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Peak Oil Ass-Backwards: Part 3
« on: October 05, 2015, 02:25:34 AM »


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Published on From Filmers to Farmers on September 30th, 2015






"Taaaaake myyyyyy moneeeeey! Pleeeeeease!"


 


 


Discuss this article at the Economics Table inside the Diner


 


Forget Austerity and Grexit – it's Time for a Gretaway!


So here we are on this precipice of sorts, staring upon the twilight of the industrial economy due to peaking energy supplies and thus peaking credit supplies (as explained in part 2 of this 3-part series).



Simply put, being on the peak oil plateau, and with fossil fuel supplies in general reaching their limits (and getting more expensive to extract), there's going to increasingly be less and less of the stuff to go around. This means one of two things, the first being that what's left gets spread around thinner and thinner between all the participants. However, since people of the West (and especially those in the richer parts) have become quite used to their energy-intensive lifestyles and seem to have zero intention of giving them up, this likely implies the implementation of the second approach: cut back on – if not cut off – the fuel supplies to people and nations on the lower rungs of industrial civilization. That way, as the fossil fuel pie continues to shrink, those on the higher rungs don't have to reduce their share too drastically. In effect, this allows for those in the upper echelons of contemporary civilization to hold on to their Nyet-Flix feeds and iGizmos just a bit longer, until the triaging inevitably hits them as well and/or the bottom just completely falls out.



This triaging can be accomplished in more than one way, but for the time being two methods stand out as the most popular. The first is what we know as austerity – cuts are made upon people's pensions, hours, welfare cheques, whatever, so that they have less credit (read: money) to buy and indulge in the spoils of industrialization. Unfortunately, living in this modern world of ours means that the basic necessities of life (such as food) also often fall under the umbrella of industrialization, so being triaged can entail much more than an inconvenient loss of iGizmos.



Using Europe as the example, Greece is on the lower rungs of European industrial civilization as not only is it not a fossil fuel superpower, but it isn't a manufacturing superpower either. It does have a lot of olive oil to sell and/or trade, but olive oil (and the rest of their exports) can't get Greeks the crude oil (and crude oil manufactured products) to the degree that countries on the higher rungs get to imbibe in. Since the manufacturing prowess of Germany places it on the higher rungs of European industrial civilization, this means that it can dish out credit/loans thanks to its manufacturing base. Greece, however, can't dish out credit/loans like this, because not only does olive oil not provide much relative earning potential, but having ditched the drachma for the euro a few years ago, it forwent with its financial sovereignty and put much of its economic destiny under the dictates of others. (Thinking of the issue in terms of "financial sovereignty" can be a bit misleading, but I'll get to that in a moment.) One result of all this is that Greece has an even tougher time affording the most indespensable input to industrial civilization – fossil fuels.



This being the case, when energy supplies become tight enough, Germany's penchant to extend credits to countries such as Greece will be significantly reduced once that means cutting into its dwindling hold on energy supplies. But for the time being Germany has been willing to string Greece along with further loans, not so that old Greek ladies can have enough money to feed themselves, but primarily so that Greece has the funds to service its debts to Germany and so avoid contributing to the eventual implosion of Germany's/Europe's/the world's Ponzi scheme banking system. Furthermore, while the bailout energy credits that do stay in Greece are predominantly accessible only by the upper crust end of society, those credits do of course come at a price. And that price goes a little something like this:




Well I'll be. That Parthenon thing sure does look pretty! But you know what would make it look ever prettier? If it was in Germany.




 






 


 



Facetiousness aside, that's austerity, and you do as you're told. For if you don't do as you're told, and try to give some of the energy credits you've been granted to the needy (so that they can eat), then you're likely to see your country get cut off from the credit lines altogether. Legalities aside, this is the second form of triaging (which has yet to happen to an industrial nation), and so rather than the poorest end of a poor nation getting cut off, the entire nation is cut off instead.



In Greece's case, this form of triaging is the forced version of what has been called Grexit (coined by Citigroup economist Ebrahim Rahbari), which is in contrast to the voluntary form of Grexit whereby the Greek government voluntarily pulls itself out of the eurozone and returns to using the drachma. The general Greek populace is vehemently against a voluntary Grexit, since more than anything the Greek people want to maintain their position within the world of progress promised by industrial civilization (regardless of whether or not they understand that this is their underlying desire).



