The Coming Cataclysm

It is late in the day, and few are prepared for the darkness coming. The signs, it seems, are everywhere:

U.S. Treasury 2009 Financial Report Shows Dire Course

The Treasury Department recently issued the 2009 financial report of the United States government. … the annual report is untainted by creative accounting but also because its message is too important to ignore.

That message is that the sky is indeed falling…

…simple addition indicates that the total net position of the government is a whopping negative $57.4 trillion… if current policies are left unchecked U.S. government debt held by the public will increase from approximately 80 percent of GDP today to 700 percent in 2080.

The Fiscal Nightmare of the Welfare State

Bloggers post what they claim to be the scariest economic chart or the chart of the century. Indeed, many data sets are frightening, but none more so than the tables found here. This data shows incontrovertibly that modern government has failed. These countries are all insolvent and will eventually default.

All Western democracies are on death row. The unlimited welfare state is the cause. Some governments are delusional, believing they can continue on their present paths. Others cling irrationally to hopes of some miraculous reprieve. All are dead men walking.

Is Greece Just the Tip of the Iceberg?

Virtually every country in the EU spends more than it takes in and has made long-term fiscal promises to an aging work force that it can’t keep … Europe would have to have the equivalent of roughly $60 trillion in the bank today to fund its very general welfare benefits in the future. Of course, it doesn’t.

Today, Greece is only the tip of a very large iceberg.

America in the Red

America is digging itself into a deep fiscal hole. In 2009, the federal government spent $3.5 trillion, but took in only $2.1 trillion in revenue — thus spending $1.67 for every dollar it collected. The resulting $1.4 trillion deficit was equivalent to 10% of the nation’s economic output, the highest percentage since the end of World War II. America’s publicly held debt now totals $7.5 trillion, about 53% of gross domestic product — the highest it has been in more than 50 years.

These figures are alarming, but they pale in comparison to budget projections for the years ahead… By 2020, the United States would owe more than $20 trillion, the equivalent of about 85% of GDP. At that point, interest payments alone would consume about $900 billion a year — almost five times as much as they did in 2009.

The outlook grows even more bleak when we account for the ongoing retirement of the Baby Boomers and further increases in public spending on health care… The twin pressures of increased entitlement spending and slowing revenue growth mean that the debt will skyrocket — to roughly 200% of GDP in 2035, under one CBO scenario — unless there are dramatic cutbacks in all other government activities or an equally dramatic increase in taxes.

The euro crisis is a judgment on the great lie of ‘Europe’

We have still scarcely begun to wake up to the gravity of the crisis now upon us, not just for the eurozone but also for us here in Britain and for the entire global economy. The measures so far taken to prop up the collapsing euro, such as that famous “$1 trillion package”, are no more than gestures.

Greece was just the antipasto: Italy, Spain, Portugal and others are now hanging over an abyss of debt which scarcely all the money in Europe could fill – created by countries living way beyond their means, thanks not least to the euro’s low interest rates. The only possible consequence of the collapse of one of the world’s leading currencies, leaving Europe with no money to trade in, would be utter chaos…

…If the euro does disintegrate … the consequences would be incalculable … Without a currency, trade would collapse – leaving Britain, dependent on Europe for 50 per cent of its trade, just as seriously affected as everyone else. A system failure on this scale would make the 1930s pale into insignificance…

Dow Theorist Richard Russell: Sell Everything, You Won’t Recognize America By The End Of The Year

Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him…

… If the two Averages violate their May 7 lows, I see a major crash as the outcome. Pul – leeze, get out of stocks now, and I don’t give a damn whether you have paper losses or paper profits!

Is Europe heading for a meltdown?

The Bank of England Governor summed it up best: “Dealing with a banking crisis was difficult enough,” he said the other week, “but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop.” … Politicians temporarily “solved” the sub-prime crisis of 2007 and 2008 by nationalizing billions of pounds’ worth of bank debt. While this helped reinject a little confidence into markets, the real upshot was merely to transfer that debt on to public-sector balance sheets. This kind of card-shuffle trick … is not so different to the Ponzi scheme carried out by Bernard Madoff, except that unlike his hedge fund fraud, this one is being carried out in full public view.

No worries, mate — sleep well.

