or the other of these, sooner or later, to get out from under the burden of unpayable debt – the unraveling of the global marketplace will be complete. Once that happens, goods and services for the American market will have to be produced here, and the rebuilding of domestic manufacturing capacity will follow. This will make it much easier for America to survive the transition to the age of scarcity industrialism now dawning around us.

4. Decreasing Income Disparities

Meanwhile, the huge disparities in income that separate the upper third of Americans from the rest of the population will unravel. Economic boomtimes are always periods of increasing social inequality, because investment income is concentrated in the upper income levels; depressions are income levelers for the same reason. In the 1920s, income disparity soared to levels that were not reached again until the Reagan years; in the 1930s, as investments of all kinds plunged in value, the gap between the rich and the rest dropped to historic lows. The same thing is true today; essentially all the exotic investments that drove the recent boom were available only to the rich, who thus have earned the privilege of losing their shirts as those investments unwind.

The narrowing of income disparities isn’t simply an issue of class jealousy; it powerfully affects the functioning of the economy. When the working classes have money, they spend it on goods and services, helping to maintain economic well-being. When the rich have money, they are more likely to invest it in speculative instruments that contribute much less. Speculation is a parasite on the economy, and it is quite capable of killing its host; that’s essentially what’s going on right now. An economy with lower income disparities is more stable and productive than one with the drastic disparities we have now, and we need a more stable and productive economy in order to deal with the instabilities that will follow the end of the age of cheap fossil fuels.

5. We’re Headed There Anyway

The most important impact depression could have is also the one that most people will enjoy the least: most of us will have to learn to make do with fewer of the comforts, conveniences, and opportunities that we have all learned to expect. For the last sixty years most Americans have enjoyed lives of relative opulence, even as the resource base and manufacturing economy that made that opulence possible has trickled away. The last few decades have seen desperate attempts to replace these losses with exotic financial instruments and an increasingly strident imperial policy overseas. These measures worked for a while, but now the bill is coming due.

At the same time, the end of America’s age of opulence comes as the world’s ability to supply itself with cheap abundant fossil fuels is becoming steadily more problematic. In a world of scarce energy, the opulence of the recent past will no longer be in reach for anybody. The sooner we begin retooling our lives to deal with that reality, the better off we will all be in the future. A depression would thus bring about changes that are going to happen anyway, and would do it at a time when the world could still devote significant amounts of energy to the transition.

No matter what we do, the way there won’t be easy. Hard times are hard times, and it’s a waste of time trying to sugarcoat that fact. Still, an economic contraction beginning now – before peak oil has a chance to force the issue – could give us a crucial margin of lead time.


FARfetched said...

One could liken depression to a fever — not pleasant, but it (as intended) weakens viruses or bacteria and allows antibodies to mop up the survivors. I'm not sure what the analogue would be to "stay hydrated" during an economic fever, but at least you can have the attitude my son did when he had a high fever at age 6: enjoy the hallucinations.

This proposed bailout is a non-starter, as far as I'm concerned. Why should we bail out the people who have profited off our backs for 28 years? The song that comes to mind is "The Roof is on Fire," which lyrics are not suitable here.

David said...

As Rosemary said: "This is no dream! This is really happening!"

I have to keep reminding myself that what I've been preparing for is really underway. And the cognitive dissonance between manifest reality and election-year rhetoric is becoming almost intolerable. Political leaders look and sound like crazy people, and the things that come out of their mouths are like the darkest gallows humour now.

I tell ya, I cannot wait to be able to look back and realize that at least we have started to live in a state of awareness of real limits to human activity, heightened respect for our neighbours and fellow creatures, and a sense of shared commitment and cooperation. It's going to be a long time to get there, but I hope it might catch me by surprise before I die.

Thanks for another good one, John Michael.

anti-globalism said...

Let the power fall, as Robert Fripp had it. Civilizations undergo cycles and the West is at the end of its cycle. No pity for the downfall. We'll build anew from the ashes of the old.

Jacques de Beaufort said...

All very true..

