Wednesday, February 25, 2009

The Investment Delusion

You might think that my position as head of a contemporary Druid order, with the colorful title and funny hat that go along with it, would keep me safely out of touch with the mainstream of American opinion. Still, it's been my experience that when I talk about peak oil to a pagan audience, I get the same reactions and questions I can expect from the most mainstream listeners.

I had a reminder of that the weekend before last, when I spoke on the future of industrial society at Pantheacon, one of the largest pagan conventions in America these days. Yes, pagans have conventions; this one happens annually on President's Day weekend at the Doubletree Inn in San Jose, California; it's an endless source of amusement, at least to me, that conference rooms more often used for corporate sales meetings spend one weekend a year hosting something so different.

Pantheacon is always a learning experience. (Mind you, one lesson I learned this year was that it's wise to avoid the Doubletree's pet steak house, Spencer's, unless you fancy undistinguished food and glacially slow service at a jawdropping price.) Still, I also gained a useful reminder of the way that certain misguided ideas pervade every corner of contemporary society, and it came – as such insights usually do – during the question and answer session that followed my talk on peak oil and the coming deindustrial age.

The questions that get asked after these presentations are as predictable as a politician's excuses, though not all of them are as pointless. There's always somebody who is sure that I haven't heard of the energy source he's convinced will enable the world to keep on increasing energy use at an exponential rate forever. There's always somebody who's convinced that an evolutionary leap or some other deus ex machina will allow us to dodge the consequences of our own bad choices. There's always somebody who thinks I'm talking about fleeing to a cabin in the hills with plenty of ammo and canned beans. All these get crisp replies detailing the reasons why I think they're deluding themselves. Then there are the people who want to know what they can do to deal with the challenges of the future, and they get the best advice I can give them.

Finally, though, there's always somebody who wants to know what investment strategies I recommend. These days, the person who asks that question is usually silver-haired, nicely dressed, and visibly worried. I wish I had a crisp reply for that question, or for that matter, some good advice to offer. I don't, because the question itself embodies a series of fatally flawed assumptions that reach right down to the nature of wealth itself. On its own terms, it's as unanswerable as a question about how to build a working perpetual motion machine.

Yes, someone at my Pantheacon talk asked about investment strategies, and yes, she was silver-haired, nicely dressed, and visibly worried. I fumbled through an answer, but the question deserves more than that, if only because it's on so many minds these days. Thus this week's post. I should caution those of my readers who have investments that they won't like what follows.

Let's start with fundamentals: the nature of wealth. Ask ten people on the street today for a definition of wealth, and dollars will get you doughnuts every one of them will tell you that wealth consists of the possession of plenty of money. That's what nearly everyone thinks, but they're quite wrong, and it's easy enough to show the fallacy.

Imagine that a private jet full of politicians makes an emergency landing on an uninhabited island in the Pacific. Each of the politicians is carrying a briefcase containing $1 million – we'll be polite and say it's from campaign contributions. The island has a water supply and enough natural foodstuffs that the politicians don't have to worry about starving to death. Will the politicians on the island have a standard of living corresponding to their net worth of $1 million each? Of course not; their actual prosperity will be measured by the breadfruit they harvest, the fish they catch, the huts they make, and so on.

Money, in other words, is not wealth. It's a social mechanism for distributing wealth. It means nothing unless there's real wealth – actual, nonfinancial goods and services – to back it up. In a healthy market economy, there's a rough balance between the amount of money in circulation and the amount of real wealth produced annually, and so the confusion between money and wealth can slip by unnoticed. When money and wealth get out of sync with one another, problems sprout.

The economic history of the 19th century offers a good example. The rising industrial economy of the time drove a massive increase in the production of real wealth. Most industrial nations, though, inherited money systems backed by gold reserves that offered few options for expanding the money supply to match the supply of real wealth. The result was a deflationary spiral that brought major economic depressions every couple of decades for most of the century. In response, in the 20th century, nation after nation abandoned the gold standard's straitjacket and retooled their money systems to meet the needs of an expanding economy.

That's the context of the present crisis because, in terms of real wealth, we no longer have an expanding economy. The production of real wealth in the world's industrial nations has been in decline now for decades. Some of the deficit has been made up by importing real wealth from overseas, but not all; compare the lifestyle available to a single salary working class American family in 1969 to the lifestyle available to a similar family today and it's possible to get a glimpse of just how much impoverishment has taken place over the last forty years.

This impoverishment went unnoticed by most people because the money supply didn't follow suit. Until the economy came unglued in the second half of 2008, money had never been so abundant or readily available. Some of it got spent on real wealth, which is why real estate and other commodities soared to giddy heights, but most of it was diverted instead into various forms of abstract pseudo-wealth related to money in much the way that money relates to real wealth. Yes, I'm talking about your investments.

The confusion between money and wealth and the biases imposed by the long economic expansion of industrialism have made it almost impossible to talk sensibly about investments these days. It seems normal to most people that they should be able to invest their money and, as a matter of course, get back more than they put in. This reflects the dynamics of an expanding economy; if the production of real wealth is increasing, investments on average will increase in value over time to match the growth in real wealth, and the payback on investments reflects this. Outside of the special conditions of a growth economy, though, that logic no longer applies.

The long economic expansion of the industrial age has fostered the massive growth of what old-fashioned Marxists used to call a rentier class – a class whose money makes money for them. Even among people who work for a living, the idea of joining the rentier class on retirement, and living comfortably off investments, has become very popular in recent years. The problem, of course, is that the age of industrial expansion is over; it was made possible in the first place only by exponentially increasing the use of fossil fuels and other natural resources; like all exponential growth curves, it faced an inevitable collision with the limits of its environment – and that collision is happening around us right now.

We are thus entering a period of prolonged economic contraction – not a recession, or even a depression, but a change in the fundamental dynamic of the economy. Over the centuries just past, a rising tide of economic growth was interrupted by occasional periods of contraction; over the centuries ahead, the long decline of the industrial economy will doubtless be interrupted by occasional periods of relative prosperity. Just as a rising tide lifts all boats, a falling tide lowers them all, and if the tide goes out far enough, a great many boats will end up high and dry.

The desperate attempt by full-time and part-time members of the rentier class to avoid dealing with this unwelcome reality has had the ironic result of making the situation much worse than it had to be. As actual investments in productive economic activities stopped yielding a noticeable profit, more and more investors sought to make money via a menagerie of exotic financial livestock notable for their complete disconnection from the economy of goods and services. The result was a series of classic speculative bubbles, culminating in the crash of 2008 and the crisis still unfolding around us. In the process, eager investors who might have lost their money slowly over a period of years have, instead, lost it all at once.

Still, in a contracting economy, on average, all investments lose money. This is the hard reality with which all of us will have to deal. This is why, in the twilight years of the Roman world, a complex money economy that made heavy use of credit and investment gave way to purely local economies of barter and customary exchange, in which money played a very minor role and credit was unheard of. It is also why the two great religious movements that rose out of Rome's ruins, Christianity and Islam, both considered lending at interest a mortal sin – though Christianity managed to talk itself out of that useful teaching some centuries ago.

Thus the only investment advice I can offer is to get out of investments altogether, and put your money into something that will actually be useful: training in practical skills that will make you employable in a deindustrializing economy, for example, or extra insulation so you can keep your home livable with less energy. At this point in history, the belief that it's possible to have your money make your living for you is basically a delusion; it's likely to be a fairly persistent one, but those who can shake themselves free of it and adjust to life in a radically different economic reality are likely to do better than those who keep on chasing the prospects of an age that is ending around us.

83 comments:

streamfortyseven said...

"Growth" stocks are out, and so are "income" stocks, because the first depends on growth in quarterly profits, and the second depends on growth in quarterly dividends, both of whose value over time depends not only on growth and expansion of production (and thus energy usage), but also on acceleration of growth and expansion of production. For an equity to simply retain its value, earnings must grow over time. In an economy making a tranisition to a no-growth state, surplusses (if any) contract in size, proportional to the amount of excess energy available to produce those surplusses. Currently, the amount of available excess energy appears to be decreasing. In this situation, it wouldn't really make sense to hold any kind of stock at all. The same goes for corporate bonds, where the ability to pay the interest on the bonds depends on corporate earnings, although for government debt, the payments of principal and interest depend on the size of the tax base and how much taxation they will bear before a revolt of one kind or another occurs. As far as I can predict, the only investments which will make money would be part ownership in reserves of scarce resources such as oil and natural gas. minerals (phosphates), arable farmland (which has a steady water supply from rainfall or natural watercourses), all of which would produce something that could be used in place of paper money (or upon the value of which notes or other marketable ownership interests could be based).

As for wealth and money, you're wealthy if you have a surplus of food, tangible goods which you produce, tangible goods upon which your life (and comfort) depends, paper money or its equivalent, or some combination of these items, at the end of each month. If you have a deficit, you're poor. I've known people who cannot make ends meet at an income of $80,000 per month - they spend $100,000 per month, thus go into debt (or spend their capital) at the rate of $20,000 per month. Eventually they'll have spent all their capital and they will end up impoverished and unable to fend for themselves. I've also know people who can put aside $1000 per month - and they end up rich.

Really, in a low or no-growth economy, the only "investments" are things that are stores of value, such as land, water, non-perishable food, tangible goods (hand sewing needles, salt, coffee, pepper, cinnamon, tea...), and perhaps precious metals like gold, silver, copper, tin, lead, and aluminum.

Lloyd Morcom said...

Thank you John for such a wonderfully lucid explanation of the investment delusion. It's extraordinary isn't it that all over the world, even in far-off Australia(!) individuals are spending sleepless nights thinking that somehow, somewhere there has to be a winner to back that'll keep the dream of a lazy retirement with fine wines and world tours going forever.

And as yet no leader anywhere has spoken truthfully of what we face, or even shown any sign of grasping the truth. The over reaching dreams continue — we'll remake Afghanistan into an image of ourselves, and keep the Chinese in their box making our stuff, paying them with Monopoly money — but not for much longer I think!

M. Craft said...

JMG, thank you for finally articulating what I have tried, many times, to come up with a plain-speaking way to describe. The closest I had come before now was to explain that printing more money just means you have more dollars chasing the same amount of potatoes, which just makes the potato cost more.

