Last Monday I went to Ekocentrum in Gothenburg to listen to Nicole Foss, also known as Stoneleigh from The Automatic Earth blog. Interestingly, the lecture hall was packed (I heard people talking outside about being on the reserve list) with mostly young listeners. I sometimes wonder if I’m the only one reading all those obscure blogs so it was nice to see so many of like mind. If nice is the right word for the fact that “doomer” scenarios are in the air…
The lecture was very interesting, and my short summary of the message follows:
At the fundamental level, we’re facing an energy crisis – peak oil http://www.energybulletin.net/primer. This will cause us problems since our economic growth has been built on increasing use of energy and, particularly during the last thirty years, has driven an enormous credit bubble. Such bubbles are basically pyramid schemes and they attract huge amounts of money since everyone thinks they’ll get rich. All goes well as long as there’s still money to feed into the pyramid scheme. When economic growth stops due to the fact the energy use can no longer increase the bubble pops. Everyone wants to bring home their “profit” and so, when it turns out that there just isn’t that much money, everyone gets frightened and panic spreads through the whole economy.
According to Foss, we’re in a very early stage of this last and very soon, as I recall within a few months, the house of cards starts to fall. This credit collapse makes around 95% of the money supply – the part which is credit – evaporate so cash becomes extremely valuable. At the same time, those who have lent money become extremely anxious to get them back, as that’s all the money they have.
The conclusions from this argument are that first, get out of dept as far as possible, so that the holder of the debt won’t come and try to extract it from you with the help of Kenny’s Kneecrushers & Debt Collectors, and also try to stay as liquid as possible (stocks and funds will become worthless when everyone tries to realize their “profit” at the same time). Second, since all this will hit the global economy hard and make necessities such as food and clothes much more expensive, engage in local networks that can help out with survival in the hard times that are coming. Third, this is a direct consequence of how we’ve all acted for thirty years and looking for scapegoats or trying to “punish” someone is pointless. There’s a large risk of violent movements arising when everybody realizes that their money is gone.
That’s my understanding of Foss’ lecture.
Foss and The Automatic Earth present, especially in lecture form, a well-phrased and coherent message, brimfull of graphs and explanations of the interrelations between energy supply, financial bubbles, money supply, interest rates etc. It’s easy to grasp and easy to interpret as a doomerish prophecy – “all our money will become worthless – any second now!”
Those who’ve followed The Automatic Earth, or other blogs related to economics or peak oil, will recognise the feeling. During 2008 and 2009, and on American blogs on finance and economics, in particular, there was a veritable torrent of graphs showing indebtedness, bad loan, and this, and that, and all this simply couldn’t last! The dollar would collapse, Dow Jones crash to 10, we’d get hyper inflation and hyper deflation. It didn’t last, either – we were extremely close to Foss’ scenario when the money flows through the top-level systems dried up after the collapse of Lehman Brothers.
Still, it didn’t turn out that way. On December 30 Foss’ colleague Ilargi wrote on The Automatic Earth that “2009 will be the year credit disappears.” That didn’t happen either.
It’s easy for me to sit here and point to a sentence out of context and say that someone was wrong, and I do believe Ilargi and Foss are correct on the large picture – energy, growth, credits and money supply are related more or less as they say and the credit bubble will disappear, one way or another. It’s quite possible that it happens rapidly.
At the moment, though, I can’t see their argument holding up. They mix and match freely: a story of how previous bubbles have ended and how the financial system is structured suddenly turns into a source of quantitative statements on how quickly things happen. They’re not alone in the – banks’ chief economists and our own finance minister do exactly the same thing all the time, and their predictions/guesses don’t hold up very well either.
As far as I can understand, Foss’ and Ilargi’s story is correct at its fundamental level and it’s better put together than most other stories dealing with peak oil. It’s by no means complete, and what’s missing leads almost all quantitative predictions, except possibly the last one, to miss the mark. Their suggestions for survival, on the other hand, are excellent, but they’re based on the story and not on any quantitative aspects.
According to Foss herself the purpose of the tour and lectures is to provide a psychological inoculation against the panic she’s expecting. She succeeds brilliantly in that. I’ve heard her message before and it still felt like a cold shower.
Those who want to know more have plenty of places to start. There are movies to see, such as this one, where Foss say more or less what she says in the lecture, but in less polished form, or buy a DVD or web version of the lecture she gave in Gothenburg, with minor differences. If you prefer reading, there’s How to Build a Lifeboat” , “40 ways to lose your future” and then the rest of the “Primer Guide” at The Automatic Earth. That last requires some free time, though.