Of course, this is merely the opinion of the pessimists, who, if they predict calamity long enough will eventually prove right. The optimists say: no worry, the economy’s getting stronger, and once that bipartisan commission on deficit reduction reaches its conclusions we’ll just spend our way out of this crisis, just like we always have in the past…

Meanwhile, the U.S. Treasury is buying its own T-bills to artificially suppress interest rates; states are going bankrupt, issuing IOUs instead of tax refunds or civil service salaries; and are funding their public pension plans … by borrowing the money from their public pension plans. Sweet! Let’s pay off our credit card debt by putting it on our credit card!

I’m no economist, but it seems blindingly obvious that the current global economic climate is extraordinarily fragile, and seems poised for an cataclysmic meltdown. Even without a black swan — a hot war in the Middle East or Korea; a mass casualty terrorism attack here or abroad; a huge natural disaster or another financial meltdown like September 2008 — the whole house of cards is poised to collapse, catastrophically. The timing is unknown, but the inevitability clear. The players are hard-wired: the Ponzi scheme of being paid today with tomorrows dollars is a powerful drug, intoxicating to both those who deal and those strung out on its increasingly delusional indulgence. And the addicts will not lie down meekly when the dealer runs dry.

Beyond the obviousness of this impending crisis lies our stunning unpreparedness to face the chaos which most surely ensue. As David Warren writes,

Europeans, outside the Nazi-Fascist Axis, and North Americans were as utterly unprepared for the horsemen of the apocalypse riding their way in the 1930s, as we are today. In fact, they were materially less well-prepared, though spiritually perhaps rather sounder. Nevertheless, the spirit of denial, which includes the desire to focus on problems that aren’t real, to avoid staring at the real ones, was so alive in our predecessors that their naiveté has become our cliché.

But I think the tests we face from abroad may, this time around, be matched by the tests we face domestically. And for those I think we are even less prepared… we are living out lives in which the focus of our attention is constantly displaced from the here and now, towards any number of fidgeting external distractions, in a “virtual reality” that disappears in the first moment of a power failure. So that, when something happens in the here and now, transcending the technological order, and muting all sources of external entertainment, we are at a loss.

How or when this cataclysm will play out is pure speculation — a speculation in which I may indulge, time and grace permitting, in coming days. Our leaders have arrogantly boasted: “Never let a crisis go to waste.” While theirs is the opportunism of self-destructive power, we too should not waste the opportunity afforded us by this impending implosion to make the most of that which soon threatens to burst upon us in ways most frightening and unpredictable.

Now is the time to become grounded, to set aside frivolous things and focus on that which is permanent, unshakable, and sure. The time to do so surely is short.

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6 thoughts on “The Coming Cataclysm

  1. Nice to see you writing again, Doc. The content is dire, perhaps necessarily so. My question is – what can one really do to prepare? Why erase all debt when everything will go into default, at which point, what does it really matter?

    If anyone has run across a preparation plan that makes sense, please drop a link. Thx, jess

  2. “unless there are dramatic cutbacks in all other government activities or an equally dramatic increase in taxes”.

    End of this year is the end of the “Bush tax cuts” which have been in effect for eight years now. This was a across board tax cut covering income, capital gains, dividends etc. Allowing these cut to expire will have the same effect as a tax increase.

  3. It seems reasonable to approach preparedness as you might if you live in a region subject to earthquake or hurricanes. Those are disasters that are infrequent, but which disrupt power, roads, and services for weeks or months at a stretch.

    No one can really prepare individually for “the end of civilization” but you can certainly become more self-reliant. Self reliance doesn’t mean cutting yourself off from neighbors. In such times, it’s even more vital than ever to strengthen relationships with a congregation, neighbors, trusted friends, etc.

    Think about all the things you do now that depend on either some municipal service – trash collection, water & sewer, gas & electricity. Or consider things you’ve become accustomed to doing that require unrestricted access to fuel for your own vehicle AND clear and safe highways, all of which may evaporate for months in periods of disruption. Then familiarize yourself with various “low tech” skills:

    Basic carpentry with hand tools – hand ax hammers, saws, drawknife, brace&bit (hand drill)

    Sharpening hand tools

    Victory gardens (composting, soil preparation, planting, cultivating, etc.)