For what the Greek populace (and for that matter every populace) generally believes to be going on is that the world of today is by and large facing a crisis of politics. In effect, to a large extent they then proceed to vote in to power whomever can best tell them what they want to hear – that they can maintain their industrial prosperity (or get it back if that's the case). However, and as I've previously explained (see here and here), what Greece (and ultimately the rest of the world) is facing is not a political crisis, but a resource crisis. In other words, no variant of political scheming is going to be able to return those on the to-be-triaged front lines to former levels of (industrial) prosperity.



In the meantime, political parties such as Greece's Syriza – who promised the moon during election times (Syriza was initially voted in on a no-bailout platform) – have been shown to be full of hot air. In Syriza's case, its referendum promise of winning the Greek electorate a better deal with Greece's third bailout was exposed as a complete sham, likely beause it was threatened by the Troika with either accepting the terms on the table or being cut off from the credit (read: energy) lines, resulting in Greece being virtually thrown into a peasant-agrarian economy overnight. Not wanting to go down in history as that guy, Greece's prime minister Alexis Tsipras capitulated and accepted the dictated terms (which were even worse than the ones turned down by Tsipras a few weeks earlier).



In effect, all that the so-called progressive politicians (and their counterparts) can really accomplish is perhaps a slight lowering on their interest rates and the stretching out of their repayment schedules. So while Greece's most recent prime minister was initially voted in to revive Greece's crippled economy, he's now gone from the bailout rebel to the bailout enforcer, having recently been re-elected with the mandate of implementing yet even harsher tax hikes and spending cuts.



However, and continuing with the Greek example, not all political parties appear to be so averse to a Grexit, since those on the extremes – the far left Communist Party and the far-right Golden Dawn neo-Nazis – seem very amenable to pulling Greece out of the eurozone. A rise to power by either of them, as should go without saying, would most certainly be an extrememly unfortunate turn of events. But seeing how there is very little realization in Greece and other countries as to what the underlying factors at play are, and seeing how Syriza and whichever other party that comes along next is going to be unable to stem the austerity tide, one hopes then that frustrations of hungry and desperate populaces don't result in xenophobic parties such as Golden Dawn coming to the fore.



 






(photo by Alehins)


 



How can such outcomes be avoided? For starters, this would ideally entail a broad-based understanding that resource crises are at the heart of increasing austerity policies. Supposing that such a realization were actually possible in the near future (which is extremely unlikely), what then? Well, seeing how one way or another Greece is going to end up leaving the eurozone, preparing for such an outcome would be the wisest thing to do. Simply returning though to the drachma may not be much of an option. Yet as one piece in the progressive media put it,




I think the fundamental problem [with Syriza’s capitulation] was in the fact that Syriza never spoke out about an alternative to the European Union. Syriza's members accepted the European Union as the framework; they accepted paying the debt as a framework, and they never formulated an independent policy. They overestimated their capacity to negotiate a progressive solution within the European Union, and absolutely nothing suggested that.




However, for progressive parties (particularly those in power, such as Syriza) to have failed in speaking out about "an alternative to the European Union" (as if the progressives just weren't progressive enough) would likely result in a quick world of pain, outcomes ranging from a coup by financial interests to topple the incumbents (so as to protect their loans and Ponzi scheme), to a rather quick crash in said country's stock markets and the progression from bank holidays to grand ol' bank retirements.



Instead, and eleborating on what I mentioned earlier, what progressives need to realize is that the issue isn't simply one of financial sovereignty, but of energetic sovereignty. As I've mentioned before, money is a proxy for energy. Because of that, the more we move down this road of energy supply curtailment, the more that energy supplies are going to be sourced closer to their point of harvest ("harvest" not simply being a cute metaphor). In effect, and with money being a proxy for energy, it make makes sense for currencies to parallel this move.



In other words, and for those aware of the current situation's underlying factors, a crucial undertaking is the setting up of alternative currencies. Not just on the national level (such as a reissued drachma), but also at the regional and community levels. Since international and even national currencies will increasingly become less and less accessible by those on the fringes of society (this is what happens when you get triaged from global and national energy supplies), turning away as much as we can from these currencies and cutting back on seeking them out may be the best option for an increasing amount of people – as well as a good idea for those who want to get ahead of what's coming down the pipe (or rather, what won't be coming down the pipe any longer).