Robert Magill said...

JMG,
I don't agree with your conclusion that gold backed currency caused the constant 19th century money crises. Here's why.

"What we have now is what we had starting in the golden past as far back as 1819. PANIC! Money PANIC!

Banks stopped lending then to pay off huge international debts because we spent too much to purchase Louisiana and people all over the place were dunning us for the money. Sound familiar?

A few years later ,1837, banks stopped lending again. Different reasons, sort of, same result. PANIC!

The we got serial PANICS! starting in 1857 when the railroad bubble burst. The folks playing with soapsuds in those dear bygone days, too? And the results, well you know---pop. The railroads did it again in 1873 and again for the grand finale in 1893. Never could make the iron horse pay its way. Still can't. Maybe someday, but we'll save that for now.

Not one of these major devastating events was caused by anything other than the boys with the big dough getting scared silly and sitting on the money. They PANIC!; then the folks panic."

From www.noabominoidshere.blogspot.com

RDatta said...

This is a very bitter pill, and very hard to swallow. But perhaps it could cure an otherwise serious malady.

Bill Pulliam said...

Excellent essay!

Unfortunately, of course, many of those who hear your message and think that they take it to heart will be concluding that real wealth consists of ammunition, food stockpiles, and home-defense systems, without giving a thought to what happens longer term if they can no longer buy canned beans, ammo, and razor wire, and after they've long since eaten every deer, squirrel, possum, snake, frog, and cricket on their compound. They will of course miss your point that real wealth would be the knowledge of how to create these things from the real resources on hand, not just how to hoard them and keep marauders at bay.

I'd propose that a major component of real wealth is social connections. I don't mean what we now pass off as "networking," which is a stockpiling of contacts for job hunting. It's the basic feature of simply knowing, and learning to get along with, your neighbors and townspeople even though you all disagree on many things. I also don't mean planned and intentional communities of all sorts, including "transition towns" and the like, that use as a premise the assumption that we need to have everyone be of like mind and on the same page even if that means we have to displace the people who are already there. It's just a simple working together, so you individually don't have to be able to do everything on your own -- you can raise chickens and more eggs than you know what to do with, your neighbor has a magic touch in the garden, her uncle always brings in the best corn crop, and his sister-in-law can keep any roof from leaking, that sort of thing. This is the polar opposite of the urban refugee in the wilderness compound behind concrete walls, and it quite possibly doesn't even require moving very far (or at all) from where you are living right now.

Lance Michael Foster said...

EXCELLENT post JMG. People need to invest in relationships as well as their own skill set and abilities. Land is of course good. If I had a million to burn, I'd buy some land, and set up a little learning center, teaching the trades and skills that don't seem to be covered very well today, not only by universities but even community colleges. Sort of an apprentice center for the trades of tomorrow. And with places to stay for homeless youth who would commit fully to that program, and promise to teach the next generation themselves as a point of honor. Bill Gates? Are you listening? And planting trees is always a sure investment for all of us.

yooper said...

Hello John, what a insightful message! Hope those stuck on Gilligan's Island receive it well...

Raymond said...

John –

One question I have from this latest post pertains to the statement:

… There's always somebody who is sure that I haven't heard of the energy source he's convinced will enable the world to keep on increasing energy use at an exponential rate forever. There's always somebody who's convinced that an evolutionary leap or some other deus ex machina will allow us to dodge the consequences of our own bad choices. There's always somebody who thinks I'm talking about fleeing to a cabin in the hills with plenty of ammo and canned beans. …

Are you saying that these people literally believe in, for instance, “… increasing energy use at an exponential rate forever”, or are you saying that this is what they are effectively stating owing to a lack a suitably critical consideration of the matter?

Matt said...

Your assertion that real wealth, actual production, has been in decline for quite a few years is really interesting to me. Could you tell me where you got the statistics and facts to back that up from? Thank you.

Ruben said...

JMG--

I have spent quite a bit of time on money recently, most Notably Chris Martenson's Crash Course, but I found this post very illuminating.

But how about posting your crisp replies; that would be very useful for those of us less articulate than you. Or at least link to pertinent past post that answer the standard questions. Not that I don't want to read your entire back catalogue again....

John Michael Greer said...

Stream, the problem with investing in physical commodities in troubled times is that they're vulnerable to confiscation by governments and less officially sanctioned thieves alike. Skills are a better investment.

Lloyd, all too true.

M. Craft, you're welcome.

Robert, to my mind what you're describing is an effect of an inherently inflexible money system, not a cause. The gold standard has its own serious problems; it's not a panacea.

RDatta, as I mentioned, a lot of my readers will be unhappy with this post. Still, they're going to be no happier if they ignore it and watch their investments move toward their logical final value of zero.

Bill, exactly. The basic unit of human survival is the community, not the individual -- and I should probably add, it's most likely to be the community where you live right now.

Lance, you'd burn a million pretty quickly with that plan! Still, might do some good.

Yooper, all I can say is "this ain't no sitcom..."

Raymond, it's some of each. Some people -- especially the Ray Kurzweil fans -- do seem to believe literally that humanity will just keep on increasing its energy use exponentially forever; have you seen the proposed classification of civilizations according to whether they dispose of the total energy flows of (a) a planet, (b) a solar system, or (c) a galaxy? Still, there are many more whose daydreams of the future imply this without affirming it in so many words.

Matt, this takes some work, since it's necessary to filter out the effects of the inflated money supply. One useful measure is to look at the number of jobs in mining, farming, and manufacturing lost in the US and other industrial nations since, say, 1970. Another is to track nonfinancial balance of trade figures; when median real income in a society is flat or declining, exports of real wealth dry up, and imports of real wealth climb, it's a fair guess that production of real wealth is dropping.

Ruben, my set of standard replies to the standard questions probably requires a post of its own -- which I'll certainly consider doing.

Blackbird said...

May you live in exciting times? Wasn’t that Confucius’ curse? I started stumbled upon Peak Oil Theory while reading an article by Gwynne Dyer about 3 years ago. In it, he talked about James Howard Kunstler. This led me to his book, The Long Emergency and that book led me to others such as The Oil Depletion Protocol by Heinberg, and articles all over the web. However, of all the articles I have read (sorry, I haven’t got to your book yet but I do plan on it) the one that seems to be the most prescient is Dmtry Orlov’s “Closing the Gap”. I imagine that you have read it, but if you haven’t, he talks about the striking similarities between the collapse of the former USSR and the present collapse of the US. Since he is Russian by birth, but grew up on the US, he offers a unique and legitimate perspective. He is a clever, convincing writer with a good sense of humour. He comes across as honest, and at his base, hopeful.

I am a schoolteacher on the west coast of Canada. I find myself looking around at my students wondering what kind of world they are going to find themselves in when they reach my age (just shy of 40). I have a couple of young kids myself and I want the best for them as they grow up (like every other parent out there). However, I am pretty sure that is going to entail fostering an appreciation of the simple good things: looking for mushrooms in the forests nearby, baking, cooking, growing vegetables in the garden, etc. vs. jetting off to holiday destinations or buying expensive and fragile/transient toys. We have a strong community in my neighbourhood where we are good friends with the neighbours all around us. This comforts me. I just hope that Dmtry’s view of collapse is a little more accurate than the vision that J. H. Kunstler offers. Already, though, there have been a rash of shooting recently in my city. Almost all of it gang related, but I can’t help but sense and level of anxiousness/unease in the air.

Cheers,
BB

nutty professor said...

First time posting here, although I am a longtime reader of your remarkable blog. On the possession of technical skills as a kind of wealth: can you think of any "lost" technologies that might be seen as vital sources of wealth in the future? I know you have spoken of this before, but it would be interesting to see how access to older, perhaps more arcane "knowledges" might play in the future order.

Jack Boot said...

Archdruid Greer,

Beautiful writing. I wish I had 1% of your talent.

If people are interested in a future way of accumulating whatever medium of exchange that is in use I would suggest learning how to sail and investing in a small sailboat. I see some container ships are now experimenting using parasails to reduce their fuel use.
The ability to carry some coffee from Cuba or South America to, lets say, Washington State could be very profitable. Of course I'm sure some reading this are thinking of becoming pirates instead.

Nino said...

Just wanted to say thanks for a great post from a long-time reader. Keep up the good work.

Lloyd Morcom said...

In relation to Matt's query about the impoverishment of the last few decades, this excellent lecture by distinguished law scholar Elizabeth Warren who teaches contract law, bankruptcy, and commercial law at Harvard Law School is worth a look.

jjglick said...

JMG,

I got myself up far too early for your Pantheacon panel, and I'm happy I did -- though I did return to my room to nap afterward. The most interesting, because most novel, part of the panel to me was your suggestive remarks on the potential role of the Pagan community(/ies).

However, your remarks on skill acquisition also hit home. Just last week, I had the great good fortune to be given an old treadle-powered sewing machine, a White Family Rotary from, I'm guessing, somewhere around 1905-1915. I'm taking this as a sign, and I'm going to be spending some of my free time becoming proficient with its use. I've fallen in love with the machine already, and since they seem to be quite available and relatively inexpensive (lots of people have them as heirlooms, but nobody seems to want to keep them, for some reason), I recommend this as a potential time/money sink for other interested readers. Mine hasn't been used since at least the seventies, and it started right back up with no complaints.

Thanks for your insights.

-Jeremy

Fourpie said...

There is one material thing worth investing in. Admittedly it could be stolen from you. On the other hand it isn't portable, so it's a bit easier to protect. Land.

Fourpie said...

Please ignore my last comment. I was forgetting, Governments can steal land. Like Diego Garcia (The Chagos Islands).
Ah well, I only have 25 years left to muddle through. James Lovelock of Gaia fame has an even harsher scenario than you, but I'll manage to see that one out! Have to think about how best to help my two daughters.

Twilight said...

I'll jump on the bandwagon and thank you for an excellent, clear and concise summary of the problem. I like the way you have presented it from a big-picture systemic viewpoint, as it makes it very difficult to hide from. I realize that there is only so much change that people are prepared to accept, and that information which requires a person to change too many of their accepted truths is likely to be rejected. Nonetheless, I think that clarity, simplicity and elegance in the way that new and conflicting information is presented makes it harder to reject.

