Friday, August 31, 2012

The coming collapse...

Revisiting the Future

by Jeff Thomas

Back in the early 2000's, the world was on a roll. Spending was at an all-time high, and people were drunk with the belief that the party would never end; that there was no limit to the amount that either they or their governments could borrow and spend and still, somehow, all would be well.

At that time, in a reverse of the old adage, "It's always darkest before the dawn," a small number of people were putting a wet blanket on this thinking, with the prediction that, as history shows, "Bull markets do not end with a whimper, but with an upside spike," or, in simpler words, "It's always brightest before the crash."

As one of the latter group, it's safe to say that, at that time, almost no one was listening to us.

My own predictions had been that, as the economic decline progressed, there would be several major stages of decline. But, in addition, there would be three major stages of denial by the great majority of people, and it is that denial that is the subject of this article.

1. The Initial Crashes

Although the initial crashes that occurred in 2007/2008 were, by far, the easiest aspects of the Great Unravelling to predict, their likelihood was, predictably, rejected by the greatest number of people. The reason for this is that the crashes represented a change of direction – from positive to negative.

2. The Greater Depression

Once people have acknowledged a change of direction, it is easier for them to accept that the trend may become more extreme than it is at present. Correspondingly, after the 2007/2008 crashes, most people were now willing to accept that a recession was underway. However, very few were willing to accept the dreaded "D" word. The term "Greater Depression" was coined by Doug Casey of Casey Research early in the game and is, to my mind, the most accurate two-word description of the economic period that we are now experiencing.

However, as I have stated, the "D" word is so repugnant to most people that, regardless of the indications that we are, indeed, experiencing a depression, most people simply cannot face the term as a reality. They prefer any number of euphemistic terms, such as "double dip recession," in order to avoid accepting the unthinkable.

This is human nature. It seems that, whilst a small number of us would prefer to face the music right from the outset and begin a plan to deal with it, the great majority will accept the details of what is occurring, whilst rejecting the overall reality.

3. Food Crisis

In my belief, people will only begin to accept the reality of this depression after the next set of crashes has occurred, particularly a second crash in the stock market. Historically, it is only after the false recovery has ended in a major downward trend that people tend to swallow hard and admit to themselves, "I guess this is for real."

So, in a sense, this may not be the time to raise the issue of what I consider to be the third unacceptable phrase of the Greater Depression: "Food Crisis." However, recent developments suggest that it may be of value to have a look now.

In July of 2011, International Man published an article entitled "Food Crisis" (reprinted in May 2012). In this article, I outlined the reasons why a significant shortage of food is possible and even likely. At that time, I also pointed out the reason why a Food Crisis is the third great event in the present economic debacle that engenders almost universal denial by otherwise intelligent and informed people:

Historically, there is nothing so chaotic as famine. As long as people have a crust of bread and as long as it arrives regularly, there is a chance that events may be controlled. It is the very unpredictability of supply that causes panic. And the greater the concentration of potential recipients, the greater the panic.

Small wonder that, when I speak to friends and associates of The Great Unravelling, this one facet often makes them recoil in a desire to avoid the subject entirely.

In response to that article, I received many predictable comments that essentially said, "It can't happen. They just can't let it happen." However, I also received quite a few that said, "I haven't even been considering a Food Crisis, but it looks like I'd better. Can you offer suggestions as to how we can deal with it if it happens?" Hence the companion-piece, published in October, 2011 entitled, "Can You Afford to Eat?"

This article dealt primarily with the subject of internationalisation – in effect, travelling in order to eat.

Some may be saying to themselves, "But even if this occurs, it is a ways off. Perhaps two years, or even more. We have enough to think about right now. Can't we deal with this issue when we get a bit closer to finding out if it will become a reality?"

The simple answer is, "Yes, you can." However, a Food Crisis, if it occurs, will have a greater impact on people than any other development in the Great Unravelling. Therefore, it would be wise to keep tabs on its likelihood as events unfold.

As the reader is likely to know, the world is experiencing the worst drought since 1934. However, even though the drought is on the evening news, not much is being said about the overall effect that it will have over time.

A failed grain crop, especially if it continues for more than one season, warns of several developments over the next few years:

Shortages of staple grains – Any food that is prepared using wheat, corn, soybeans, rice or other grain will become scarcer and significantly more expensive.

Shortages may not be limited to grain – Much grain is used as cattle feed. A failed crop means that ranchers will cut the size of their herds, as they deplete their storehouses of grain and rely on grazing. (Grass, too, is affected in a drought.) Beef, pork, poultry and all other meats are likely to be in shorter supply.

Few people will have personal food supplies – In 1934, more than 30% of all people lived on farms, and many others had home gardens. Today, less than 2% live on farms. In addition, in 1934, it was legal to store food. Today (at least in the US), FEMA has the authority to confiscate food. There is no limit as to what they may confiscate, but, as the FEMA website states that two weeks' food is sufficient in an emergency, they may regard this as the allowable limit. It remains to be seen whether they would exercise this power.

Inflation – Due to shortages, the price of food rises. In a period in which the Chairman of the US Federal Reserve has stated that his solution to the problem is to create more money, inflation is not only possible, but certain.

The most important commodities are food and fuel, in that order. Corn is used to produce ethanol, an alternative to fossil fuel. With a shortage in corn, there would be an equal shortage in ethanol, driving up the price of fossil fuel. Additionally, the Environmental Protection Agency requires that up to 40% of all US-raised corn be used to create ethanol. In a time when corn is experiencing a shortage, Larry Pope, CEO of Smithfield Foods, has called this "a government-mandated disaster."

Extended effects – No one can say how long the present drought condition will last. Should it become extended, as did the drought of 1934, another dust-bowl is entirely possible. Either way, though, farmers who have lost their annual crops will find it hard to recover, especially after more than just one year of drought. Likewise, it will take several years for meat-producers to build up their herds again until they have sufficient meat to fill the ongoing demand. Recovery will not occur immediately after the drought ends.

Food Crisis – And here we come full-circle. When the world is already experiencing a major food shortage, nothing could be less welcome than a collapse in the food delivery system. If the events described in the "Food Crisis" article were to develop during the present drought, we would be facing a similar or worse situation than in the 1930's, when a climatic calamity compounded an economic calamity.

Almost no one in the First World has experienced such a situation. Small wonder that we seek to hope that, "It can't happen. They just can't let it happen."

It is left to the reader as to whether it is wisest to a) plan ahead for this eventuality, b) keep a close eye on developments, or c) simply "wait and see."

In the words of Robert Heinlein,

"After three missed meals, most men are willing to kill for food."


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