What I'm proposing then is instead of a Grexit, what is needed is a Gretaway – a concerted movement away from international (and to a certain extent even national) financial systems. This would entail the purposeful attempt to fly under the radar of international banking as cushions are set up for the increasing amount of people who will be triaged from major currencies and so from access to basic necessities – supposing, that is, that such necessities are even available (and there's no guarantees of that).



As even the New York Times has pointed out, the alternative currency TEM in Volos, Greece, was "inspired… by a need for solidarity in rough times," a currency that would be "prepared to step into the breach" "if Greece does take a turn for the worse and eventually does stop using the euro." That's not to say that the TEM is merely a fallback plan, as it has already allowed for local business amongst veterinarians, opticians, seamstresses, music teachers, language teachers, bookkeepers, computer technicians, hairdressers, and of course, farmers. And, I might add, all legally sanctioned by by Greece's federal government.



Make no mistake though, alternative currencies don't imply a continuation of business (nor "culture") as usual. As one butcher who was having much success with another alternative currency in Greece put it, "One person wanted me to trade a Madonna CD for a chicken. But I said no. The Madonna CD was definitely not worth a chicken."



 






"Madonna!? Shame on you!"


 



Ultimately, and as Jan Lundberg (who lives in Greece) recently put it in his piece "Why the Cash Economy in Greece May Be Ending,"




At some point, cash can become quite secondary to a sharing economy based on acheiving local resiliency.




The take home story? There's no better time than the present to get working on our Gretaways.



Offline MKing

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #1 on: October 05, 2015, 10:53:45 AM »
Allan is still using peak oil (highest ever crude oil and lease condensate took place in 2014 according to EIA data) as though it is causing things happening today, because peak oil happened at some time in the past.

While we all can spin a tabled tale and pull our own conclusions out of thin air, we do not get to make up our own facts.
Sometimes one creates a dynamic impression by saying something, and sometimes one creates as significant an impression by remaining silent.
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Offline luciddreams

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #2 on: October 06, 2015, 05:39:37 AM »
You are so right Allan, but I'm afraid also too idealistic.  Some places may get away with local currencies.  I've heard tale of it.  I heard Asheville had a local currency brewing a couple of years ago, and then nothing.  I've heard of places trying local currencies and then they seem to just fail.  Not surprising to me given the nature of our predicament. 

It seems to me that the most likely avenue will be the black market/underground economy.  I'm working on barter whenever I can.  For instance I'm working on a deal to trade some of my bamboo varieties for goats.  It's the small victories, but not that this gets much done.  Keep being optimistic because we need all the optimism we can get. 

Great essay by the way.  For what it's worth I think you're right on all accounts.  I agree with you synopsis of this clustercuss.  It really is as simple as energy=fiat money=energy.

Offline Allan Stromfeldt Christensen

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #3 on: October 06, 2015, 06:48:19 PM »
You are so right Allan, but I'm afraid also too idealistic.  Some places may get away with local currencies.  I've heard tale of it.  I heard Asheville had a local currency brewing a couple of years ago, and then nothing.  I've heard of places trying local currencies and then they seem to just fail.  Not surprising to me given the nature of our predicament. 

It seems to me that the most likely avenue will be the black market/underground economy.  I'm working on barter whenever I can.  For instance I'm working on a deal to trade some of my bamboo varieties for goats.  It's the small victories, but not that this gets much done.  Keep being optimistic because we need all the optimism we can get. 

Great essay by the way.  For what it's worth I think you're right on all accounts.  I agree with you synopsis of this clustercuss.  It really is as simple as energy=fiat money=energy.

Yeah, I'm with you on that one, but that would be due to the unfortunate Catch-22 involved. For a local currency system to be successful, it needs enough people to make it viable. But getting people involved is a near impossibility due to the accessibility and ease with the national currencies we've already got. So to get one started before collapse or whatever is a tough venture. And once collapse starts/happens, do you have the resources and knowledge to get one effectively started?

Goats! If there's one animal that I'd like to raise, that would be goats. I'm too scrawny for cattle (and not too interested in them anyway), sheep are insanely boring, but goats are the biggest trouble makers in the world. I totally want goats.

