A Prepper Garden

Here comes another prediction, from the blog Ecomomic Collapse, that it will. It’s based on evidence that the government and major banks are making preparations they aren’t telling us about.

Among other ominous signs, blogger Michael Snyder points to:

1. A secretive directive from regulators that big investment banks, like Bank of America and Goldman Sachs, set up contingency plans to dismantle themselves if their Ponzi pyramid bubble bursts and they have to declare bankruptcy. (These are already technically insolvent since their debt level vastly exceeds their assets.)

2. The US government is stockpiling food and ammunition, and Obama is signing a raft of executive orders to be implemented in response to a societal meltdown.

3. The European debt crisis continues to worsen as EU economies continue to contract. There is even talk of Germany leaving the Euro.

4. Over the past 12 months, hundreds of banking executives have been resigning and selling off enormous quantities of stock. Many have been shopping for “prepper* properties” in rural communities.

5. Economists and European leaders are predicting the next banking crisis will be worse that the one in 2008 – mainly because governments are too indebted to deliver more bailouts – and other policy fixes (such as dropping interest rates and quantitative easing) have already been enacted. One former World Bank economist believes the coming banking crisis will be so severe that civilization won’t survive it.

6. The problems facing human society aren’t merely economic. Energy, water and food distribution (especially with the severe drought in the US and Russia) are also in totally disarray.

It’s clear from Snyder’s blog that he’s been predicting economic collapse for awhile – he uses the site to hawk gold, silver, emergency food rations, seeds and guns (to keep your neighbors from stealing veggies out of your garden). However I find it highly significant that he’s citing mainstream sources, such as Reuters, a former World Bank economist, a Fortune 300 executive and a member of the European Parliament.

Read more here.

*A prepper, a term derived from preparedness, is someone who becomes self-sufficient in providing for food and other basic needs.

Dr Guy McPherson

“The opera ain’t over till the fat lady sings” – Dan Cook, sports writer and broadcaster 1978

I have spent this past weekend at a lecture and workshop by Arizonan Guy McPherson, who is currently touring New Zealand. McPherson blogs at Nature Bats Last and has recently published a book called Walking Away from Empire: a Personal Journey. During his lecture he presented some very interesting oil production/price data that has made it possible for a number of mainstream and non-mainstream economists and financial advisers to project a date for the next economic crisis. Many, like McPherson, believe the next one will be so catastrophic it will bring down the global financial system and world trade and monetary system, and possibly our energy and telecommunications grid. In other words, TEOTWAWKI (The End of the World as We Know It).

For nearly a decade various Peak Oil economists have been predicting the collapse of the global economic system, based on the growing cost of oil extraction (we’ve used up all the sweet stuff that’s easy to get at – sucking it out of tar sands and from deep water wells is far more difficult and costly). While the mainstream media rarely makes the connection, all industrial activity and economic activity has always depended on the ready availability of cheap fossil fuel. Yet a close examination of world oil reserves and production shows that the era of cheap fossil fuel has ended. Owing to the high cost of extraction, world oil production virtually plateaued in 2004. According to current data it will begin to decline sharply (by 4% per year) in 2014.

You know the coming crisis is real when the world’s most two most famous insurance companies, Lloyd’s of London and Chatham House, advise the businesses they insure to begin scenario-planning exercises for the oil price spike they expect in the “medium term” (Lloyd’s 2010).

Until recently the exact timing of the next oil spike (and economic collapse) has been difficult to predict. In large part, this relates to the failure of industrialized countries to operate as free markets. While no other country is as generous as the US in the corporate welfare government provides multinational corporations, all industrialized countries do it to some extent.

Numbers That Point to a November-December 2012 Oil Spike (and major economic crisis)

1. Oil production has plateaued

The following graph is from an exhaustive paper analyzing global oil production trends by Russian economist Dean Fantazzini. Fantazzini counts all liquid fuels (e.g. liquified natural gas), owing to their ability to be used interchangeably with oil. You can see that production virtually flat lined in 2004:

2. Demand from energy hungry countries like China and India continues to increase rapidly.

When demand exceeds supply, the law of supply and demand dictates that the price must increase – unless government intervenes to stabilize it.