I wonder however if this lead time will just be squandered in a futile effort to bring back things to the normative hallucination of the last 20 years. Certainly if ever there was a time for Peak Oil public education, this is it.

It's interesting to me our addiction to oil is always couched and qualified by the MSM as our dependence on "foreign" oil as if somehow it's only a negative if it threatens our imperial domination. At least there is a recognition of a problem, and it's not a huge jump to remove the jingoistic syntax and give birth to a new reality paradigm.

The problem with Depressions is that massive angry and disenfranchised hordes are very susceptible to propaganda and easily manipulated. I have my eyes peeled for emergent forms of fascist ideology and militancy that will surely emerge as a response to a national wounding of pride. Additionally I fear that the wealthy will further cloister themselves behind Blackwater style militias and try to hang on to the last vestiges of their speculative gains.

Time will tell.

Chris said...

John - great analysis, as usual.

I'd add one more factor, however. The post WWII boom came about largely because of geographic factors. While Europe and Japan were bombed into ruin, the United States escaped the war with its infrastructure completely unscathed. We possessed roughly 1/2 of the world's industrial production. Furthermore, if we didn't find an outlet for all of that surplus productive capacity, it was quite possible for our economy to slip back to prewar levels.

That excess productive capacity provided goods to the rest of the world. This meant that the U.S. became the world's creditor, and discovery of massive Texas oilfields also made us the global swing producer of petroleum.

That arrangement could not continue in perpetuity. As Europe and Japan rebuilt, they began capturing sectors of the world economy previously monopolized by America. As our share of global production declined in percentage, and we passed our oil peak, circumstances we had come to take for granted began to unravel.

I think that we chose to continue the unsustainable rather than accept the reality that crises in the 1970s were trying to show us. We chose the man that Andrew Bacevich described as the "modern prophet of profligacy" and his promises of "morning in America" over Jimmy Carter's "malaise."

hapibeli said...

Bravo. My sentiments exactly, for the last 20 years. An economic cleansing would be painful, but a long range blessing.

hardhead said...

I've been following this blog for a few months now (though I've been following the implosion of capitalism for about 35 years), and it seems to me that you have a firmer grasp of the root factors than anybody else I've seen. Hail, and well met.

Couple of things I'd like to add, if I could: First, I agree that recessions, or depressions, or panics, or whatever you care to call them, are endemic, and the one that's coming is no different, just the latest. They have inevitably occurred, without fail, ever since people began believing that they could get something for nothing. And they will continue, inevitably, as night follows day, just as long as we hold to that superstition. Only in imagination does interest compound indefinitely - it is distinctly not a feature of the real world.

The other point I'd like to make is that this particular iteration, aside from offering us the opportunities you pointed out, also presents us with a chance to begin retaking control of our governments at all levels. It'll be a long hard row to hoe, because what we have now is only a semblance of (small d) democratic or (small r) republican government, with hardly any substance. As a beginning exercise, I suggest voting out every single incumbent, regardless of individual merit. We have to send the message that BAU is no longer an option, and I can't imagine a better way. Once that's done, the next item on the agenda is to devise a new system for choosing candidates, one that proceeds from the bottom up, rather than our current system of being offered a choice between candidates pre-chosen by unaccountable powers.

I could go on, but getting that much done will certainly occupy us all for a good long while - long enough to decide where to go from there. The key is to start now, while the window is open. Our current and looming crises will engender, at best, great discomfort, but if we grab the bull by the horns, we can get right with this world, before it's too late.

Bill Pulliam said...

I guess I don't see as much clear distinction between the unfolding collapse of the financial speculative bubble, the 2000 collapse of the high-tech speculative bubble, and the looming collapse of the cheap energy bubble. To which you can also add the impending collapse of the personal fiance bubble, which will be coming on to the radar screens as the effects of the financial collapse trickle down to through the middle class, with or without the "bailout.". To my eyes all these bubbles are just different twigs on the same bush, which all have their roots deeply and solidly in the affluence and grow-grow-grow-thinking of the energy boom in the run-up to the peak. The gradually growing global depression as the peak is neared, reached, and passed is a virtual inevitability, of course; I see these things as individual tremors from the same underlying tectonic shift.