Offline jdwheeler42

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #4 on: October 07, 2015, 05:50:19 PM »
You are so right Allan, but I'm afraid also too idealistic.  Some places may get away with local currencies.  I've heard tale of it.  I heard Asheville had a local currency brewing a couple of years ago, and then nothing.  I've heard of places trying local currencies and then they seem to just fail.  Not surprising to me given the nature of our predicament. 

It seems to me that the most likely avenue will be the black market/underground economy.  I'm working on barter whenever I can.

Yeah, I'm with you on that one, but that would be due to the unfortunate Catch-22 involved. For a local currency system to be successful, it needs enough people to make it viable. But getting people involved is a near impossibility due to the accessibility and ease with the national currencies we've already got. So to get one started before collapse or whatever is a tough venture. And once collapse starts/happens, do you have the resources and knowledge to get one effectively started?
I don't think it is so much of a Catch-22 problem.  From what I've seen, what you need to have a working local currency is a fully-functioning, vibrant, complete, self-reliant local economy, with growers, gatherers, makers, and doers.  But, once you have that, having a local currency is pretty much just an afterthought.  The hard work is getting the local economy to that level, but people think a local currency is a shortcut.  Honestly, a local credit union is more valuable.
Quote
Goats! If there's one animal that I'd like to raise, that would be goats. I'm too scrawny for cattle (and not too interested in them anyway), sheep are insanely boring, but goats are the biggest trouble makers in the world. I totally want goats.
Goats definitely are cute, but not exactly something I would want to mix with a food forest.  If I were to really settle into farming, I would want some Dexter cattle -- which aren't much bigger than the largest breeds of goats.

Oh yeah, and free-range chickens are a close second to goats when it comes to trouble-making.  Especially when led by a tom turkey.
Making pigs fly is easy... that is, of course, after you have built the catapult....

Offline Allan Stromfeldt Christensen

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #5 on: October 08, 2015, 04:23:04 PM »
I don't think it is so much of a Catch-22 problem.  From what I've seen, what you need to have a working local currency is a fully-functioning, vibrant, complete, self-reliant local economy, with growers, gatherers, makers, and doers.  But, once you have that, having a local currency is pretty much just an afterthought.  The hard work is getting the local economy to that level, but people think a local currency is a shortcut.  Honestly, a local credit union is more valuable.

I don't see why you say that a local currency becomes an after thought. Bartering can be very useful and I'm all for it, but you're not going to be able to run a diverse and vibrant economy with it, even a small one -- what's happens when the guy who raises chicken wants a pair of shoes, but the cobbler doesn't like chicken? You say then that a local credit union is more valuable, but the question is, what do they use as their currency? A local one, or federal dollars, which I think we're ultimately going to need to move away from?

Offline RE

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #6 on: October 08, 2015, 04:38:50 PM »
I don't think it is so much of a Catch-22 problem.  From what I've seen, what you need to have a working local currency is a fully-functioning, vibrant, complete, self-reliant local economy, with growers, gatherers, makers, and doers.  But, once you have that, having a local currency is pretty much just an afterthought.  The hard work is getting the local economy to that level, but people think a local currency is a shortcut.  Honestly, a local credit union is more valuable.

I don't see why you say that a local currency becomes an after thought. Bartering can be very useful and I'm all for it, but you're not going to be able to run a diverse and vibrant economy with it, even a small one -- what's happens when the guy who raises chicken wants a pair of shoes, but the cobbler doesn't like chicken? You say then that a local credit union is more valuable, but the question is, what do they use as their currency? A local one, or federal dollars, which I think we're ultimately going to need to move away from?

The problem when you introduce money of any sort is assigning value to anything.  Let us make it simple with 3 items.

Chickens
Shoes
Hours of Labor

Now, how many HoL for a chicken, how many for a shoe?  What happens if there are not so many chickens around to buy with the Labor Hours you put into the system?  What happens if there are too many shoes and not enough shoe buyers?

You see, the Money value cannot remain stable, so it can't serve as the "savings" medium you would like.  I could save up lots of credits for my retirement, but what happens if when I retire there are no chickens?  It doesn't matter what the token is, gold, silver, paper note, if there are no chickens all you saved up won't buy a chicken!

