Economic Redundancy, The Decline of Complex Systems & "Remedial Practices"

Redundancy: noun, the state of being redundant

Redundant: adjective, more than enough; overabundant; excessive

The bad economic situation continues to ratchet itself to new heights, or maybe it is to new depths. Whatever the case, I think we’re all growing tired of it.

However, unlike watching a redundant movie or reading a redundant book, we can’t turn off or lay aside a worsening economy. And it would be a mistake to ignore the situation. Withdrawing from reality is evidence of psychosis, don’t ya know?

I’m of the mind that it’s much better to look ahead, try to understand the reality, and proactively deal with it.

The late Larry Burkett's heralded economic earthquake is now occurring (though not exactly as he expected it would). Buildings and infrastructure once seemingly sound and solid are crumbling to the ground. Everyone is in shock and awe, wondering to themselves: “How much worse can it get?” My answer: “Look at the bigger picture. It can get a whole lot worse. And it probably will be before long.”

Every so often I head over to James Howard Kunstler’s web site to see what he has to say. Kunstler gained some acclaim as a Peak Oil prognosticator. When the price of oil skyrocketed last year, Kunstler was something of a celebrity.

But now a barrel of oil is downright cheap. It's selling for less than 50 bucks. One wonders, is the Peak Oil theory now out the window? Probably not. It could be argued that a Peak Oil hiccup was the spark that ignited the current financial crisis. The free flow of cheap oil is as much a part of our industrialized world as the fiat-money banking system and all its progeny. In a March 2 essay titled, What Next? Kunstler writes the following:

The Peak Oil story was never about running out of oil. It was about the collapse of complex systems in a world economy faced by the prospect of no further oil-fueled growth. It was something of a shock to many that the first complex system to fail would be banking, but the process is obvious: no more growth means no more ability to pay interest on credit... end of story, as Tony Soprano used to say.

That last sentence about no more growth meaning no more ability to pay interest brings up a point worth understanding. Years ago, I put some effort into learning how fractional reserve banking, and the federal reserve, and our money supply works. I still don’t fully understand it (almost no one does). But one thing I learned that struck me as strange is that almost all money is loaned into circulation. However, the interest to pay for the debt is not loaned into circulation. Therefore, for the whole economic system to operate smoothly and perpetuate itself, there must be continued economic growth, with more debt-money being continually generated to pay off the interest. It is something of a Ponzi system, or so it appears to me.

Now that we have seen a dramatic collapse in economic growth, coupled with a freeze in credit, we have a disaster, all the more exacerbated by a vast complex of banking and finance schemes. Kunstler further writes, in his own unique way:

The last desperate act of the banking system in the face of Peak Oil's no-more-growth equation was to engineer species of tradable securities that could produce wealth out of thin air rather than productive activity. This was the alphabet soup of algorithm-derived frauds with vague and confounding names such as credit default swaps (CDSs), collateralized debt obligations (CDOs), structured investment vehicles (SIVs), and, of course, the basic filler, mortgage backed securities. The banking system is now choking to death on these delicacies.

The trouble is that the EMT squad brought in to rescue the banking system -- that is, governments -- can't remove these obstructions from the patient's craw. They don't want to drown in a mighty upchuck of the alphabet soup.

Kunstler further asserts that the collapse of banking has led to the collapse of commerce and manufacturing. Then he opines that...

The next systems to go will probably be farming, transportation, and the oil markets themselves (which constitute the system for allocating and distributing world energy resources). As these things seize up, the final system to go will be governance, at least at the highest levels.
If we're really lucky, human affairs will eventually reorganize at a lower scale of activity, governance, civility, and economy. Every week, the failure to recognize the nature of our predicament thrusts us further into the uncharted territory of hardship. The task of government right now is not to prop up doomed systems at their current scales of failure, but to prepare the public to rebuild our systems at smaller scales.

Does anyone out there really think our government is going to “rebuild our systems at smaller scales?” Strong, centralized, corrupted, overbearing, out of control government does not do “smaller scales.” If you want to see real psychosis in action, look at Washington, DC.

But what happens when farming collapses? The prospect for that is closer than most of us might realize. The way we produce our food has been organized at a scale that has ruinous consequences, not least its addiction to capital. Now that banking is in collapse, capital will be extremely scarce.

Every branch of the industrialized order, including BigAg, is kept alive by a steady infusion of oil and credit. Cut off the supply of either and the system suffers. And when the system is so highly refined and intertwined, as it is, it all begins to unravel and break down, as is happening. It may well be that we are still in the beginning stages of the unraveling.

My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world's most productive places -- California, northern China, Argentina, the Australian grain belt -- are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.

Once again, I’m dubious of government doing any such “remedial policies.” Our government has become a tool of the corporate interests. Such interests do not have any desire to promote small-scale, localized, sustainable agricultural practices. It’s not gonna happen, at least not by government influence to any significant degree. In fact, government will be a hindrance and stumbling block to such proactive and worthwhile change.

But remedial practices are exactly what every person and family in America needs to initiate and undertake on their own. As the complex industrial systems unravel themselves in the days ahead, one thing is certain—you will still need to eat, and the system may not be able to keep you supplied. Bearing that in mind, the most prudent remedial practice you can undertake is to grow and supply as much of your own food as you can. If you can not do that, then it behooves you to develop personal relationships with people in your area who are producing food.

Food...a place to grow it, the knowledge and skills to grow and preserve it, and the tools to do this may be worth far more than inflated and devalued fiat money in the days ahead.