I think the push for the bailout, unfortunately, demonstrates exactly the means by which our remaining capital will be squandered in trying to deny the shift, rather than using it to build for the future. The fact that as far as I can tell about 98% of the general public, regardless of political alignments, seem to be crying "Foul!" against the bailout suggests that maybe the great unwashed collective actually is acquiring a better sense of historic change than the political and economic leaders have.

Right now, in State Capitals surrounding me, there is a severe gasoline shortage. People in Nashville who have gas are having to go rescue their friends who have run out. Though the "officials" are saying it should ease within a few days, other more credible sources (see "The Oil Drum for instance" indicate it could drag on for weeks. And are the masses rioting? Nope. It's hardly even making the national news; hell it isn't even always the lead story on the local news. People are just dealing with it. There seems to be a pervasive sense in the collective mind that the American economic system is unravelling on so many fronts that this one more little systemic failure of infrastructure, industry, and economics is hardly even surprising to people anymore. "Oh great, now the gasoline is gone... fine... whatever, tomorrow it'll probably be the food or the drinking water. Sheesh, the way things are going these days, I just don't know anymore..."

John Michael Greer said...

Farfetched, that's quite a workable metaphor. As far as staying hydrated, I'd compare that to making sure you have ways to produce useful goods and services, and exchange them with your neighbors and friends; you may be poor but you can still eat.

David, I know the feeling. After so many years of predicting, say, oil prices over US$100 a barrel and the explosive unraveling of the debt economy, it's a bit dizzying to see all those predictions coming true.

Antiglobalism, it's one thing to talk of letting the chips fall where they may in abstract terms, but these are human lives we're discussing. Compassion becomes an even more crucial practice than usual in harsh times.

Jacques, we may well see mass movements of various kinds, and I don't doubt that the rich will try to cling to what they think is theirs. Still, the sheer scale of economic failure made evident by a depression tends to send old truisms to the dumpster in short order; thus you're quite right that this is an excellent window of opportunity for education.

Chris, you're quite correct, of course -- the roots of American empire in the aftermath of the Second World War is something I've discussed in earlier posts.

Hapibeli, exactly. Surgery hurts.

Hardhead, if we're to have a republic again in the US, the rebuilding has to start at the local level, with the reinvention of civil society and the politics of personal involvement. Voting out the current incumbents simply means that a new set of scoundrels takes their place; what has to happen is a sea change in the way Americans relate to their government, and that has to start with abandoning the fantasy that we can have other people run things for us.

Clifford J. Wirth, Ph.D. said...

The stock market will keep going down as everyone realizes that paper investments are only as good as the availability of cheap oil. If an airline ticket costs $50,000, how much is your pension worth? And when gasoline costs $50 per gallon, how much will it cost you to drive down the convenience store to buy a little milk? This depression is not a cycle, it is the beginning of the end, documented free here:

tristan said...

I was discussing these issues with my roommate last night and we came to the conclusion that one thing that needs to be dropped from our cultural mythology is that we somehow are in service to the "markets". It has become bizarre to hear the various talking heads talk about this or that plan and whether or not it is "good for the markets". The underlying assumption is that what is good for the markets is defacto good for the populace.

I believe that our elected leaders are now facing a cognitive dissonance. 700 billion dollars is certainly good for the markets but their constituents are screaming that it will be bad for them.


yooper said...

Hello John! If there ever was a post that I'm in more agreement with, I've missed it! Excellent, everything!

Coming from the U.P. of Michigan, I've got a glismp of what these CCC (Civilian Conservation Camps) were like here during the Great Depression...(that is not an error, camps not corps) NO ONE, who ever was apart of this govermental movement called it in any different terms than that, as it was related to me....

Hopefully, as I describe this era, as it was here, your readers can envision what this may mean for them and their family in the near future.

I'll be back....

Thanks, yooper

painfulsyntax said...

What happens when examples #1 and #3 are combined? America's military will be moved stateside. This military will need to do something besides practice. It seems the most energy efficient means will be domestic harassment or near-international harassment (Mexico? Cuba? Canada is too nice and similar to us).