These are the reasons I've become so very tired of the endless chatter about "solutions" (meaning a return to infinite growth), and all the schemes that do not address the fundamental issues, especially since most of those are unaddressable.

Isis said...

I find articles such as this one quite amusing. Not because you said anything unreasonable. On the contrary: because what you said is eminently obvious, and yet, it clearly isn't obvious to quite a few people. But I ought to be fair. I was, after all, a billionaire at age 10, and at the same time I had to wait in long lines for bread, (cooking) oil, etc.; hyperinflation combined with shortages will make that sort of thing happen. (Yugoslavia, early nineties.) But most people who come to your talks haven't had that sort of experience (at least not yet). So I should, I suppose, show some understanding for people's lack of understanding in these matters.

streamfortyseven said...

JMG, you write "Stream, the problem with investing in physical commodities in troubled times is that they're vulnerable to confiscation by governments and less officially sanctioned thieves alike. Skills are a better investment."

Skills are a part of what people will need, and that should go without saying. People should know how to make, fix, and use tools to produce useful items, food, shelter, clothing, and so on. Steam engines and Carnot cycle engines will be of great use in a petroleum-scarce economy.

As for government or thieves stealing the commodities which you've invested in, be it gold and silver, your land, your crops and livestock, your tools and trade goods, you'll just have to come to a decision over whether you'll stand for that sort of thing, and what you'll do to prevent it. The government that steals your goods and property will not hesitate to draft you into forced labor, as has been seen in so many totalitarian governments in the 20th century. Skills then will perhaps be important, maybe it'll get you a better place to sleep or a couple of crumbs of food more than your unskilled neighbor. A quote from Samuel Adams comes to mind here:
"Among the natural rights of the Colonists are these: First, a right to life; Secondly, to liberty; Thirdly, to property; together with the right to support and defend them in the best manner they can. These are evident branches of, rather than deductions from, the duty of self-preservation, commonly called the first law of nature." - The Rights of the Colonists, November 20, 1772

sv koho said...

JMG: another good post, nuts and bolts useful in much the same vain as Sharon Astyk's blog. I agree with Robert that the gold standard was not the source of the various depressions of the 19th and 20th centuries. Robert also used the old term which needs to come back into vogue of "PANIC" to describe the events. I also have studied these various panics and most share common characteristics of cheap credit, debt, over investment and greed and then collapse. Sound familiar? This panic is different for many reasons and you hit most of them but it's possible this panic could become the mother of all financial panics chiefly because of the global scale of the interconnected webs of leveraged bets, unbacked CDS and forex swaps and derivatives and money inventing all manner of absurd "investment vehicles!" like CDO's and the like: cash into trash that is now going up in smoke, all the result of cheap credit and an astounding deleveraged debt implosion. The actors in the beltway have changed but the play is much the same with massive continued and accelerating debt assumption by the government to try to get us all back in the station wagon again on our trip to the American dream. Their assumptions are of course wrong but they don't see it. Both Einstein and Will Rogers both said something to the effect of "if stupidity got us into this mess, then why can't it get us out?". The only way you can justify going into debt is that if you have growth going forward to pay back the principal and the interest of that debt. You pointed out that industrial contraction will not allow this debt to be serviced without growth in goods and services, so what alternative is there? Default.Bankruptcy. Lots of nations have defaulted on their debt over the past millennia. A good paper by Ken Rogoff for the IMF looked at 800 years of defaults. Default will almost certainly be part of the picture here. I better close. I do have a good link for family income in the US in the postwar period to the present. You have to search a bit for the relevant graphs but they amply support your contention of wealth declining here, primarily in the past 30 years or so.To wit using ? inflation figures median family income in 1979 was about $38K and by 2006 had risen to a lofty $42K. Final comment is as you say, we will need to make things again of real value. In 1960 our manufacturing sector was 26% of the workforce and it has declined to a paltry 9+% mostly making weapons, airplanes and heavy equipment. My sources are the OECD fact book, the IMF, the CIA factbook and here is that final link for Matt:http://mwhodges.home.att.net/family.htm
Cheers and thanks again for a tidy summary of our current financial arrmageddon.

Peter Dodson said...

Hi John,

Great essay and something that has been ringing thru my mind for some time now. I hear people all the time these days saying it is a great time to invest (and in fact late last year our PM here in Canada said it during the election campaign) - I like to remind them that in the short term it's a terrible idea and in the long run you are making the assumption that there will still be such a thing as the stock market.

As you say, take your money and make it work for you in a rational way given the realities of the world- invest in a wood heated stove for your house, or a solar heated water tank.

John Michael Greer said...

Blackbird, my guess is a little closer to Kunstler's than to Orlov's, but we'll see.

Professor, that's s dizzyingly complex question, and will depend to a very great extent on local variables. One result of the end of the age of cheap energy will be the unflattening of the world -- sorry, Thomas Friedman -- and what will work in one region may fail utterly in another. In general, though, look for the technologies that functioned where you are before the First World War, and use that as a starting point.

Jack, maritime transport and piracy are both ancient trades and I expect both to be around for many millennia to come.

Nino, thank you.

Lloyd, many thanks for the link!

Jeremy, that machine's worth its weight in light sweet crude. Pick up another one as circumstances permit, so you have a source of spare parts.

Fourpie, the problem with land isn't so much that governments can confiscate it, but that right now, over most of the industrial world, it's fantastically overpriced -- even after the last year of price declines. If you can stand losing nearly all of the paper value, buying a home can still make sense, since it's easier to put in a garden, install solar water heating and a composting toilet, etc. when you don't have to please the landlord; as an investment, though, land is pretty much guaranteed to lose you your money.

Twilight, thank you. This is why I tend to stress that our situation isn't a problem that can be solved; it's a predicament that we have to live with.

Isis, thanks for a useful bit of perspective.

Stream, I encourage you to read that piece of Adams to the boys in jackboots when they kick down your door. (They will have better guns than you do, remember, and more ammo.) It's only in the imagination of the privileged that people always have a choice of what they will or won't have to endure.

Koho, it's simply a matter of time before the US defaults on its foreign debt. I'm guessing it'll happen in Obama's second term, if the house of cards can be kept propped up that long.

Peter, anybody who claims that it's a great time to invest has clearly been smoking his shorts. I hope there aren't too many people listening to those claims.

John Michael Greer said...

Koho, I went from responding to comments here to the BBC news site and learned that Obama's proposed budget of $3.6 trillion includes no less than $1.75 trillion of red ink -- in other words, half of next year's federal budget will have to be borrowed. At that rate, I'll be impressed indeed if a default on the US foreign debt can be delayed until his second term.

Dan said...

First time posting here, although I am a longtime reader of your excellent blog.
Seems amazing to read about investment delsion when just the other night. A friend was telling me I should buy a house and stop renting since now is the time to buy supposedly. Now, I don't know what the future will be like but the prices of houses on the east coast where I like would have me in more debt then I'd like to be (honestly any debt is more then I'd like). I don't mind renting especially when a morgage would be more money then renting at this time. I spend my money and time learning friction fire, wild edible plants, braintainning, soap making, bow making and other Ancestral skills. Even talked a beekeeper in his 70s into teaching about beekeeping Despite what some friends say I'm not trying to be some survivor man. These skills are fun and interesting, ok some of them are alot of hard work but prodcut is well worth the work.

jagged ben said...

Longtime reader, first time posting...As usual, found something to laugh at (commentary on the Doubletree.)

If Christianity and Islam came out of the classical era denouncing the practice of lending with interest, perhaps a new religion/philosophy/culture denouncing economic and population growth can come out of our era. Sustainability in our living must be seen as a core moral value.

Nothing you haven't said before in one way or another, JMG.

Loveandlight said...

The fantasy of retiring as a member of the rentier class is as common among older middle-aged people as the fantasy of maybe someday being a rich and famous rock-star is among alienated teenage boys. And both of these fantasies in this day and age are every bit as unlikely as they are common.

I more or less echo what Twilight said about how the mainstream people who need to hear what you are saying in this excellent post are the very ones who probably won't hear it because they don't want to hear it. It's still worth saying in the most effective way one can manage, however, because one never knows when one might convince somebody who is on the proverbial fence about what to believe about today's realities.

Lance Michael Foster said...

As I note in my own bioregionalism blog here in Montana, one thing I am concerned about when the U.S. defaults is that the price will be right for foreign entities to come in and buy up arable farmland to feed their own citizens, or grow agroforestry/biomass operations for energy production. And in many western states, water rights are tied to land title. China has already been buying up lands in impoverished neighbor Cambodia, to make into rubber plantations and kicking Cambodians off their own lands. And pollution and degradation of land and water proceeds with such operations.

Unfortunately the mantra of private property and landowner rights in the U.S. is a foundational value, so once foreign entities get the land and the water rights, there will be little U.S. citizens will be able to do legally.

Danby said...

It's interesting that your definition of wealth is the same one we were discussing at a distributist blog just this week.

A bit of clarification. Christianity doesn't and didn't forbid lending money. It forbids usury.That may seem a tautology, but there is a difference.
Usury is the charging of interest for the use of money. More specifically, it is lending for redistribution or consumption at interest. Lending in order to increase production at interest is and was allowed.

For a specific example, let's say you are a 2nd century landowner with a vinyard. Due to a recent earthquake, your winepress is destroyed, as well as some of the houses in the village. A lender would be able to loan you money to rebuild the winepress, as that would pay for itself out of increased earnings.

He would not have been allowed to loan money to rebuild the houses, as they could not reasonably have been expected to increase the production of wealth.

This is the difference between credit cards and industrial bonds.

Also note, there is no problem with taking the loans, only in making them.

SouthFlorida said...

JMG,

I have a question regarding a tangential point you raised in a couple of your replies:

Do you really think Obama will be reelected to a second term? My own guess, for what it's worth, is that he will become a lightening rod for the anger of just about every competing interest in our society before long. Practically everything he is doing now seems to me only to be hastening the unfolding disaster along. Is it really very likely to suppose that he will be reelected if the current trajectory of events continues?

FARfetched said...