3. All Modern Recessions Were Triggered by Spikes in the Price of Oil

Even more surprising is the following graph, published in the Wall Street Journal in February 2012. It shows that every recession since 1973 has been triggered by a steep increase in the price of oil. It’s perfectly logical when you think about it. Businesses have no choice but to cut their oil use when the price goes up. And because of the direct link between energy use and industrial production, economic activity decreases accordingly. This, by definition, is a recession.

WSJ Oil price recession chart

Other economists have extended the oil spike/recession link back to World War II. Since 1947, according to James Hamilton, every recession but one was linked to a spike in oil prices.

Recent Demand Collapse

The price of oil per barrel has decreased 25% in the last three months, mainly due to demand bottoming out in dying economies like Greece and Spain. The price of gasoline hasn’t reflected this decrease, in part because Eurozone oil sanctions against Iran are expected to push the per barrel cost up again. Bloomberg’s predicts the price to rise to $114 per barrel in the 3rd quarter of 2012.

What Obama Could But Won’t Do

Owing to the upcoming elections, we can expect Obama to release most of America’s strategic oil reserves. However this is a drop in the ocean, compared to the billions of barrels lost to Europe and the US due to the sanctions on Iran. Other options open to the President are to implement price controls (like Nixon) or to ration gasoline (like Roosevelt during World War II). Obama’s past behavior suggests he worries more about pissing off oil companies (by interfering with their price gouging) than voters angry about the price of gasoline. Thus I think bold action on his part is highly unlikely.

Preparing for Economic Collapse

McPherson’s presentation had a powerful effect on the hundred or so of us who listened to it. Perhaps the fat lady hasn’t quite started singing, but I can sure see her standing in the wings. About thirty of us met with McPherson and his wife the following morning to begin drawing up a detailed food security plan for New Plymouth. If there is a second, more severe economic crisis in December, New Zealand’s oil imports could cease overnight. Without petrol for our vehicles, we are a long way (by horse or donkey) from the agricultural centers that currently provide most of our food. While many of us already produce large amounts of fruit and fresh vegetables in our gardens, we are very short on staples (like potatoes and grains), sources of concentrated protein and seeds.

McPherson will be doing an interview with Radio New Zealand, and I will post a link to the MP3 file when it’s broadcast.

There was a great story in last week’s Daily Mail about Athens residents queuing around the block for food parcels – one that should ring warning bells for the rest of the industrialized world. Economic analysts who chart the link between oil production, price and economic crises (including Paul Craig Roberts, Max Keiser and Marc Faber) are predicting another major economic crash by the end of 2012. This time there are virtually no oil reserves, in the US or elsewhere, to call on. This time most, if not all, industrial activity will cease (as it nearly did in 2008). We can also expect the energy and telecommunications grid to collapse in many regions and a major upheaval in food distribution, i.e. you are likely to find empty shelves at your neighborhood supermarket.

From the Daily Mail article:

“Starving Greeks queued around the block for free food handouts yesterday as the country’s politicians managed to end a crippling stalemate to form a coalition government.

Young children as well as the elderly waited in line in Athens to collect the parcels of fruit and vegetables donated by farmers from Crete to help ease the devastating austerity faced by many Greeks.”

The photos are heart rending:

Read more: Starving Greeks

German chancellor Angela Merkel

A total collapse of the electricity and telecommunications grid is the way I always visualize TEOTWAWKI (the end of the world as we know it).

It seems about to happen in Greece, where the government is out of money and depositors are withdrawing their money from Greek banks and sending it overseas as fast as they can.

According to Reuters UK Edition,  the Greek power regulator RAE has called an emergency meeting to avert a collapse of the debt-stricken country’s electricity and natural gas system. They did so after receiving a letter from Greece’s natural gas company DEPA, which threatened to cut supplies to electricity producers if they failed to settle their arrears with the company.

The IMF, Germans and global investment banks all seem pretty staunch about refusing Greece any additional loans unless their government agrees to further austerity cuts. Yet existing lenders lose any hope existing loans will be repaid if they allow the power to be cut off to Greece’s struggling productive sector. Makes you wonder who will blink first.