World production of oil aside. America may not be getting 2/3's of its oil fix within a few years. Reports of China becoming wary of the USD are showing up. Many nations may follow soon.

As many others have already posted, personal predictions coming true give me delirious heebie-jeebies. In metaphor speak: If this is the first crack of thunder and gust of wind. I don't know if I'm ready for the storm.

CrismonCoconut said...

In response to Mr. Wirth:

You're being quite useless to the Peak Oil community, as are the other 'Hard Crash' theorists out there. Your group offers NOTHING except paralyzing fear to your readers. You don't make us want to conserve or relocalize, you make us want to leap from the highest building we can find. You all assume that world governments will sit around picking their noses while society crashes into the ground. Why would they allow gas to go up to $50 a gallon, etc? We're still in the very early stages of the decline, if we're even actually declining yet. I don't see any reason why world powers wouldn't come together to deal with this issue once it becomes obvious. There may be a few resource wars here and there, but I strongly believe that in crunch time we'd much rather invest in wind turbines and public transportation than building more bombs and blowing eachother up. Nobody wins that way. But I digress- If you aren't going to do anything but make ridiculously over-the-top apocalyptic claims, we're not interested.

Anyway, now that I got that out of my system, I'd like to pose a question to John. You've talked about the end of the global economy and rebuilding our own factories, but does the end of cheap oil really mean the end of large-scale trade? We have our neighbors in Canada and Mexico, and further down in South America. Perhaps the 'Global Economy' will be replaced by a smaller, less distant version of itself in the near future, maybe breaking down into trading within hemispheres? American exports are still popular from what I know. The few things we still make here, we make well.

Nicolas said...

I would like to add another point to that list. The completely unecessary High Speed Train that Argentina's government tried to create in our soil was completely stopped since no one of the possible companies was able to get loans for the project.

hardhead said...

John -

Whether we gradually glide down to some comfortable network of green communities or plummet into a maelstrom of roving bands of foragers, government will still be an essential function - just as essential as food or shelter. Unless, that is, we don't mind living with an anarchic war of "each against each and all against all."

Agreed, we need to rebuild civil society at the local level by reconnecting with each other in our own communities. But we need to get out of our armchairs and down to the street, or we're going to get steamrollered by others who have another agenda in mind.

The present situation, with people everywhere of all political persuasions overwhelmingly opposed to, and angry with, the "bailout" being railroaded through Congress, is a golden opportunity to begin a political reconnection with each other and simultaneously get out hands back on the controls of our government and begin ruling ourselves again.

It's important to have a sense of how we got to where we are, what direction we'd like to go, and some ways to get there. But at some point, we have to do more than think and talk and lay groundwork - we gotta grab hold of the handle and "git 'er done."

The chance might not come again.

Panidaho said...

painfulsytax said:

"As many others have already posted, personal predictions coming true give me delirious heebie-jeebies. In metaphor speak: If this is the first crack of thunder and gust of wind. I don't know if I'm ready for the storm."

I don't know if it is possible to be ready for the storm, except perhaps "mentally ready." Too many variables, too many unknowns. But I try to take heart in knowing that there are things that are the right and smart things to do no matter what is coming. I figure if I do those things, I'm accomplishing more than just preparing for a storm - I'm preparing for a new kind of life, and hopefully eventually a more sustainable one at that.

I think mental flexibility and a firm sense of one's place in the universe will be the most important indicators of success in the next few decades.

John Michael Greer said...

Clifford, phrases like "the beginning of the end" are a tipoff that what's being retailed is myth rather than history. You might want to glance at this post sometime.

Tristan, excellent! "The markets" are simply the complex economic games that prop up the current order of things, including its power structures. Human values take precedence -- or ought to.

Yooper, we had quite a few CCC camps out here, too, and the official paperwork I've seen said "corps." Still, it's a minor point.

Syntax, when the US military returns stateside, those units not demobilized as a cost-saving measure may be up to their eyeballs in domestic counterinsurgency. We're facing some very rough times. Agreed, though -- it's unnerving to see the things I've been predicting for all these years happening around me.