JMG, thanks for the peek into your convention. I humbly suggest that anyone who thinks increasing energy use forever should watch the movie "Wall-E." That's pretty close to what we'd end up with. I'll join Ruben in looking forward to your "crisp replies" article.

Regarding investments… while you're certainly correct that investments will collectively sink with a non-expanding economy, there are always fish that swim against the current. I have a knack for finding stocks that sink in a rising tide; someone with the opposite talent could do very well indeed in the next few years. Me, I'll "invest" in increasing my skills.

tristan said...

JMG,

Its been a dog year since I last posted. I lost my job in November and haven't found a new one. This forced me into moving into the basement room of my mother in laws house where my wife (whom I am separated from)is living on the top floor with my son. The mother in law is renting out one more of her rooms to a nice lady from South America. We feel like we are so far ahead of the curve!

But on topic - currently I have very little funds but in the last year I doubled my retirement by putting my money into an inverse DOW fund (it went up as the market went down). The ironic thing is that I can't access the money without a huge penalty until I am 65 and by then who knows if it will be worth *anything*. But in theory I have made money in a falling market.

T.

John Michael Greer said...

Dan, I'd wait at least another two years before buying a house; by that time, in many areas, you may be able to get one for back taxes, or even have one given to you if you promise to maintain it (as has been the case for some time in some parts of the Great Plains). And keep up those beekeeping lessons -- an excellent investment.

Ben, my guess is that 500 years from now, loaning money at interest will be the quickest way to get yourself staked out over a live anthill. In times of sustained economic contraction, allowing the existence of a rentier class is collective suicide.

Loveandlight, I'm often surprised both by who listens and by who doesn't. Either way, though, the effort is worth making.

Lance, what you're suggesting is that other nations might do to the US what the US has done on a huge scale to other nations. Yes, it's pretty likely.

Danby, thanks for the clarification. Is usury still considered a mortal sin, as it was in the Middle Ages?

SouthFlorida, my guess is that Obama will be reelected, but that's primarily because the GOP has so few viable candidates to run against him.

Farfetched, well, every statistical curve has its far end. The problem is that everybody thinks they're going to be the lucky one,

Tristan, you're well ahead of the curve! I hope you're putting your time into developing some skills you can put to good use as the economy contracts further.

Priestess said...

This is my first time here. Thank you for what sounds like the most
sensible "investment advice" I've read so far. I also enjoyed your
description of the Pantheacon. Your sense of humor reminds me of that of the Shinto priests I know (I'm one too), and there is probably a lot in common between the two religions.
Recently I was invited to speak before a womens retreat, and talked
about reconciliation between spiritualists and non-believers, because we will need to foster communities of people with diverse world views. I noticed that everyone at the retreat was talking in one way or another about
community-building. I think most people in Japan (I don't know about other countries) recognize the community as our most crucially important asset in
coming times. Also, while land can be confiscated, it's still worthwhile to try as it has intrinsic value enough to be considered a valuable investment,
and prices will drop as people become more desperate for cash.
I recently cashed in my annuity--penalties be damned--because I do not expect that company or my money to exist in ten years. My husband is learning how to make houses more energy efficient cheaply using readily available materials. I'm learning about healthy methods of food
preservation, such as pickling. We rent and farm three fields. So many fields lie fallow that the owners are grateful for someone to work them, improving the soil and keeping up their value as productive land. I recommend anyone with the leeway to make a shift to this kind of lifestyle
do it while it is still easy and you have time to learn the skills. Japan has no shortage of octagenarians and nonagenarians to give helpful advice. They would need to be sought out in America.

JimK said...

It may merely be cemantics, but that's a lot of the work in front of us - rebuilding our language to make it work for us, instead of letting it be a tool that's used for our own deception...

Anyway, this sentence sounds very strange to me: "Thus the only investment advice I can offer is to get out of investments altogether, and put your money into something that will actually be useful: training in practical skills that will make you employable in a deindustrializing economy, for example, or extra insulation so you can keep your home livable with less energy."

The way I use words, putting money into useful things is the very definition of investment. Training and insulation are top-notch investments. A thousand dollars wisely spent on such investments can save/earn itself over and over again.

The real point is probably something like relocalization, or maybe reconcretization. Wall Street is remote and abstract. Modern bureaucracy is a wonderful means to obscure and evade responsibility - we've put our trust in a system that slices and repackages and boils it to the point that nothing is left but if we look for who is was that abused the trust, all we find are shadows.

Investing in yourself, your skills and your insulation, is always smart, and it doesn't require a whole lot of trust. But the best response to the present crisis is not to avoid trusting anyone. One by one, humans are a sorry sort of naked ape.

Here's one suggestion for the older folks among us and thinking about more attractive possibilities for the golden years. Just as learning practical skills is a splendid investment for younger folks, teaching practical skills is another very worthwhile investment. As one's own physical capabilities decline, the younger folks can thereby pick up the tools and use them well and carry on the work needed for the community to thrive.

Ricardo Rolo said...

Well, Mr Greer, that one is definitely a thing we don't ear every day, in spite of being the harsh ( and mind to say, obvious ) truth.

First, for the record, usury is still a mortal sin: it is a direct violation of the "Thou shall not steal" commandement ( money for nothing = theft ). As far as I'm aware, no christian church ever said otherwise... what most of them do is to "creativelly" redefine what they do as something necessary for the bigger good or say that money is a object, so it should be bought too or another convuled argument ( just for the record, the first christian theologist that did not condemn inequivocally usury was Calvin, to please the bankers of Geneve.... ). In the other hans and for their own good, the majority of the Muslim world still respects their holy laws ....

On the topic: I agree that in the following years, making "investements" in the way most people love to talk will give a a verage net loss in real average wealth. But I'm afraid that we'll follow the exact same path that the late roman empire did: people will still invest in commodities, because they will be lured by the rising prices, not noticing that the high prices are created by general scarcity, meaning that their "profits" will be unable to buy anything. At the same time I can definitely see the governements trying to pin people to jobs they consider essential, a form of civilian conscript ( Rome even made some professions forcefully hereditary, like tax collectors and ship crews ) or, using the french word, corvee . And when money is worthless and people are pinned to the ground by force, we are a minimal step away of a feudal like society. I think , to my sadness that in that regard Rome was a little better than us: Rome money was in solid metal and it contained some highly desired metals. So, if no one still believed in the Roman empire, the Roman money would still be useful in terms of trade as a gold or silver dish-like sculpture ( or, using a French Historian words :"When ( in the High Middle Ages ) it was exchanged gold coin, in fact what was exchanged was a group of very precious objects and not coin as we think on it today". Nowadays, pocket money is still somewhat worthy in terms of scrap metal, paper money is worth their weight in paper, electronic money is worth their value in bit weight ( sic ) and promisses to pay are worth the ability and will of the other part to pay... this is , our current money is basically worthless by it self ( and as a humorous side note, the ones with pocket money are in better shape than Soros and Co ;) )

I definitely agree with your point that the best investement in a society like the one that is coming is in pratical skills: hoarding stuff makes your belongings valuable, hoarding skills make YOU valuable. But if someone wants to spend money in material items, I suggest 3 items ( besides the already mentioned phosphates ):
-Seeds
Seeds are probably the best investement you can make in material items if they are fertile ( no monsanto sterile seeds ). They are easy to conceal and they yeild a high revenue in other seeds, the only pyramid scheme that works .... In my opinion, the best ones to keep are seeds of the Fabaceae family ( peas, beans, soy.... ): highly nutritive, high dormancy tolerance and they help the soil fertility. A bag of seeds concealed in a coat pocket may be the best thing you can have in troubled days.
-Nitrates: The nitrates natural reserves peaked more than a century ago... we didn't noticed that so far because of the Bosch-Haber process, but I don't expect that this high-energy process will be attainable or cost-effective in harsher days. Nitrates are extremely valuable for agriculture, but I definitely do not recommend to keep them in bulk: besides being extremely dificult to maintain out of air-tight enviroments ( They are extremely nydrofiles and water solutions of nitrates are highly corrosive ), nitrates are also needed to make explosives ( including the good old gunpowder ) and having a nice storage of them would make you a really nice target for jackboot theft. If you only want nitrates for your field, the best thing to do is to rotate fabaceae and other cultures in the fields ( or to grow them together ). If that is not enough, the best way is to use the old tried and tested method of pouring some acid ( vinegar works well )in the residue of dried urine ( any mammal urine works well, but the more popular way in the old days was to use horse or donkey urine ) or bird feces . Equines are probably the best suited animals for that, but they are highly valuable for their cargo ability as well....and too bulky to conceal easily. The best thing to do with equines is to maintain them in half-wild state: that would allow, not only cheaper maintenance, but also a chance of the animals not being associated to you.
-A good set of portable cast iron kitchen ware: as any person that really cooks ( this excludes microwaves ) knows, the half-life of steel and aluminum kitchen ware is quite small ( somewhere between 5-10 years if you're lucky and maintain it well ). Cast iron kitchen ware if properly maintained ( and the best way of maintaining it is using it ) can last for a century ( I have one pan that belonged to my great grandmother of my father side that it is still usable.... ), not mentioning that the better thermal properties of cast iron cookware make the food more tasty and allows the cooking of meats that would require a pressure cook otherwise ( goat ( a good choice of animal to pasture in dificult years, because they can digest pratically everything that they can chew ), donkey or old horse ( believe me: it is very tasty... in fact, old goat cooked in a cast iron pot in wood fire is a traditional dish in some areas in my country, called chanfana ; it is also a very economical dish, given that old goat meat is pretty cheap in here because it is very dificult to cook besides using this method )).
Again, anything made of metal is in danger of being a trouble magnet, but used cast iron cookware has very bad look ( it is coated by black iron oxide... a good rule about cast iron cookware is that blacker is better , but it definitelly looks like carbon coated overburned cookware ... no "shiny" factor ) and will probably be spared in case of facing armed thugs.

All this items are relatively easy to hide or look undesirable, in spite of being extremely useful. A good bet for troubled days.

Danby said...

Danby, thanks for the clarification. Is usury still considered a mortal sin, as it was in the Middle Ages?

