The coming collapse (or not)

These days it seems that almost everyone (yes I'm exaggerating) is talking about one type of "collapse" or another. We have Wendy talking about the collapse of the US$, Igor Panarin predicting the break-up of the U.S.A., Kunstler, John Michael Greer and others talking about Peak Oil and Man Made Climate Change. If you read The Daily Reckoning then you have been exposed to the view that the world economy is doomed. We have great choice in collapses. Which will happen? How to deal with them all?

First of all, what constitutes a collapse? I suspect from a personal POV it is going to be similar to the difference between recession (when your neighbor loses his job) and depression (when you lose yours). I think some hard times are coming, but I do not think that there will be a collapse. What follows are several different disaster/collapse scenarios, and how we would deal with them.

When Worlds Collide: This covers Planet X, Comet and Asteroid strikes.

We are not preparing for this at all. If something like this is going to happen, there will be months, if not years of warning (despite what the conspiracy types say). Rather quickly we will know if it is an event that will destroy the world or if it will only cause a lot of damage. If it will "only" cause damage, then we will get to the place that is likely to be safest on the globe and ride it out. If it will destroy the world, we will probably party until the end. No use even thinking about this scenario now. If the time ever comes that we have to deal with it, we will.

Grid Failure

Next we have solar winds or something else that causes quick, massive, prolonged and wide spread gird collapse. I am not referring to local events although they may be good practice for the real thing. If for any reason, all electric generation and transmission capabilities are lost over a very wide area, and cannot be recovered quickly, then very soon water and fuel pumping will stop, as will modern telecommunications. All the grids that our society depends upon will be down. Without fuel, food will not be distributed. Neither will medicine. On and on. This will cause some serious social disruption, so we can expect a huge increase in crime. It will be a very big mess, to say the least.

If this were to happen tomorrow, we would be in trouble, but not fatally so. We have our own water, and can be, if necessary, self-sufficient in food. We have tools and weapons and have developed some local contacts, so bater will be possible. We will have to scramble for somethings, but I think we will get by until normality is restored, even if it takes a year or two. However, if this happens in two or three years, then we will be only be uncomfortable. We are working on several projects to make ourselves more self-sufficient. Given the typical course of these things I expect to have them in place by then. The real big problem with this scenario is the things we do not have locally. It will not be possible to withdraw money from a bank, let alone from one that is overseas. Managing assets that are remote will be next to impossible. It is very possible that some of those assets will be lost, either through damage or perhaps even due to outright theft. But I expect to survive.

Peak Oil and Climate Change

For a variety of reasons I do not consider these credible collapse scenarios. However, even if they are, they will take a long time to arrive. Hubbert peak theory shows a bell curve for each fuel type to be be depleted. Some people claim that the world either reached the oil peak around 2005 or will be doing so any day now. Even if this is true, and if it is true for all the other fuel types, what this means is that we are just now heading down the slope. Running out of fuel, or even have fuel be so expensive that I cannot buy it, is not something that will happen within the next 10 or so years. So I am not going to worry about it now. Several years from now, if the data shows that we are indeed on the downward slope and no new fuel sources are looking promising, I'll start to consider the Archdruid's advice.

Likewise Global warming. Some of the worst predictions say that global temperatures will rise up to 6.4°C by the year 2100, with the greatest increase occurring in the last 20 years. Mankind will survive this. If I am still alive as we get much closer to 2080, I will deal with it then. Note that Peak Oil and Climate Change contradict each other. If we run out of cheap "fossil" fuels, the greenhouse emissions will stop. While both may be wrong, they cannot both be true.

Greater Depression

Given the brilliant economic policies of all (not exaggerating this time) the world's governments, we can expect what would have been a fairly short bad recession (caused by government policies) to become a long and very bad economic depression. The current situation is not one that a government can spend its way out of, but no one in power, anywhere in the world, believes that. The spending will just make matters worse. But is it a collapse? Let us say that real unemployment reaches 50%. This will be really bad, but a lot of businesses will still be operating. Food will still be produced, transported and sold. Banks will still be in operation, although they may all be state run, given the way things are going. The Internet will still be operational, as will most of the grid. In specific regions there may be things like rolling blackouts, or temporary water shut off, but overall, these services will function. I do not think this qualifies as a collapse, but it will be a really rough time. The biggest problems I see coming out of this scenario are the social and political risks.

On the social side there will be more crime, and the tried-and-true practice of scapegoating of someone. Probably bankers, but I bet there is a resurgence of anti-semitism as well. Many places, especially cities, will become very unpleasant to live in.

Funny enough, this is managed by the very same methods that will deal with grid failure. Specifically the local social network that will allow us to barter. Also, since we are known and are on good terms with many people, including our neighbors, all of us will hopefully be watching out for each other. This predicament is much easier to deal with for than grid failure.

The more difficult problem is political risk. Will the Costa Rican government implement policies that make living here untenable? Will they confiscate the property of foreigners, or impose taxes on money transferred into the country? What about other places that we have assets? What will they do?

To deal with the risk in places we only have assets is fairly straight forward. Keep things diversified and keep up with the news. If things start to look dicey in a particular jurisdiction, move everything out as fast and as quietly as possible. Unfortunately, dealing with political risk where we live is not as easy. It implies not owning a house. If we were renting it would be much easier to simply pick up and go. But then, that would mean not being as prepared for the other scenarios. It would also mean not leading the kind of life we want to. It is a trade off. We decided to settle. People who settle are more at risk from the state than those who can easily take to flight. With grid failure we face the potential of losing non-local assets. In this scenario it is just the opposite. If things get really bad politically we may have to leave what we have here behind.

Currency collapse

Hyperinflation may well be coming, and not just to the US$. All the world's currencies are fiat. Costa Rica will probably inflate even faster than the US. If the Yen, Euro, etc hold value a bit longer than the USD, that is all it will be, a bit longer. Eventually, they too will hyperinflate. The problem is when will this happen? I haven't got a clue. Also I have no clue as to how bad it will get. Things do not have to get as bad as Zimbabwe. In the 1980s Israel ran triple digit inflation for over five years, hitting 485%. Eventually they stopped and returned to "normal" inflation. There is hyperinflation Israel style, Weimar Republic style and Zimbabwe style. Probably many others as well. Each is very different, each affects the people very differently. There is no way to predict what a specific government will do at any given moment. But I view it as a safe bet that most of the world's currencies will hyperinflate to one extent or another in the next few years and that most governments will add insult to injury by doing things like imposing price and currency controls. In fact, I think hyperinflation is likely to be part of a greater depression. However, as a collapse, only Zimbabwe really qualifies. The Weimar Republic's hyperinflation was intense, but fairly short lived. In Israel there was pain, but with salaries being indexed every month, it was possible to continue with normal life for a long time, even with hyperinflation.

The social and political risks are very similar to those of the greater depression scenario, likewise, the preparations are the same. Additionally, we have savings in gold. Outside of the country we live in. Governments will confiscate the gold of their residents if they feel the need. Witness 1933 in the US. But typically, governments will hesitate in seizing the property of non-resident aliens, because doing so carries heavy consequences under international law. This does not provide a guarantee, just a bit more protection.

At the end of the day

All that having been said, we are not actually preparing for any of the above. We do think about and discuss the possibilities, simply because that is the type of people we are. By coincidence, how we choose to live now will help if some of the above scenarios occur, but really, we would rather they did not. We will be OK under most circumstances, but that does not mean we are not better off now. I can live without Argentine yerba maté, Chilean wine and Italian cheese but that does not mean I want to. Unfortunately, I think a greater depression and hyperinflation are high probability scenarios.

Good luck with your collapse planning.