Crismon, there'll doubtless be trade across borders; by suggesting that the global economy is ending, I'm simply saying that in an age of scarce energy, much more of each nation's economic potential will be spent supplying the needs of its own population.

Nicolas, that's a good example of the process at work. A lot of expensive projects being touted as solutions to the current crisis will face the same sort of real-world obstacles.

Hardhead, of course government will be a reality in the future; anarchy is a temporary and self-correcting phenomenon. My point is that trying to rebuild a democracy here in America by trying to force change in the current system will fail, unless we also rebuild the institutions of civil society that make government by the people a possibility in the first place.

Teresa, the one thing I'd add to your list of necessities is the foundation of practical skills needed to get through the rough spots of the crisis ahead of us. Still, that's my only quibble.

Panidaho said...

JMG said:

"Teresa, the one thing I'd add to your list of necessities is the foundation of practical skills needed to get through the rough spots of the crisis ahead of us. Still, that's my only quibble."

Absolutely! I was implying that in the "things that should be done regardless" portion of my post.

In that list I include living lightly on the earth, becoming as self sufficient as possible, being frugal, creating practical and beautiful things with your own hands for personal use and trade, etc. In other words, not being wasteful, arrogant, lazy or useless.

Matt said...

I'm of a mixed mind over the financial collapse going on. On the one hand this will probably harm a lot of people and make life harder for them, especially in the Third World. On the other hand, it does seem we need to slow down and a deep recession maybe something we need. I am posting a portion of an interview done with Sveinbjorn Beinteinsson, an Icelandic pagan, back in the 1990s, because I think its really on point. The whole interview can be found at

G. G.: You have here in Iceland partially due to the island's isolation and partially to the political move for independence­ a Republic since 1944 ­somewhat of a special situation.

S. B.: "Yes, technical advances in the world pushed us forward. Machines, cars, jet planes, modern ships ­all of it came at once­ in a single generation. We hadn't gone through any of the modern developments like the rest of the European countries. Take, for example, sailing. For a 1000 years man has been sailing. It took thousands of years for man to learn sailing. And, suddenly, in the space of one generation came steamships, then motor boats, all the way up to atomic powered submarines. That was all way too fast, and much too much at one time. That can hardly be done in one generation. Amazingly enough, man adapted quickly to all the new things but at the same time lost his normal, intuitive relationship to Nature. Instead, man created a dead environment. He surrounded himself with a man made wasteland."

G. G.: Is Nature taking revenge while she dies because man has lost his relationship with her? Is that what you're saying?

S. B.: "Yes, I can well remember what the old people used to say to me as a kid: 'Let the tree stand; leave the moss on the rock; don't kill the fly in the window!' Nature was a part of our lives back then. After the arrival of technology and science, we have to wait because the soul comes in second. Mankind seems to me to be like someone who is being forced to dance. A long time ago, I knew of people who were forced to dance and couldn't stop dancing until they either fell completely exhausted or dropped dead. That how it is in the world today with all the its wars. The world is dancing itself to death and can't stop itself."


painfulsyntax said...

Panidaho, from both mental and physical readiness perspectives I'm more ready than the average joe. Same goes for everyone following this blog. The events in the near future will take many by surprise. At least we have an idea of what is going to unfold.

For instance I choose to not use heat in my home (with the exception of minimal use during near or below freezing outdoor temperatures). What happens when rolling black-outs deny me the choice of electric heat? Personally, I haven't fully let go of the modern industrial illusion of control. I like having the ability to turn on the heat, even though I choose not to.

Anyway. An economic depression should be good for the US, so long citizens remain civil. Depression will become inescapable. You can only run up credit card debt for so long. People are going to be forced to wake up from the American dream.

John Michael Greer said...

Teresa, thanks for clarifying!

Matt, thanks for the excellent interview!

Syntax, a useful point.

Yooper, your post got bleeped for profanity; by all means resubmit it in a state that will pass muster on school computers, and I'll post it.