Theoretically, yes. As a practical matter, very few even know what usury is. They think means exploitative lending, and that it has something to do with the rate of interest charged, or the financial circumstance of the borrower. While exploitative lending is a sin (and widely recognised as such), it's not usury. It's fraud. I seriously doubt that even 1% of the Catholics engaged in usury could define it, and certainly nobody is going to call them on it, or enlighten them on it.

There is a fair hope that when the dollar collapses sometime in the next couple of years, moneylending will lose it's aura of respectability and people will once again start thinking of bankers as the parasites they are.

On a related note, for the goldbugs above, it's not a tenable assertion that a metal-packed currency will prevent depressions and panics. Look up the "Long Depression" of 1873-1886 for an example. It's fractional reserve banking that is the engine of the business cycle, and the author of both bubbles and depressions, not the basis of the currency. So long as some people are allowed to create money out of thin air (which is what banks do when they loan money that is deposited in demand accounts), there will be both booms and recessions. Any time the creation of money is accelerated to create a bubble, as it has been for the last 15 years, there will be a depression. It's theoretically possible for a central banking system like the Fed to dampen the business cycle. I don't think it's politically possible, however, for that to happen for very long in a mass democracy. There's just too much pressure to accelerate money creation in both good times and bad. We saw it in the 1920's and in the last 2 decades.

John Michael Greer said...

Priestess, yes, there are many similarities between Shinto and my own Druid faith; when we lived in Seattle, my wife and I used to attend Shinto services at the jinja at Granite Falls, not far north of there, and the guji made us feel very welcome.

Jim, yes, it's mostly semantics, but most people these days use the word "investment" to mean "I put money into something and get a lot more money back" -- in other words, what would more properly be termed "speculation."

Ricardo, many thanks for useful suggestions. The Romans actually debased their currency repeatedly in the latter days of the empire -- replacing much of the gold with base metals to make the denarii stretch further; that's how inflation was managed in those days.

Danby, I think a lot of essentially parasitic professions are going to be facing a rapid fall in public esteem in the decades ahead.

Anne (offlist), I do have to screen comments for profanity -- this blog gets accessed in schools with online censor programs, you know. If you'd like to resubmit your post without the profanity, I'll be happy to put it through -- and to respond to it in detail.

Jacques de Beaufort said...
This comment has been removed by the author.
marielar said...

Hello,

Another excellent post and very well-timed. Its interesting to observe the psychological investment into our make-belief world. People talks about loosing on their investments like in other times, one would feel about loosing sight or limbs.

In the same vein than another poster wrote about open-pollinated seeds, I would add that investing in old, hardy livestock breeds is a very good idea. Even with chicken, it is now very hard to find good production bloodlines. Although not as much talked about, an enormous erosion in genetic diversity of the livestock happened in the last 50 years. Also, learning about and planting medecinal herbs in the garden make lots of sense.

James m Dakin said...

I am amazed at how well you have summed up a difficult subject. Bravo! I don't know if it will do any good, but I'll share this article with my readers. Thank you. As a PS- your book is now included in my top ten non-fiction list on making sense of the future.

Danby said...

Ricardo,

As a horseman and an owner and user of draft horses, I will have to disagree with you on keeping horses half-wild. Perhaps as a store of wealth it might be conceivable to do so, but the value of horses, especially in a post-industrial economy, is their ability to provide draft (draught) power for cartage and farming.

A good draft horse is at once the most powerful and the most efficient draft animal, both because of her structure, and because of 5000 years of continually evolving technology. When there is no diesel fuel, a four-in-hand can pull 30 tonnes better than an engine. At least on the flat, a hill might require a six-up hitch.

The most important quality of a good draft horse is tractability. She must be docile, willing, calm and well-disposed towards humans. A horse kept out of human contact will lose those traits very quickly, and revert to the high-strung fearful animal that can survive in the wild. Far better to be actually using that horse on a daily basis.

Yes horses can be stolen. But at least in this country, such an act was traditionally dealt with by summary execution. Wealth one cannot use for fear of theft is as much good as money one cannot withdraw from a retirement account. Very little in the current situation.

Two great advantage we will have in the coming centuries are a vast network of paved roads stretching to insanely distant places, and the contributions of folks like Pirelli and Lyons to the art of training horses. Jim Lyons' book Lyons on Horses is the very best book for anybody starting to work with them.

John Michael Greer said...

Jacques, that's a priceless story. Thank you.

Marielar, very true. Fortunately the habit of keeping small livestock at home is likely to become much more popular in the decades to come, so heirloom breeds of chickens, rabbits, etc. are likely to do well.

James, thank you, and by all means pass it on.

Danby, thanks for the horse info. I remain convinced that draft horses are the wave of the future -- tractors don't manufacture little tractors, and they don't produce large quantities of first-rate fertilizer feedstock, either.

DIYer said...

By far the craziest "investment" for me is (are) the ultrashort exchange traded funds. There are funds for shorting most anything in the "market" today -- real estate, bonds, financials, any of the popular averages. On superficial analysis, they don't even make sense.

On deeper analysis, they don't make sense. However, I have a largish chunk of my "savings" in them right now, based not on direct recommendation, but on guesses from the financial blogs. Yes, I'm just gambling here. <sigh>

We do live in interesting times ...

Jan Steinman said...

Thanks for another great posting!

I must say that I do see some reasonable investment advice besides "get out NOW." A lot depends on when you get out.

Having studied trophic systems is some detail, I'm of the opinion that we will see what ecologists call "punctuated equilibrium," except with an overall declining trend.

Ecologists use variants of what is called the "logistics equation" to model trophic (food energy) systems. A famous example is the relationship of numbers of lynx and hare populations. The lynx eat too many hares, and starvation and disease cause the lynx population to crash, at which point, the hare population skyrockets, enabling the lynx population to also take off. Repeat.

If, instead of lynx and hare, you plug in human financial wealth as the predator, and crude petroleum as the prey, you get similar behaviour -- around equilibrium, you get chaotic gyrations in both predator and prey. (And, of course, crude petroleum doesn't have offspring, thus the overall declining trend.)

The point I'm taking way too long to make is that there will be upturns and selling opportunities. On average, each peak will be lower than the previous one, but rather than sell out now, one could wait for $40 oil to cause the economy to take off again, then sell everything in order to get training, buy land, invest in true capital — the means of production.

The economy will take off again, until it once again hits the "glass ceiling" of trophic limits, at which point, it will crash again. It will probably peak at ~80 million barrels a day or less, rather than the ~87 mb/d we saw last July.

So there's the market signals. I have no argument against getting out completely — I have — but it would seem prudent to let people know that they don't have to sell in a falling market.

Red Neck Girl said...

I've thought for years that our civilization was in trouble since nothing grows continually unless it's a cancer and everyone knows the end result of a tumor.

I've been saving How To books on old skills since I was in my 20's (I'm now in my mid 50's) but lost them to family spite and I've had to start over with less money to spend then before.

My plan for the near future is to go for a grant to start a boarding stable and on the side acquire one or two good stallions and a few quality mares for breeding. My best friend would partner with me to teach me horse training and to raise and train stock dogs, both skills she has practiced for years. Since petroleum will be so expensive both ventures will become quite valuable in working cattle in the future.

I plan to build both the stable and a large house with earthbags. We will also invite my room mates grandchild and siblings to live there in order to pass these skill sets on to them.

Whether the collapse is immanent or further off in time we would be well situated to endure a difficult transition and perhaps provide a secure base for our heirs.

BoysMom said...

This is fairly off-topic, but I was wondering if there's a specific place to talk/ask about your book.
My library finally got it for me and I am encouraging all my friends to check it out when I am done.
Thanks.

Beki said...

Hallo, JM!

This is my first time visiting your blog, but not the last. I was at the PantheaCon talk, found it immensely informative, and bought the book: it sounds bang-on to me.

Re: the investment question... I've been merrily telling my friends that their investments are naught but "pixilations", sigh.

I coulda warned you about that excruciating dining experience. We bring our own food to the Con.

I'm doing my best to build local community here in Dunsmuir. We're starting with the Community Compost project, progressing with a veggie gardening class, hoping to generate sufficient mass to get a community garden rolling.

Just wanted to give you a heads-up that the 'Permaculture Activist' has a planned theme 'The State of Peak Oil', deadline Sept 1 09: You're an obvious resource for that issue!

ChristineStone said...

JMG, I love your parallel between retirement and being a landlord - both are 'rentiers'!

Even long before I heard of peak oil, the idea of 'retirement' always puzzled me. Why should we expect to stop working at about 60-65 years old and continue to be paid money, when we may still have 20-30 more years to live??
I imagine that since the dawn of humanity everyone always worked until they could work no longer (even though the nature of "work" meant radically different things in different cultures/times - not necessarily paid employment.)
In England here, the first old-age pension from the government was introduced about a century ago, to keep the very aged out of workhouses. I believe less than about 5% of people ever lived long enough to receive it. Since then, the idea that the state should pay you to live comfortably for decades in your later years has taken such a firm grip that people are horrified at the idea of "being forced" to work into your seventies, let alone "working till you drop". I am not suggesting that a 70 year old can do the same type and amount of work as a 20 year old, but equally, why should they expect to do nothing at all but relax, and perhaps babysit the grandchildren now and then?

John Michael Greer said...

DIYer, I wish they'd stop pretending those were investments and label them honestly as forms of gambling. Didn't one of Pohl and Kornbluth's satiric science fiction novels have a future Wall Street with pari-mutuel machines like a horse racing track?

Jan, in theoretical terms you're certainly right. Still, I'd point out that trying to time the market -- which is what we're talking about here -- is, for most people, a very effective way to lose your shirt. It's only a speculation that $40 oil will cause renewed economic expansion; my guess, rather, is that the overhang of bad debt and other structural problems will drag the economy much further down than it is now -- and in that case selling now, even at a loss, is a better move than staying in.

Girl, sounds like a good plan.

BoysMom, not at this point -- still, I'll look into the options.

Beki, thanks for the heads up! I'll see if I can come up with something for them.

Christine, exactly. I'm planning a future post on this subject; it will not be popular.

ValleyOakDruid said...