Money as currency can work over short intervals, but as a savings medium it blows chunks.  As long as there was a lot of surplus around and some folks coveted Gold, you could save by hoarding gold, but this period of surplus is over so that won't work.

Money is a token that allows you to access resources available, but that availability can change radically over quite a short period of time, so the money value will change as well.  It is inherently unstable once there is not a pretty large surplus, which essentially provides liquidity and pool of resource.

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Offline Palloy

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #7 on: October 08, 2015, 05:03:30 PM »
This a minimalist on-line banking system which I have written in PHP: http://palloy.net/banking
It would be a simple job to convert it so that people had to deposit some Dollars/Euros to get a positive balance, with negative balances not allowed.  Then it would act like any current account.

Check it out.  Most DD posters have an account already set up, username=DD-username, password=doomdoomer
If you want an account PM me.

This should not be a problem for any community to set up.
« Last Edit: October 08, 2015, 10:06:02 PM by Palloy »
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Offline Palloy

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #8 on: October 08, 2015, 05:11:10 PM »
Quote
I could save up lots of credits for my retirement, but what happens if when I retire there are no chickens?

You are conflating the functioning of money and the planning of an economy.  In your example, it is the planning of the economy that has gone wrong, not the money.  You have to do both, but the functioning of money (and the accounting of it) is easy.
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Offline RE

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #9 on: October 08, 2015, 07:06:16 PM »
This a minimalist on-line banking system which I have written in PHP: http://palloy.net/banking
It would be a simple job to convert it so that people had to deposit some Dollars/Euros to get a positive balance, with negative balances not allowed.  Then it would act like any current account.

Check it out.  Most DD posters have an account already set up, username=DD-username, password=doom
If you want an account PM me.

This should not be a problem for any community to set up.

I tried signing in.  Got Invalid username/password

RE
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Offline Palloy

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #10 on: October 08, 2015, 09:34:53 PM »
Quote
I tried signing in.  Got Invalid username/password

You couldn't save some time and actually tell me what username and password you actually used, since that is critical in this case, could you?  I know what you SHOULD have used, but what DID you use?
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Offline Palloy

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #11 on: October 08, 2015, 10:04:40 PM »
Because when you said:
username=RE
password=doom

I would have said "You idiot, I said password=doomer" !!
And then moments later I would have realised it was MY mistake, not yours.  :D
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Offline jdwheeler42

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #12 on: October 08, 2015, 10:55:49 PM »
I don't see why you say that a local currency becomes an after thought. Bartering can be very useful and I'm all for it, but you're not going to be able to run a diverse and vibrant economy with it, even a small one -- what's happens when the guy who raises chicken wants a pair of shoes, but the cobbler doesn't like chicken?
Yes, "afterthought" definitely has the wrong connotation.  Having a local currency in place is absolutely critical, so much so that people will develop them spontaneously after being deprived of another.  This happened as recently as when Greece had their bank holiday this summer.  Healthy local economies aren't going to stop because of a lack of currency; dysfunctional ones will.  Local economies take time to develop, local currencies can literally pop up overnight.
Quote
You say then that a local credit union is more valuable, but the question is, what do they use as their currency? A local one, or federal dollars, which I think we're ultimately going to need to move away from?
Ultimately, sure, but in the meantime why let the banksters steal all the loot?  And when I say a local credit union is more valuable than a local currency, it is because the credit union can totally replace all the functions of a bank.  It's like the idea of getting 1% of $1 million rather than 10% of $1000.  A local currency may do a better job of keeping money in the locality, but if its usefulness is limited, total profits would be less.
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Offline RE

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #13 on: October 09, 2015, 01:07:43 AM »
Quote
I tried signing in.  Got Invalid username/password

You couldn't save some time and actually tell me what username and password you actually used, since that is critical in this case, could you?  I know what you SHOULD have used, but what DID you use?

I tried a whole bunch of different combinations.  DD-RE, doom  DD-re, doom  DDRE, doom, DDre, doom   RE, doom   re, doom

RE
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Offline Palloy

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Re: Peak Oil Ass-Backwards: Part 3
« Reply #14 on: October 12, 2015, 09:29:23 PM »
user = RE
password = doomer
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