Dragonfly, your post came through garbled -- the first two paragraphs were repeated twice over -- and also contained profanity. Same rules apply.

CrismonCoconut said...

Hard times so often bring out the best in people. The depression was nasty, sure, but it didn't turn people into savages, and most likely neither will this one. In fact, I would suggest that hard times often bring out the best in people rather than the worst. Some of our greatest cultural achievements occured during the depression years after all, especially in the creative sectors.

Still, the thing I don't understand is, do we really NEED to have a depression at all? Or at least one as bad as the last? In the depression, we waited and let things get worse than I think they had to be, because nobody was sure what to do until FDR. This time, though, why not just begin the healing process at the start, if we're just entering a depression. We'll probably still have one but it may not be as long or painful. This time at least we can use history as a guide and see what worked. I'm sure the next president would rather be remembered as another FDR than another Hitler. Do we actually need for the depression to get into full swing before we get going on this, or can't we start now? Well, we'll see.

yooper said...

Hello John, you're quite right, what was I thinking? I'm better than that! Btw, it's pretty hard to stomp on somebody's tail, if they don't have one, eh?

As promised, here's a link to the CCC (Civilian Conservation Corps).,1607,7-160-17451_18670_18793-53515--,00.html

The North Coast said...

One of the astute posts I've ever read, even though I have very little argument with most of your points.

It will be painful, but I'm acclimated to pain. But there will be many gains, not the least of which is that a major downturn is the necessary cleansing that will wash out dishonest, parasitical businesses and industries, and get us rooted in reality again.

The proposed bailout will not do one thing to mitigate the worst of what's coming, but will only add unnecessarily to the pain, and place us in danger of a U.S. Treasury insolvency.. which looms as a frightening possibility in any case.

John Michael Greer said...

Crismon, in a purely theoretical sense, no, we don't need a depression; we have the potential to make the changes we have to make right now. In the real world, though, a majority of Americans would agree to accept a drastic cut in their standard of living -- this is what we're talking about, after all -- when pigs fly and the sea is less wet. Thus the value of a depression; it forces us to accept the choices that will give us a future, even at the cost of present pain.

Yooper, many thanks.

North Coast, thank you! As for the US defaulting on its debt, at this point that's simply a matter of time. The US is bankrupt by any definition, and it's purely a question of how long it takes for its creditors to realize that fact and begin dumping T-bills on the market for whatever they will bring.

CrismonCoconut said...

wwwwwGood reply! Though I didn't mean to suggest that we wouldn't have to have a depression at all, merely that we don't need to let it fester for four years the way Herbert Hoover did.

That being said, I really think that a 'drastic cut' in our standard of living isn't completely impossible to sell. Obviously we'd all really like to have it both ways, energy independance AND an SUV. Still, I think that if people were told to sacrifice for the sake of energy independance/climate change, a lot of us would. Sell it to them as patriotic if you must, that should get the conservatives going. For one thing there are dozens of things we can do without that really won't hurt our standard of living. We need phones, not cel-phones. We need food, but not as much as we eat now. We need cars, not SUVs. I would bet we could cut our energy use in half without hurting too much just by cutting out waste, and that will looks pretty darn good soon. Besides, consumption isn't directly related to happiness after all. There's no evidence that people in Brazil are any less happy than we are, with far less energy used and still remaining major power in the region.

One thing I get a lot from friends when they talk about frustration with politics is the threat to move to Europe. I've had the thought a couple of times, but seeing Russia's growing influence over oil reserves there, I'm thinking a medium-smallish city in the Northwest might make a better spot. Yes, they're better set up than we are, and are used to using much less energy, but at the same time many European and Asian countries have NO oil of their own at all. We still do, and have neighbors that do. Everyone seems to think that the US will be ground-zero for the peak oil disaster, and as a college student I'm looking into some skills that will be useful no matter what happens. Still, I don't think it's fair to run around scream 'AAAAGH, WE'RE ALL GOING TO DIE!'. I think we could be in a much worse postition than we actually are.