JMG
I was at your presentation at Pantheacon. It was a great "wake up call" to all the issues out their regarding your topic. I did find it a bit depressing however, the truth sometimes is when it opens your eyes. I too found it funny when those in the audiance tryed to "stump" you by throwing something they think you didn't consider your general direction. HA! You showed them. :)
They must not realize how briliant you really are. lol You wouldn't be up there presenting had you not had all the facts. Anyhow JMG great job, great presentation. Keep up the good work.

Isis said...

ChristineStone & JMG,
I personally never understood why a person in tolerable health would voluntarily retire. Ever since I was a child, retirement struck me as forced idleness, something to keep old people out of society's sight. If I have any say in the matter, I'll work until I either die or become permanently disabled.

Bill Pulliam said...

About oil prices and the business cycle... to rehash some basics:

It is very likely that whenever a recovery does try to get off the ground, the uptick in energy demand will lead to such a rapid and dramatic spike in energy prices that the economic brakes will be put on pretty quickly. In case anyone has forgotten, before the spectacular financial meltdown, we were already seeing a global economic slowdown caused by "high energy prices," which in fact was really just a sideways euphamistic way of avoiding saying that we had a global economic slowdown because of a global energy shortage. That shortage has gone nowhere. Whether we are technically post peak or not, we are already in the world where the global economy is fundamentally capped by energy resources. As we saw last year, supply no longer increases in response to increased prices caused by higher demand. The price just increases to the point that it triggers enough of an economic decline that demand drops; supply hardly budges. This is a new "fundamental" of the world economy that almost no mainstream economists are taking in to consideration in their analyses and prognostications.

Sorry to lecture; this is all material that has been covered much better and more thoroughly throuhout this blog, The Oil Drum, and in many other places but it still bears repeating from time to time.

ezab said...

I discovered your blog in December; I printed out all the posts from 2008 and took them with me to read during a January vacation. I’m currently halfway through The Long Descent.

So, I’ve been meaning to thank you, because your writing has been extremely valuable to me. It offers a context in which lots of things now make sense. There are things I’ve been doing intuitively ... now I have a much solider understanding of why I’m doing them.

I especially appreciate your breadth of historical knowledge. You mention many historical examples I wasn’t familiar with, or give additional details about well-known examples. (I had read about the decline of Mayan civilization; I wasn’t aware that alternative food sources were available to them.)

In my opinion, sometimes you overstate your argument a bit. You say “this is what will happen” and I often wish you would insert “probably.” Perhaps it is implied.

There are two things in your work I find particularly valuable:
** not to wait for the government, and not to grumble about their inaction
** to think about preserving aspects of our culture for future generations

You wrote about the value of ham radios (I’m forwarding that column to a friend who’s a long-time ham radio operator) and the value of slide rules. I’m studying with a Tibetan Buddhist teacher... I’m wondering how the visual record of his teachings, currently widely available, could be preserved for future generations. Grateful Dead music is an important part of my life; I’m wondering how that music could be preserved for the future.

So, thank you very much!! You’ve given me some valuable tools.

I want to comment on this week’s essay, and I will do that in another post.

BurntToast said...

Not to complain or anything John, but I keep looking to see if my earlier post (from Thursday or Friday) pops up to no avail. Lost in the system? Giving it some heavy thought? Just wondering. I don't think it could be construed as offensive...?

Regards,

Chris

hapibeli said...

The link, http://howto.fiziwig.com/index.php, from [I'm sorry ,I couldn't find who!], was as important as anything I've read on your blog JMG...Simply awesome! Thanks to you as usual, and to whoever posted the link.

team10tim said...

JMG,

The investment strategies that you are describing already have names, very old names that have been forgotten.

Oikonomia and Chrematistics

Oikonomia means management of house hold and the word economics is derived from it. Chrematistics refers to political economy or the short term return on ownership. At present when people think of investment they are thinking of chrematistics and one way or another that will change.

Tim

ezab said...

In this week’s column, you talk about someone who asked for advice about investment strategies. You discuss people who expect to “invest their money and, as a matter of course, get back more than they put in.”

I’d like to put a slightly different angle on this question. My major resource for aging is a retirement account. Okay, so I’m not going to get back more than I put in...but I still have to figure out the most sensible thing to do now with those funds.

Even though I don’t have grey hair, I’m almost 67, so this question has great resonance for me personally. I plan to work full time until age 72 and if possible part-time after that. I have a small amount of money in a retirement account (an IRA) but my principal income, after retirement, will be Social Security.

In earlier civilizations, old people lived with their families, wove at the loom, cared for the grandchildren. This isn’t generally an option in our society. I live on the West Coast; my relatives are on the East Coast.

You suggest that people should “get out of investments altogether and put your money into something that will actually be useful.”

There are couple of structural problems in doing this. First, if someone is 59 or younger, and they withdraw money from a retirement account, then they pay a 10% penalty to the IRS. In addition, at any age, you pay full income taxes on anything you withdraw.

Since I’m working full-time now, I pay a fairly high federal tax (the marginal rate is 15%). I live in Oregon, with a 9% income tax. That means right now I’ll pay approximately 24% income tax on anything I withdraw from the IRA. If I wait five years, I won’t pay any income tax on that withdrawal. That gives me, and people in a similar situation, a substantial incentive to wait!

If/when I do withdraw the money I’ve saved for retirement, I still face the question of what to do with those funds. You recommend more insulation, and that’s a good idea for anyone who owns their house. However, I wonder about the benefits of “training in practical skills that will make you employable in a deindustrializing economy” for people who are in their 60s. Personally, I already have some of the skills you mention in the Long Descent: I’m an experienced organic gardener and food preserver, and I have some training in both natural and conventional healthcare. (By the way, next time you discuss healthcare, you might want to mention the book “Where There Is No Doctor,” a wonderful detailed resource on practical healthcare.)

Having these skills is a benefit at any age and in any circumstances.... but I don’t see them as a way to support myself in old age. When I look at the life experiences of my aging relatives and friends, if they live long enough, everyone seems to reach a point where they really cannot work. My plan was to pay off the mortgage before I retire, live on Social Security and vegetables from the back yard, and hire help when necessary in my old age. If the money I’ve saved has lost all its value, if it’s impossible for me to hire helpers, and the people who would naturally want to help me are on the east coast.... I’m going to be in trouble.

So, when you write again on this subject, I hope you will look more closely at options for elderly people as our society goes through this transition. The question I’m asking isn’t “how can I use my retirement funds to make a killing?” The question I am asking is, “what is the best way for me to survive and age gracefully during the coming decades?

Many thanks, Elaine

BurntToast said...

I have a question about your book (The Long Descent) and as another poster noted, there isn't really a forum here for discussing it, although this seems like the natural home for such a conversation.

So here goes - on page 166 you note that some calculations indicate that the amount of usable energy produced by a solar cell is about the same as the amount required to produce that cell, citing Odum as the source of this analysis.

Odum's study has apparently been much criticized in the field of life cycle assessment for including energy costs that would not, strictly speaking, be necessary, and which are significant. The best I could find is here:

http://www.energybulletin.net/node/17219

Most of the estimates recognized much lower payback times after including life-cycle costs - some as low as a year, although the linked survey picks one, makes a few adjustments and calls it about 4 years (a little less).

While I'm not particularly defending Odum, I can't say I'm comfortable with the lower estimate either, in large part because I can't find a simple explanation of what costs are included or how the system boundary is defined. As best I can infer from what I can find, the system boundary typically includes the inputs from extraction to waste disposal, but does not include the energy requirements of the equipment needed for each step along the way (manufacturing and maintenance as well as operation). So for example, it would consider the cost of fuel for the equipment which extracted the sand and transported it to the processing plant, but not the energy required to make that equipment (as if it were all just there). If correct, this seems a serious flaw in the typical lifecycle assessment methodology, making it not really 'life cycle' in the sense of truly understanding the overall cost required to support PV (or any product or system analyzed).

I did contact one of the co-authors of the survey I linked (Stephen Gale) for clarification on the question of system boundaries and received the following response, quite quickly to my surprise:

The boundary for the LCA's was generally the extraction of the raw materials at one end and the end of useful operations at the other.

The embodies impacts of the manufacturing equipment were generally not included, though I vaguely recall one paper in which an allocation was made for plant and equipment.


So this seems to confirm my suspicion, but Mr. Gale goes on to note that operating costs tend to outweigh embodied costs by an order of magnitude. I'm skeptical of this too, but as I have no professional interest, I don't want to pester Mr. Gale. My reasoning is that whatever equipment is used requires the same cost analysis as the PV itself to form a true accounting - otherwise it is as if you are assuming it has always simply existed or have taken some other equally illogical step.

I'm wondering whether you have done any research or thinking on the issue, and what, if any, sources you might have to shed any light. I am of the opinion that the LCA's presented severely underestimate the costs when all factors are included (including the energy required for plant and equipment, maintenance and operation of plant and equipment and so on), but I have no real support for this view at this time. Thanks for any thoughts you might have.

Fed up completely said...

The point that most people seem to miss regarding the money system is that the system exists on trust. The bankers have to trust that you will pay them the money you borrow. The borrower has to trust that the bank will have his money when he needs it.

Without trust the system collapses regardless of the so called reasons. With trust the system can continue indefinitely.

What is a promissory note but a promise to pay?

das monde said...

I can't not to post here anymore... A truly sharp, timely and knowledgeable post.

The hidden explosive social problem is that the only good investments in a contracting economy are... rentier investments. That particularly includes investments in physical commodities.

All the modern craziness about living on investments constitutes perhaps the greatest brainwash in human history, at least in numerical scope. The investment boom looked indeed good, as long as globalization could introduce a constant flow of new suckers into stock markets. This Ponzi-lite dynamics could hide stagnation of real productivity very handily. On top of that, living on growing debt became a massive norm. At the end, so many people are loosing their hard-or-smart earned savings, desired homes and retirement promises. Is this supposed to be a natural scenario? Or was the free-marketization of the last decades actually a willful radical transformation of societies around the world, like some effective Marxists claim? Special conditions of a growth economy, indeed.