    Build a Greenhouse or raised beds with old windows

    Cooking & heat options: scrounging fuel; building primitive stoves & ovens

    Canning & prepping food for long term storage

    Building shelters from various materials

    Purifying & filtering water for drinking & cooking

    Disposing of Human Wastes

    Raising chickens, ducks, or rabbits so they are protected from nocturnal predators and daylight attacks from your local red-tailed hawk.

    First Aid (emergency wilderness response; “first responder” skills) General hygiene and antiseptic methods; Monitoring vital signs; Recognizing, preventing, treating: heat prostration & stroke; exposure, hypothermia, frostbite; controlling bleeding from deep lacerations; treating burns; reducing (“setting”) fractures; stabilizing broken bones & sprains; cleaning wounds; bandages & dressings; CPR for adults, children & infants; dealing with major injuries & loss of consciousness; Recognizing common communicable diseases; insect & snake bites, etc. Certification for these skills is available, and recommended. You can find classes for extremely low cost at your local Red Cross chapter. Many municipal fire departments offer classes in Community Emergency Response.

    If you already have learned these skills, think about taking to the next level, especially so you can train other folks.

    Advanced first aid & life support: child birth; minor surgery, suturing & wound management; airway management; treating chronic conditions such as emphysema, diabetes, CHF, COPD; pharmacology & herbal treatments, etc.

    Build a simple spring-pole or treadle-powered lathe or reciprocating saw. (Amazingly, a very simple device can create astoundingly sophisticated products.)

    Learn Oxy-acetylene Welding & metal fabrication techniques. Local School districts or municipalities offer adult courses.

    Timber framing, Cob building, foundations, surveying

    A lot of these skills can be learned and sharpened in the course of doing some camping. You don’t have to go trekking on foot into the deep wilderness to learn how to set up a tent, cook a meal, carry & filter water, etc. You might really have a lot of fun participating in “historical re-creation” groups. There are folks interested in the trappers and frontier people of the 17th century – visit a “rendezvous” or black powder rifle match, and meet folks who can share some tasty recipes for squirrel, duck, or groundhog. Or try a civil war re-enactment group, or a medieval tourney put on by the Society for Creative Anachronism. The SCA is NOT the same as a renaissance faire – they are more folks who like to camp with their families and friends in silly clothes, yes. But many of them seriously study and learn low-tech skills. I met people who could build a pair of sturdy leather shoes, shear a sheep, clean and card the wool, and knit a rain-proof cap or make tough felt slippers; other folks who learned blacksmithing and made chisels, screwdrivers, saw blades, hinges, or a sword; still others who learned to strike coins from hand-carved dies, make paper from rags, or print broadsheets on a replica 15th century press.

    Fun stuff!

  4. Thanks David – that was useful (if a little intimidating)…

    I guess what I was looking for is a balanced, inter-urban survivial treatise. I guess I suppose that the basics will still be covered by our communitarian lifestyle, am wondering on specifics on what we need to store resource-wise and food-wise. I have begun to buy and put up more food, especially grains and canned protein. Ugh is what I think about this whole topic – but I don’t want to bury my head in the sand either!

    Sigh. Hang in there all, some days I am more hopeful and optimistic, like today… jess

  5. Sadly, you guys are really fun! Here you are, rationally discussing civilized ways to live and to survive the destruction of our civilization. There’s another way…the old fashioned way…just steal the stuff from the civilized guys who discuss rationally. That’s the way you’ll need to think, simply because that’s the way of The Rest of The World. It amazes me that there is no mention in the discussions of self defense, or of armed resistance….when every example of history shows those are the skills that will determine the outcome.
    Hoard bullets. The guy with the bullets can get the food.

  6. Although the levels of debt are outstanding, this is not a Domesday Scenario. Civilization is not collapsing. Look around Europe and you will that the trains are still running, garbage is still being collected and people employ people to have their houses painted. We are seeing a 5-10% drop in personal wealth. Many people can bear that without hardship and those who can’t are finding that there is work that they can do that formerly they have disdained.

    Retirement at 61 is no longer an option, but should it have ever been? The major problem has been the importing of deflation from China, which has crept into the West unnoticed. Massive Western has inflation has been disguised by this and suddenly we are feeling the cost.

    Growth is still at 9-10% in undeveloped economies. It is called sharing the planet.

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