Still, a couple things worrie me-A depression would seem to give us a great chance to get our national act together, but with all we have to do, where will the money come from? And with other economies rising in China and Russia, would a depression in the States really help keep oil prices down?

Danby said...

Contrary to what you may have been taught, FDR's actions actually prolonged the depression, just as Hoover's made it more severe. Both tried to get us through without accepting the economic pain that was necessary to correct the credit markets, and without destroying the fractional reserve banking system.

Hoover tried to stem the crash by dumping huge amounts of money into the banking system (sound familiar?). Not only did this fail to clear up the basic problems in the economy, it destroyed the banking system as well.

FDR's "alphabet soup" of government agencies, materials allocation, producer's cartels and wage and price controls may have helped a bit in the first year of two of the 1932 depression, but became a huge drag on the economy, with essentially every business decision being made by bureaucrats rather than the businesses themselves.

Ultimately the stock market is parasitic on the economy, and a stock market crash is of no concern to anybody but stock investors. A vanishingly small percentage of the activity on Wall street actually does anything to fund productive work.

The real engine of the industrial economy is the credit markets. That's where companies raise get the financing to purchase equipment, make payroll, buy raw materials, etc. After the stock market crash of 1929, the economy was actually getting along okay, for most working-class people, even though investors were watching their theoretical wealth being destroyed. It wasn't until the cascading bank failures of early 1932 that the economy went in the tank. Virtually every bank account in the country was frozen, some for weeks. Imagine what that did to local retailers, small manufacturers, ordinary people. A lot of locales wound up creating their own currency for the duration of the "bank holiday".

I fear that our masters have decided that they must "do something" and the loudest lobby is the banks and the Fed. Rather than try to deal with the roots of the problem, it appears we are about to commit the same mistakes, with the same tragic results, only without the cheap energy resources to eventually pull us out of this one. I just hope we don't start WWIII on the mistaken belief (often repeated in histories of the 1930s) that WWII was what finally ended the Depression. Given that our biggest rivals on the world stage are much more industrially and petrocehemically self-sufficient than we, it would not bode well.

tristan said...

Interesting comment about the T-bills as currently they are being bought up as a flight to safety. But we are undoubtedly running into the classic Austrian "crack-up boom" where things tend to whip saw violently.

I think the reason that we will see a depression is summed up nicely in todays events (09.29.08). Wall street sees the need for a massive bail out but how that should be implemented is not clear. The amount is so enormous that the tax payers revolt against it. The congress is facing the business experts telling them "do this or it all goes down the toilet" and their constituents saying "don't you dare send my money to bailout fat cats who at best made bad decisions at worst were corrupt".

The result - noting happened. The bailout bill failed by a narrow margin. It may eventually pass but who knows if it will do any good at all. As our representatives dither the situation gets worse and worse and even though we have history to guide us - we still don't know what to do because we don't want to face the painful truth.


Lance Michael Foster said...

Speaking of a depression and hard times, there are lots of places to get lessons from on how to get by, both in inner cities and in rural areas.

For example, there is a wonderful resource from West Virginia, including a seasonal round of activities, much like Native Americans had. See
the Library of Congress at:

Here's a brief quote: "Flea markets in the region span a gamut from large, more formal sites like the Beckley Flea Market (open on Wednesdays and Saturdays) to ephemeral roadside stands and yard sales that proliferate throughout the region. Like gardening and in former days, moonshining, small-scale trading in second hand goods has long formed a crucial piece in a rural patchwork economy that fills in the financial gaps endemic to boom-and-bust economies built around coal and timber."

hapibeli said...

"All hail the coming Redepression!" May the financial and social systems have the cleansing they deserve. May the USA finally have to admit that the Military Industrial Complex and its associated financial institutions, petroleum oligarchies be brought down to a more realistic size that real manufacturing industries can return to North American shores. May we once more see USA and Canadian made products that last 30+ years be the norm. May Big Box stores have to fight with local suppliers for retail dollars and loyalty. May good union jobs return to lift North American families into a realistic middle class. May the "service economy" be returned to its level of importance that it held in the late 1950's and 60's. We've been on a dangerous path as a society since Ronald Reagan's disastrous terms as president and it is time to reverse course. Bring on the pain for 10 years or so and let's stand up and walk TALL again. New alternative energy support, rebuilding of our rail systems, conservation as a watchword of pride! This foolish consumerism with its debt, stress, greed, and stupidity must be erased. Come on America and Canada!

hardhead said...