Other great brainwashing meme is the competition myth. Folks are compelled to believe in a “jungle” competition for better jobs, education, cars, housing... Do poor people or countries have moments of helping to each other, doing things together? What capital of social connections can they make? Did you notice, how much more comfortable is the “competition” on elite society levels, with plenty of exchange in financial, legal, entertainment services or knowledge? That may explain, why political leaders fail to grasp or tell truths of not-so-rocket-science financial and political imbalances, or ignore concerned extrapolations so well. Hard-core rentiers are doing well in this crisis - they may not be reaping double-digit profits anymore, but they are gaining power.

Usefulness of the investing class is certainly overrated. After all, they provide only money - a “license” to act or live. Since when is the civilization neglecting the value of labor and sustained living so much?

Danby said...

Jan,
When oil gets cheap enough, it will cause another boom. The question is when and where. The way we are situated right now, with enormous debt, the public part of which has doubled in just the last 3 months, and our new president promising to take on more and more debt in the hopes that we will be able to borrow our way out of a depression and currency collapse, it's VERY unlikely to happen in the US. Europe, due to the relatively looser banking laws, is in even worse shape than we are. China is essentially our client, and it bids fair that she will descend into violent anarchy when we can no longer buy her exports. There were over 10,000 urban riots in China in 2005, the last year in which a count was released.

So where to invest, and when to put your money down? Some analysts are looking for the Dow Jones Industrial Average to hit 1500 (from about 7500 currently) sometime this year. That's a very good way to lose a lot of money. Shorting the market is even riskier, since there's no limit to how high a stock can go, especially in a short squeeze.

As for getting out now, a person who took that advice 18 months ago would still have their money, as opposed to the average investor who has LOST 1/2 his portfolio in that time. Sometimes cash in the mattress is the best investment.

John Michael Greer said...

Valley, well, I don't claim to have all the facts -- but it's always amusing to watch people trot out the same objections over and over again, under the delusion that they're being original.

Isis, with that attitude you'll probably do well. Me, I expect to stop writing when they haul my cold stiff body away from my keyboard, but then I love what I do.

Bill, it certainly bears repeating.

Ezab, you're welcome. I do state things forcefully at times, as much to get points across as anything; since I don't expect anybody to take what I say on faith, I doubt it does any harm.

Chris, everything you've posted that got to my inbox has been put through. It may have been eaten by a giant space walrus or something; you might want to try reposting.

Hapibeli, I thought it was a great site also.

Tim, many thanks! "Chrematistics" in particular is a great word.

Elaine, I'll be discussing these points in detail in an upcoming post.

Toast, since I'm neither a physicist nor an economist, I rely on specialists in the available fields for my facts. I know Odum's calculations on net energy have been much criticized by solar power aficionados, who insist that the figures are much more favorable (along the lines of Gale's work). The point I'd make, though, is that we have a good general surrogate for net energy: price. Breakeven points on solar panel systems are generally way out there in the future, even with optimistic assumptions, and I think this offers some real world support to Odum's claim.

Fed Up, all very true.

Das Monde, it'll be interesting to see how well even rentier investments work in a truly contracting economy. I heard from a lot of people who lost their shirts in commodities in the second half of last year.

Danby, exactly. You can very easily have a situation, in a contracting economy, where every investment loses money for a protracted period. I think there's a good case for suggesting that we're in such an economy now.

John Michael Greer said...

Stream (offlist), at this point you're way off topic, and beating a dead horse as well. Give it a rest.

Bill Pulliam said...

It will be interesting (to say the least) to see what it takes, and how long it takes, for the investment delusion to burst. The ideas underlying it are entrenched in the American psyche as deeply as any religious belief; fitting, of course, since materialism actually is the predominant religion of American society. Even now, as "the system" is splitting seams and revealing its ugly inner workings right and left, you still hear all the same liturgy. Still almost no one seems to have noticed that the entire stock market itself is one large Ponzi scheme; even more so for the inflating housing market. We scapegoat Madoff and Stanford, yet we fail to see the parallels between their actions and those of the entire financial industry and markets taken as a whole. We still hear pundits saying that in the long term the market is always up; in particular the old (rotten) chestnut that over a decade it always makes money. Again, the plain fact that this is a lie is never noticed; the losses from 1929 were not recouped until the 1940s or even 1950s depending on the metric you use; adjusted for inflation there was a 2+ decade flat period from the 1960s to 1980s; and of course at the present time the markets are well down compared to 10 years ago. When I mention this to people who are "well educated" in the field, they always tell me that if I looked at broader market indices, not just the Dow, I'd get different results. Well of course, since the broader indices (like S&P) were not calculated back in the 1920s-1940s! Yet this commandment is still believed devoutly by those in the industry: The Market Shall Go Up Every Decade, hence Thou Shalt Put Most of Thy Money In It. It is believed so devoutly, as devoutly as the "sacred scriptures" are believed by their followers, that those who espouse it are not even aware that they are speaking blatant falsehoods.

Like most other organized religion, the effect of mainstream economic theory and financial education is to prevent their disciples from achieving deep understanding, not to promote it. One wonders what it will take to push us (collectively) so far that we finally lose our religion.

FARfetched said...

I think JimK above (2/27 6:29 AM) touched on something that deserves more comment.

In the same manner that localvores and other energy-conscious people try to minimize the distance that their food travels, perhaps investment (as opposed to speculation, as you point out in your response) should also be made as local as possible.

The most local investment possible, of course, is "training in practical skills" — for yourself and your family. Even if you have to leave your home behind, the skills come with you. But investments in (and around) your home is the next rung: insulation, upgraded heating, and so on — the recent stimulus package provides tax breaks for these — as well as food production, both perennial (trees/bushes) and annual (garden).

If you have more to invest (lucky you!), investing in your neighborhood (or your neighbors) is the logical next step: CSA, both formal and not-so-formal, and cross-training in various skills. After that, what businesses in your town or county need to be incubated or rescued?

Investing locally provides a little comfort for the suspicious or paranoid investor — it's really easy to hunt down a local cheater. ;-)

ezab said...

to Jeremy (and others) ... about that sewing machine:

Sewing machines are dependent on a number of tiny parts that tend to bend or wear out, including particularly that tiny wire thing that goes up and down, and the thread goes through it (I've forgotten its name.) In addition to a duplicate machine for large parts, you might want to consider getting a selection of bobbins, presser feet designed to do specialized tasks like shirring and hemming, and similar gadgets. I had an old-fashioned Singer I used for many years, and my impression is that these small accessory parts are interchangeable on many of the older Singer models. (I don’t have practical experience with White machines.)

I used to live in New York City, and had many relatives in the garment trades. The garment district in Manhattan is made of highly specialized streets (one sells lace and ornaments, one sells thread, one sells sewing machines, etc.)

If you’re seriously interested in developing this skill set for the deindustrializing future, you might want to spend some time in that neighborhood. See if you can find some old sewing machine repair guy who’s ready to go out of business and sell you his stock. I just checked over the Internet, and it looks as if the sewing machine stores are still clustered around 35th, 36th, 38th and Broadway. There might be additional clusters out in the immigrant neighborhoods in Brooklyn and Queens. Also, I bet there would be similar clusters in other large cities where
clothing is manufactured ... there was a substantial clothing industry in Los Angeles 20 years ago; I don’t know whether that’s still true today.

PS – you also want a supply of sewing machine needles. I think there was a rubber belt, too, that carries the energy to the needle.

If someone is seriously considering this as a skill for future years, you might consider old-fashioned electric machines, as well a treadle machines. They were made to last a lifetime, and I think their electricity consumption is small. Sewing is one of the skills we’ve shipped overseas. Also consider a heavy duty machine that could sew heavy fabrics.... like a big bag someone could use to haul stuff around their garden.

Good luck!

jagged ben said...

@BurntToast, who said:

"[A typical LCA] would consider the cost of fuel for the equipment which extracted the sand and transported it to the processing plant, but not the energy required to make that equipment (as if it were all just there). If correct, this seems a serious flaw in the typical lifecycle assessment methodology..."

and also said:

"Mr. Gale goes on to note that operating costs tend to outweigh embodied costs by an order of magnitude. I'm skeptical of this.."

The seriousness of the flaw in methodology is an empirical matter; it depends on whether the energy required to make the equipment is actually significant compared to operating costs, or not. (And by the way, some of that equipment may fact just be there already, or in other words, not wholly part of the life-cycle. This is what's called a 'bootstrapping' issue.)

If your skepticism of Mr. Gale's statement is based merely on your intuition, I would caution that it's a mistake to make intuitive judgments about matters that can and should be interrogated with empirical research. As far as that goes, if you were to ask these same questions at theoildrum.com, you might get a number of more direct answers.

I tend to visit JMG's blog here not to try to answer such technical questions, but to prepare myself mentally and spiritually for the fact that big changes are coming.

Stephen Heyer said...

A very interesting article and discussion. Thanks John.

Cannot find much to disagree with and most of the comments I’ve wanted to make were soon covered by others.

I suppose, the main overall comment I could make is that things are always more complex. For example, even in a prolonged depression there are always profitable investments, but you have to have a great deal of detailed knowledge of THAT PARTICULAR investment to pick a good investment and you have to accept that most investments will fail.

However, the days of millions of people being able to hand over their retirement savings to “someone” to “invest” in “something” and expecting to get any of their money back, let alone get lots more than they put in back, are over – possibly forever.

Problem is, problem is, they were told, promised by their governments and financial industries that this was the way to get rich and provide for their retirement. In fact they were herded into this system as governments and the financial system openly arranged laws and the economy to force them in.

One of the main reasons openly given for forcing our economies into monetary inflation (rather than the mild deflation developed economies “want” to run) is that inflation, combined with income tax on bank deposit interest, discourages people from saving (for God’s sake).

Ditto for the kind of houses they were encouraged to “invest” in: Huge, hopelessly expensive to heat/cool and maintain houses, often on tiny blocks, far out in the suburbs. Exactly the kind of houses they don’t need in an impoverished old age, and exactly the kind the younger generation won’t want to buy off them.

What I’m concerned about, is what happens when all those people realize in their hearts what has been done to them. They already sort of know in their heads, but it’s when that knowledge settles into your heart and soul that you really “know”.

We know they’ll be looking for someone to blame, some evil conspiracy of comic book villains so as to avoid accepting any responsibility for their ruin themselves. What astonishes me is that there are so many excellent prospective comic book villains still running around holding up their hands and shouting “pick me! pick me!”.

