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Life After the Oil Crash
Deal With Reality or Reality Will Deal With You
This was posted to the Market Ticker Forum a few days ago. In my estimation, with the exception of the prognostication of oil going back to $20/barrel, it's probably about as good a summary as you're going to find of where things are going in the short-to-medium term:
Great survival and disaster preparedness books:
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Now is the time to invest in micro-solar equipment:
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In the era when I was born, commentators used to liken the economy to a casino. A few folks were making trillions of dollars, euros, and yen trading in currencies, companies, and commodity futures. None of these people were actually doing anything useful; they were just laying down their bets and, in many cases, raking in colossal winnings. If you followed the economic food chain, you'd see that all of that money was coming out of ordinary people's pockets . . . but that's another story. Anyway, all of that economic activity depended on energy, on global transportation and communication, and on faith in the currencies.
Early in the twenty-first century, the global casino went bankrupt. Gradually, a new metaphor became operational. We went from global casino to village flea market. Stores were empty. People were out of work. How were they to survive? The only way they could do so was by endlessly recycling all the used stuff that had been made before the crisis. At first, after the initial economic shock waves, people were selling their stuff on internet auctions - when there was electricity. Then, when it became clear that lack of reliable transportation made delivery of the goods problematic, people started selling stuff on street corners so they could pay their rents and mortgages and buy food. But, after the currency collapse, that didn't make sense either, so people began trading stuff, refurbishing it, using it however they could to get by. Source
I must caution everyone - if you are not prepared for six months to two years of unemployment, you need to be. If you are dependent on credit to survive (that is, if you couldn't make it without your credit cards) you need to fix that now.
Like today now.
As during The Great Depression, millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford.
As credit collapses distribution of food and other essentials will break down. Unable to access credit, trucking companies will be unable to get goods to market. The current distribution system for food requires travel of over 500 miles from production to consumption; this is untenable in a market where stable credit is unavailable. Food distribution will be severely impacted and in some areas may break down below critical levels.
Unemployment will reach 25% within two years. Median income will fall by 30% nationally. Foreclosures will reach 20 million homes. The government will step in with HOLC-style remediation but it won't matter - the unemployed won't be able to pay irrespective of the price.
House prices will fall to well under $100,000 nationally on a median basis but with lending all but non-existent you'll need 50% down. A few people will make out like bandits near the bottom, being able to buy up homes for $10,000 each in blocks of 10 at a time - for cash. 60% of America will be renters; nearly half of all homeowners will ultimately lose their homes to foreclosure.
Civil unrest will break out in major cities when incomes fall but the cost of food and essential services fail to come down materially, leaving millions of Americans hungry, broke and homeless. Unlike in the 1930s America will not quietly stand in soup lines - instead they will riot, loot and burn. The National Guard will be called up but will find it impossible to exert meaningful control without shutting down all commerce in the affected areas. The decision will be made to cordon off the cities and deny entry to anyone who does not live in that specific neighborhood, essentially shutting down commercial activity. GDP will fall by 30%. Source
As far as oil prices, they certainly could drop back to $20 in light of the economic collapse only to then shoot up to $300 as energy analyst Charles Maxwell explained in a recent Barrons article or even $500 as Matt Simmons explained in a recent Fortune article.
A longer term perspective worth revisiting in light of recent events comes from Richard Heinberg's 2001 article "A Letter From the Future", in which he predicts a that the "global financial casino turned into the village flea market" someimte in the eary 21st century:
For what it's worth, last year I asked Jay what he would do if he was me considering that I was (at the time I asked) 28 and single. He said "marry into a big family." I asked "what makes you say that?" He replied "so you have people to turn to for protection."
Best of luck,
Matt
As far as what you can do about it, the most succint summary comes (again) from Jay. In the final issue of his newsletter (way back in the year 2000) he wrote the following shortly before retiring:
#1. Move out of the city! Sometime in the next couple of decades, civil authority in large US cities will simply disintegrate. And when authority goes, we know exactly what's going to happen.
Remember the Rodney King rebellion? All that old class hatred and jealousy comes boiling to the surface. It's really going to be ugly -- you don't want to be there!
Go somewhere where the climate is warm, with plenty of rain (just don't come here to the Kona Coast.) I don't think "ethnic cleansing" will be a big problem except in the cities (at least, not to start with).
#2. Prepare yourself to survive without municipal power, water, or sewer services. You won't have to live without hookups initially, but you will be forced to do without them sometime in the next few decades.
Most of the country's groundwater is already contaminated, and once sewage systems and dumps are abandoned, it will ALL become contaminated. Without power to pump or chlorine to disinfect groundwater, you really have no option except to rely on rain catchment for drinking water.
#3. In order to survive, you are going to need a large garden. An oversized garden would allow you to exchange your extra produce to your neighbors for hard goods -- like ammunition.
#4. Remember that you will not be able to rely on complex technology, because once supply lines break down, you won't be able to get spares. So limit yourself to technology that you can fix with a hammer and forge. (If you don't know what a "forge" is, go see an old cowboy movie.)
Beyond these four points, just try to fit in with your community as best you can. Perhaps join a church, lodge, or club -- find someone who is willing to help you in case you are attacked. Source
As far as how things are likely to play out in your particular neighborhood, consider the prognostication that John Robb, a former U.S. Special Forces mission commander, offered back in 2007:
Wealthy individuals and multinational corporations will be the first to bail out of our collective system, opting instead to hire private military companies, such as Blackwater and Triple Canopy, to protect their homes and facilities and establish a protective perimeter around daily life.
Members of the middle class will follow, taking matters into their own hands by forming suburban collectives to share the costs of security -- as they do now with education -- and shore up delivery of critical services. These "armored suburbs" will deploy and maintain backup generators and communications links; they will be patrolled by civilian police auxiliaries . . .
As for those without the means to build their own defense, they will have to make do with the remains of the national system. They will gravitate to America's cities, where they will be subject to ubiquitous surveillance and marginal or nonexistent services. For the poor, there will be no other refuge. Source
