What is really going to matter.

Because of the huge sums of money being poured into the financial bailouts, and the fact that we started with a huge national (and personal) debt, the USA is headed for "bankruptcy". This is the start of the second great depression (The Greater Depression).

By the time you have reached this sentence, you are either willing to accept the new reality, or dismissed what I've written and gone back to watching American Idol reruns. Come on back when you have been furloughed/laid off and continue reading.

The Greater Depression doesn't have to mean that everyone is going to go all mad max, but it does mean that only essential government services will continue. Even these essential services will be spotty and limited. These would be tax collection, law enforcement, national defense, sewer and water. Think “third world country”, and you get the idea. Americans will once again be totally dependent on themselves, like they haven't been for almost a century.

When I say spotty service, I mean don't expect the police to show up at a traffic accident, or the military to be building/maintaining high tech equipment. Unless people are dying violent deaths, don't expect a response.

NASA will be gone, most of the Armed Forces technical capability will be gone. Also on the block? Social security, Medicare, schools, road maintenance, the list is endless.

The era you are entering will have history books written about it, much like the American revolution or the great depression. If you think this is all bull, then stop reading and look up the phrase “cognitive dissonance” or the “five stages of grief “. Here is a hint, the first stage is denial.

For those still with me, consider what is important: water, food, shelter, clothes, waste disposal, security, medical and energy. If you are not providing one of these products or services, you will be unemployed, and stay unemployed. “They” will not be calling you back to work, period. Promises will be made, to make everyone go quietly, and maybe even believed by those making them, but eventually reality always wins. Severance pay? Unemployment insurance? Food stamps? Housing subsidies? Welfare? Don't count on it. Remember the government is bankrupt.

So what can we do? Build a bunker and stock it with MRE's?

Well, that may work for a little while, but not for long. We have some modern day examples of what happens in these situations. (Argentina, Yugoslavia, Cuba, North Korea..).

First lesson: Communities survive, not individuals. As much as you think you have prepared, you will not be ready for the violent struggle for survival.

Second: You have to have water. A clean accessible source of water is the greatest thing you can have. It waters crops, sustains the body and make life worth living.

Third: Food is not easy to grow or store. You need seeds, and chances are you don't have them. The right variety of crops for your soil and climate are essential. Then there are the pests: fire ants, Japanese beetles, rabbits, gofers, deer, the list is really long, and includes your neighbors. Even if you manage to harvest enough to survive winter you still have to preserve it. Do you know how to can food? Do you have the equipment? How about a root cellar or drying? Knowledge that our grand parents had, we do not, and relearning it will be an unpleasant experience.

Fourth: Heat prior to the advent of fossil fuel was from biomass. It takes a lot of wood to heat a house with a fireplace. They are not very efficient and the suburbs are not located in a forest. Plus, cutting, collecting and storing fuel is also a lost art. Note: Creosote is a great way to burn down you house!

Five: Security! Let us assume you are successful with items 1 through 4. Chances are, some one will notice how successful you are, then round up some of their friends and “share” in you success.

Time to start thinking about self sufficiency on a personal level!

What comes next shouldn't be a suprise to anyone.

Can you say FDR style infrastructure projects?

Here is link to a 2003 Federal Reserve Bank of Dallas paper about "Monetary Policy in a Zero-Interest-Rate Economy". (pdf format)

You can't say the fed didn't tell everyone what they were going to do. They published their play book in 2003, and are currently following it.

1)Cut rates to zero. (if fails see #2)
2)Buy “Other domestic securities” (if fails see #3)
3)“The goods & services solution”


a) This article from FT.com makes the argument that the rate cuts didn't work.
"Fed capitulates: the central bank is broken" .

b) Considering the unemployment numbers, I would argue that the alphabet soup of fed facilities and bailouts ( buying up “Other domestic securities”) also didn't work.

c) Next up will be “The goods & services solution”. From the Fed paper:

“The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.”

Looks like the fed is going to resurrect inflation, even if they have to buy the Brooklyn bridge (literally). I would guess that massive infrastructure projects are going to be started. Probably more food stamps. This seems like a perfect ideology match for the new democratic government.

Oh well, we need expanded electric grid and rail service anyway to deal with peakoil.