Tell you what, if I had have been in on any of the financial system Ponzi schemes I would have long since taken the $billion or so I’d looted and retired to my nice hacienda in Uruguay where I’d be concentrating on keeping my head low and becoming popular with the locals (build a few schools, support the local labor movement, be nice to my employees, you know, the usual).

I am becoming more and more afraid that in the end, the bitter end, there will be blood.

Stephen Heyer said...

John Michael Greer: “Still, in a contracting economy, on average, all investments lose money. This is the hard reality with which all of us will have to deal.”

There is also another phenomenon acting here that would in the end produce much the same result for most people even if we were not running headlong into Peak Everything, something I was aware of from the 70s but became really conscious of when I read Peter Russell’s “The White Hole in Time”.

In short, it was getting easier and easier to produce “stuff”, even the factories to make “stuff”. As fewer and fewer people and less and less investment capital was needed wealth would tend to migrate into fewer and fewer hands and the ordinary people become surplus to requirements, their incomes would reduce, and the world, at least from the point of view of the proletariat, would enter a permanent depression .

Now the futurologists knew this as far back as the 70s, in the case of some government planners perhaps the 50s, but it was thought that systems would be introduced to force the distribution of this potentially vast wealth so that everyone had a reasonable standard of living and much more leisure, work no longer being central to life. Instead, systems were introduced that had the opposite effect, hastening the concentration of wealth into a smaller and smaller section of society.

So, even if the current financial criminal lunacy had not happened, and even if Peak Everything was not yet starting to bite, the proletariat would still get squished, if not just yet, then soon.

By the way, I believe this “getting easier to make stuff and do things” is going to continue through The Long Descent, just not as fast and not in all areas. This is one more reason why things have to be sorted out, soon: Imagine a future feudal society (which is where current trends would take us) where most of the peasants and serfs are surplus to requirements, just a nuisance to have around, except for a few needed for personal servants and sexual services.

BurntToast said...

Chalk it up to the space walrus then - I didn't keep a copy so I can't re-post. Thanks for your reply and for the insights you share on your blog (still working my way back through older entries).

You make a good point with regards to the financial payback period on solar pv. Put more bluntly, if the energy payback is measured at ~2 years, the financial payback should approximate that number. Most estimates however put the financial return on solar at 10 years or more, which suggests one of two things: 1) that there are significant hidden energy costs not counted in most life-cycle assessments or 2) an energy payback of 2 years is pretty poor relative to the energy sources we currently use, and therefore solar can't support standards of living we currently have.

No need to reply - just thinking out loud.

marielar said...

farfetched wrote:
"If you have more to invest (lucky you!), investing in your neighborhood (or your neighbors) is the logical next step: CSA, both formal and not-so-formal, and cross-training in various skills. After that, what businesses in your town or county need to be incubated or rescued?"

The problem of investing locally is that the policies and mindsets are not there yet to make investments at the local level to just break even. As an example, just take the food sector. It is so expensive to comply with food safety laws, there is so many loops to jump, and the overheads are unreal. And people dont want to pay the extra bucks to cover the more intensive labor.
Recently on MSNBC:
"Wal-Mart Stores Inc., the world’s largest retailer, said Tuesday its renewed focus on low prices paid off with a 4 percent rise in profit for its fourth quarter as holiday shoppers brought discounted groceries and home electronics as well as health and wellness products."

The economy contracting, people are flocking to where they can buy the cheapest. Its the worst path to take, but people will go there anyway. We are such an atomized society that people dont see or care how they impact on their very community. Some neighbours buy our eggs but many of them just wont because they expect we will sell for grocery price (at which we dont make a cent). Just yesterday, another one was complaining about a 6 cents increase on the milk quart, even if our neighbour wife has to work outside to keep their dairy farm.

Its a mad rush to the lifeboats and the majority dont care about who they trample on. People worry about their retirement investment, not about where their food and fuel will come tomorrow, or climate change or peak oil. At this point in time, small producers just cant compete in the larger economy. I am worried about how organic farmers, small cheesemakers etc. will do in the near future, if the demand for higher end products will keep increasing or just dry out. Hopefully, they will have the financial strenght to make it through the bottleneck.
I tend to believe that this is just like a forest wild fire. Lots need to burn before the seeds of an alternative system can sprout. Some pine seeds remain dormant until the fire has run its course. The changes are so fast and chaotic right now. Whatever people get into, make sure it pays you right now to do it. Dont invest your resources with the idea there is a market now or in the next few years. For example, learn how to garden to feed yourself and your family, learn how to sew if you will clothe yourself. All kind of small scale industries like mills, woodshops, cold-pressing for oil, etc...would be more than useful for the new economy, but I dont think their time has come yet. To use another metaphor, dont plant the tomatoes out before the last frost is passed. And yes, keep investing in CSAs and other valuable local businesses but be prudent for larger investments. The head of the giant industrial/financial chicken has been cut, but there will be some serious trashing around before it is all said and done.

Danby said...

Marielar,
You have some beautiful and apposite metaphors there. I would like to think we are in early spring, with last frost approaching. I am pretty sure, however, that we are in late September, with no rain since May, and smoke on the horizon. Iceland has already collapsed, and Hungary, Ireland and Estonia are on the short list of candidates for the next crater. If we are lucky, we may avoid bloodshed, but i would not bet on it.

Kurt said...

Great post, I've been pondering this very thing for quite a while now but tangentially. I've been thinking of the confluence of our concepts of money, wealth and ecological wealth in particular. Sure there's the non-renewables like fossil fuel that have seen quite a bit of scrutiny and even occupy a popular gauge on the dashboard of life, both in value and how much is left in the tank so to speak.

It seems to me that it's a fallacy that we are getting wealthier in any form when divided by renewing ecological forms. Fresh water aquifers, topsoil, fisheries, etc seem to be getting strip mined, poisoned or paying much fewer "divedends". Divide that amongst a growing population and the wealth of nations might have been written by Malthus instead. :/

Anyway, great comments on this as well. Very much like Bill Pulliams observations on his first post on the community unit of survival. Also, Ricardo Rollos comments about nitrates made me wonder if there's been anyone out there that has created habitats for bats in order to harvest their nitrate/phosphorous rich guano for fertilizer. Is there such thing as "bat-keeping"?

messianicdruid said...

Gold is a sapling, silver is an acorn...

some great info:

http://goldismoney.info/forums/showthread.php?t=262458

FARfetched said...

Marielar, you make a good point… if the point is to get a monetary return from your investment. In a declining economy, when the future of even your money is in doubt, keeping things going might bring very good returns. For example, if you rescue a local bakery, you should have no problem obtaining bread.

Walmart is riding the wave at the moment, but when fuel supplies get tight and they can't keep their shelves full of junk, they'll be going bye-bye. They won't die as fast as I (or many others) would like, but die they will.

lessingham93 said...

I have been saying essentially this (if much less thought out) for many years. I have been complaining for a long time that my social security payments are a joke and that i will never see any of it in my old age. It's simply the government stealing money from the poor to give to the poorer.

My folks are in their early 70's and dad still gets a government retirement check. But they are still working part time to make ends meet. (And help out their children and grandchildren)

Most of the gen X folks I grew up with don't have any savings or retirement plans anymore. My entire lifes savings was lost in the forced sell of my house in Medford. Something that weighs heavily as I have been saying for years that real property that you can do things with is probably the only real security in ones future. I really miss my garden and workshop.

I have also been stressing the importance of alternative fuel sources (preferably cellulosic ethanol in my opionion) which don't rely on burning other resources (like food stock)

Put these all together and there is as disturbing trend to witness. In Brazil there is a concern prompting a call to limit foreign investment in purchasing land there. Their succesfull Ethanol industry has prompted purchases of their farm property by foreign interests. http://www.mstbrazil.org/?q=node/568 Regulating and limiting these purchases protects local interests.

Looking at our own crash and the number of foreclosures and over extended properties in the US shows another phenomenon. A large increase in foreign interests purchasing us agriculture and residential properties. United Land Sales reports on their website "UnitedLandSales.com has seen a dramatic increase in Foreign Buyers, up about 20%. The bulk of the foregin buyers are hitting our site from Canada, United Kingdom, Germany, and Australia." first ran across an article on this phenomena in the local newspaper last week.

This prompts a real concern. Are local people even going to have land to work and live on without being indentured to wealthy land owners who might not even live in the same country. How do you survive the crash of our economy if you don't even have a place to live and work without being beholding to foreign interests?

It's a concern. I know you yourself are a renter.

Jeff

SactoMan01 said...

I think after reading all these posts on this message thread, I can say that ALL of us should take a chance to read Alvin Toffler's two seminal works on predicting the future: Future Shock and The Third Wave.

If you take the viewpoint of the times these two books were written, it actually does a lot to explain the modern world we live in. Especially prophetic was the chapter "De-massifying the Media" from The Third Wave, in which he predicted as communications technologies improve the days of true "mass media" will come to an end. Since the publication of The Third Wave in 1979, the rise of home video record/playback systems, multichannel cable and satellite TV, the maturation of the home computer from desktop systems all the way down to your cellphone and the rise of the public Internet has made his prophecy a modern reality. The rapid decline of newspapers in recent years is proof that modern communications has effectively "de-massified the media."

The Third Wave also talks about the potential end of the petroleum age (this book was written at the time of the second oil shock in 1979-1980). And they also mentioned how even "massive" scale governments will have to end because of the increasing need to accommodate everybody, not just the mass majority.

MsMarmitelover said...

Very interesting post. I recently attended a lecture called 'Facing the financial winter' which looked at this crisis backing it with astrological data.
http://travelswithmyteenager.blogspot.com/2009/03/facing-financial-winter.html

Reinier Torenbeek said...

A while ago, my wife pointed me to an interesting article in the Chronicle Herald (Nova Scotia). It tells about large-scale acquisition of arable land in East Canada. It made me think of this post and also connects to lessingham93's comment.

The original article does not seem to be available on the web anymore, but a copy can be found on http://farmlandgrab.org/5916 . I highly recommend reading it.

Thanks for your outstanding posts and kind regards,
Reinier