The Five Stages of Collapse

[David Farber <dave () farber net>]

Begin forwarded message:

From: dewayne () warpspeed com (Dewayne Hendricks)
Date: December 24, 2008 2:26:18 PM EST
To: Dewayne-Net Technology List <xyzzy () warpspeed com>
Subject: [Dewayne-Net] Re: The Five Stages of Collapse

[Note:  This comment comes from reader Randall.  DLH]

From: Randall <rvh40 () insightbb com>
Date: December 24, 2008 10:43:22 AM PST
To: Dewayne Hendricks <dewayne () warpspeed com>
Subject: Re: [Dewayne-Net] The Five Stages of Collapse

On Dec 24, 2008, at 11:38 AM, Dewayne Hendricks wrote:
> [Note:  More from Dmitry Orlov.  This item from 11/08. Worth  
> reading!!  DLH]
>
> The Five Stages of Collapse
> by Dmitry Orlov
> <http://www.energybulletin.net/node/47157>

[SNIP]

> I am an engineer, and so I naturally tended to look for physical  
> explanations for this process, as opposed to economic, political, or  
> cultural ones. It turns out that one could come up with a very good  
> explanation for the Soviet collapse by following energy flows. What  
> happened in the late 80s is that Russian oil production hit an all- 
> time peak. This coincided with new oil provinces coming on stream in  
> the West - the North Sea in the UK and Norway, and Prudhoe Bay in  
> Alaska - and this suddenly made oil very cheap on the world markets.  
> Soviet revenues plummeted, but their appetite for imported goods  
> remained unchanged, and so they sank deeper and deeper into debt.  
> What doomed them in the end was not even so much the level of debt,  
> but their inability to take on further debt even faster. Once  
> international lenders balked at making further loans, it was game  
> over.

The collapse of the Soviet Union was not something that "Just  
happened" but was instead engineered by the master strategists of the  
Reagan Administration.   They leaned on the al-Saud and al-Sabah  
petrokleptocrats of Saudi Arabia and Kuwait.   Our pet Arabs opened  
the sluice gates and pumped every quart of oil their sands would yield  
and they dumped this oil on the market at whatever price they could  
get.  This drove the world price of Saudi Light Sweet Crude down below  
$10 a barrel, recall.

It cost more than $10 to raise a barrel of Russian oil.  The Russian  
economy collapsed.

It cost right at $10 to raise a barrel of Iraqi oil, right at the time  
Saddam Hussein was strapped to pay for his invasion of Iran (which  
invasion he had done largely at the behest of the Reagan  
Administration).

The Iraqi economy collapsed.

Saddam told Kuwait that he was not going to allow them to destroy his  
economy by cheating on their OPEC quotas.  He asked April Glaspie what  
the US reaction would be if he forcibly put an end to the Kuwaiti  
cheating.  Ambassador Glaspie phoned home to Foggy Bottom for  
instructions and then told Saddam that "The United States does not  
have a mutual defense treaty with the Emirate of Kuwait" and that "The  
US takes no position on inter-Arab disputes".

Saddam took this to be a diplomatic way of telling him to do what he  
had to do.

We all know how well that worked out, for him.

Meanwhile, back on the farm:

It cost more than $10 to raise a barrel of Texas, Louisiana, Arkansas  
or Oklahoma crude.

Before 1981 the maximum interest rate S&Ls could pay was set by the  
federal government, and S&Ls could only invest in real estate  
mortgages within 50 miles of their home base.   In 1982 those  
regulations were done away with, after which S&Ls could pay any amount  
they cared to pay for CDs and they could loan money to anyone who  
cared to borrow it.

The S&Ls in the Oil Patch (TX, LA, OK and AR) loaned money to oil  
producers.

Ten years later the Arabs were flooding the world oil market in order  
to bankrupt the Soviet Union and coincidentally to cause an economic  
boom in the Industrialized World.

The propaganda meisters told us the economic boom was caused by the  
tax-cutting policies of Reagan's government. They didn't bother trying  
to explain why Germany and the UK were also having economic booms  
without having enacted regicidal tax cuts.

Cheap oil led directly to the collapse of the USSR.   And to the First  
Gulf War.  And to the collapse of the FLSIC - something like 90% of  
the S&Ls that failed were located in the Oil Patch.   If the S&L  
collapse had been due to some flaw inherent in the nature of a Savings  
and Loan, the S&Ls in Maine and Minnesota would have failed at about  
the same rate as did the Oil Patch S&Ls.

> What is happening to the United States now is broadly similar, with  
> certain polarities reversed. The US is an oil importer, burning up  
> 25% of the world's production, and importing over two-thirds of  
> that. Back in mid-90s, when I first started trying to guess the  
> timing of the US collapse, the arrival of the global peak in oil  
> production was scheduled for around the turn of the century. It  
> turned out that the estimate was off by almost a decade, but that is  
> actually fairly accurate as far as such big predictions go. So here  
> it is the high price of oil that is putting the brakes on further  
> debt expansion. As higher oil prices trigger a recession, the  
> economy starts shrinking, and a shrinking economy cannot sustain an  
> ever-expanding level of debt. At some point the ability to finance  
> oil imports will be lost, and that will be the tipping point, after  
> which nothing will ever be the same.

While it is certain that the world will reach its Hubbert's Peak (if  
it hasn't already passed it), the $147/bbl price we saw a few months  
ago were not the result of demand-pull or of cost-push inflation.  Oil  
reached that price because of hedge fund manipulation.  Somebody or  
some group of somebodies bought an appreciable percentage of the  
available futures contracts for oil, and that drove a frenzy of buying.

While world oil prices were flirting with $150/bbl, the IAEA was  
reporting that crude oil inventories were at or near record highs.

NYMEX Crude is trading at $35.40 a barrel, even as I type.

> I don't mean to imply that every part of the country will suddenly  
> undergo a spontaneous existence failure, reverting to an uninhabited  
> wilderness. I agree with John-Michael Greer that the myth of the  
> Apocalypse is not the least bit helpful in coming to terms with the  
> situation. The Soviet experience is very helpful here, because it  
> shows us not only that life goes on, but exactly how it goes on. But  
> I am quite certain that no amount of cultural transformation will  
> help us save various key aspects of this culture: car society,  
> suburban living, big box stores, corporate-run government, global  
> empire, or runaway finance.
>
> On the other hand, I am quite convinced that nothing short of a  
> profound cultural transformation will allow any significant number  
> of us to keep roofs over our heads, and food on our tables. I also  
> believe that the sooner we start letting go of our maladaptive  
> cultural baggage, the more of a chance we will stand. A few years  
> ago, my attitude was to just keep watching events unfold, and keep  
> this collapse thing as some sort of macabre hobby. But the course of  
> events is certainly speeding up, and now my feeling is that the  
> worst we can do is pretend that everything will be fine and simply  
> run out the clock on our current living arrangement, with nothing to  
> replace it once it all starts shutting down.

"In the Long Run, we're all worm food."
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