John -

> ...unless we also rebuild the institutions of civil society that make government by the people a possibility in the first place.

Well, sure. We're in agreement, then.

I'm posting this after the House of Representatives voted down the bailout. It looks like this happened more because many Republican members stood by their ideological guns (for which I admire them - at least they have principles other than getting elected, even though I personally disagree with nearly every single one of them), though apparently a number of Democrats were swayed by their constituencies' vehement opposition. This would seem to indicate that at least some of our elected officials are still susceptible to rank-and-file voter opinion.

In any case, this voter opposition looks to me like a golden opportunity, while everybody's mind is still on the subject, for us to begin the rebuilding of civil society that we need. I strongly urge everyone to talk with family, friends, coworkers, or whoever else will listen, about our current crises, with a view to building some kind of consensus among ourselves about what's really going on and where we want to go, then learning how to effectively get control of our elected leaders to help get us there (or at least stop helping those who don't want to see us get there). Keep at it, though, even if there's only 2 or 3 people at first working together - this is long-term, painstaking work requiring commitment and persistence. We can do it!

John Michael Greer said...

Crismon, one way or another it's going to be tight. The reason I think a US depression will likely bring down energy prices, though, is that we in the US use 25% of world petroleum production, and a fraction of the remainder goes to produce goods and services for us overseas and ship them here. Cut that sharply and it'll take a while for the slack to be taken up.

Dan, I'm far from convinced that Roosevelt's actions were as damaging as current conservatives claim. New Deal reforms played a large role in stabilizing the economy -- as evidence, I point to the return to bubble-and-bust economics once they were removed -- and those people I knew who lived through the Thirties all insisted that Roosevelt's programs more or less saved their skins. I tend to think their on-the-spot assessments deserve the benefit of the doubt.

Tristan, good. The volatility we're seeing is very much a symptom of an economy in extremis; we'll see what happens now, but a prompt return to prosperity is about as likely as pigs (with or without lipstick) sprouting wings.

Lance, thank you for an excellent resource!

Hapibeli, I'm not quite as optimistic as you are; still, if more people approach the current mess with your kind of attitude, we may yet see some positive change.

Hardhead, we are indeed in agreement. I was proud of what remains of our republic yesterday -- it's rare enough that elected officials actually listen to the people they allegedly represent, but it does happen. The challenge now is to get past slogans and get people talking about the hard realities of our predicament.

roy said...

"Anarchy" has been mentioned a few times, and it's usually equated with chaos,etc.. There is a lot to be said for anarchistic tribal, informal and formal associations. For too long we've been taught that we are in desperate need of being led. I think we can all see where that's gotten us. Most societies evolved some form of cooperation. Given the chance, I think we can get back to that.

John said...

My name is John.
I am an Anarchist.
Anarchy does not mean chaos, chaos is more like Capitalism, which is based upon fear, inequality, and hierarchical violence/theft.

I believe in self-sufficiency, self-defense, sustainability, personal autonomy, freedom from oppression, true equality, communal property, liberation, and mutual aid, among others.

For an easy introduction to what anarchism actually is, look up

"Anarchism 101" series on youtube (this one answers every question people have about anarchism)

For anti-civilization information/arguments/perspective:

Derrick Jensen's "Endgame, Vol.I & II"

Question your assumptions. Oppose injustices. Cooperate as equals, in harmony and without hierarchy/oppression. Learn to be self-sufficient, and to not rely upon things that are not sustainable/replenishing, such as an oil-economy, or industrialism.

Kold_Kadavr_flatliner said...

Cool. Will keep it succint --- Got moxie? Most of U.S. don’t. Read the signs of the times: God’s a concrete, kick-ass reality. “A must read if youse wanna live.” -Fr. Sarducci, SNL