If the econmy fails

Bill Bonner wrote:In modern America, long complex chains of production and distribution put food on your table and gas in your car.

Any engineer with experience knows that cascading failures sometimes occur. The more complex a system is, the higher is the probability of such failure. This does not mean complicated: a pile of sand with steady addition at the top is simple, but not simplex, and can have cascading failures. So can snowfall on a slope. Remember the story about Honor's rescue operations at the ski resort? IMHO the current economic system is both complex and unstable.

It's far more palatable for governments to inflate away their bad debts by devaluing their currencies – which can then always be blamed on someone else – than to write off those debts or default.

It is wise to plan for success or failure. When failure means problems getting necessities, the backup plans should be simple and probably effective. Knowledge of wild foods can help for a short time, but there is a reason why farmer/gardener/rancher societies have higher population densities than hunter/gatherer types. The former replace the means of production, the latter depend on natural replacement which is much slower.

In our current society, there are certain to be problems from those who have been trained to get more by taking or tantrums (riots) rather than improving production. For some reason, riots usually include infrastructure destruction, with dire results

We are working on our paper assets. This is done by studying on-line information, seeing how well it works, and picking the best method. The latest method varies between slightly negative (very short time) to over 40% annualized (also very short time), averaging 20+% annualized since that method was put into practice. This is expected to fail suddenly, so we are prepared.

We also garden and work on ways of using local resources. The relative importance to us can be seen by the fact that time at the computer is normally time when weather makes outdoor projects need breaks to warm up, cool down, or dry out.

Bill Bonner wrote:Well, either we all band together and take care of one another…

Or American society begins to break apart… People turn on each other…

It’s hard to say, but we can look at the past for examples…

We had a thread discussing sustainable (correct the present system) and survivalist (survive the breakdown) practices. There are many on-line resources. The suggestion is to study them. Properly planned, this can be done without increasing expenses, although more labor and planning is needed.

Practice make perfect. Or in this case good enough.

Edited by HB: Meaning all the various many survival skills must be practiced to maintain the skill level.

Examples would be medical training. Another would be survival gardening. A third would be defensive skills.

The needful list is very long. Difficult to turn back the clock to a self sufficient life style. Expect failures.

Yikes!

Citizen X wrote:
I am an engineer who designs automated systems for distribution centers like Amazon and others.

My company has seen a massive increase in business over the last 10 years, primarily in union facilities,
where the work force is so overpaid relative to the tasks being performed, that a $20,000,000 investment in our technology becomes very attractive, especially when it will pay for it's self within 10 years. I think that you will see the same phenomenon across many other industries.

Also, in the case of fast food, why stop with the cashier, most of the "cooking" is automated right now, the employee merely feeds the product into the machine. This person could easily be replaced by a robot similar to the type used to weld cars together.

These people are sewing the seeds of their own unemployment.

From one who is in a good position to see the pattern. I wonder when the Luddites show up

Capitalism used to work in the Boom and Bust cycle, that was good. Nowadays we have the neo conservative / neo liberalism system of keeping interest rates artificially low. This is good if you don't want a bust but it leads to runaway house prices and lack of jobs without recovery. It kills the middle class.

Boom and Bust high interest rates, house value deflation, Economic recovery and boom until bust once again. We need the bust to get the boom and to keep the costs in check. We need high interest rates.

No more neo fiscal policy, we need real Capitalism again.

Lord Skimper wrote:Capitalism used to work in the Boom and Bust cycle, that was good. Nowadays we have the neo conservative / neo liberalism system of keeping interest rates artificially low. This is good if you don't want a bust but it leads to runaway house prices and lack of jobs without recovery. It kills the middle class.

Boom and Bust high interest rates, house value deflation, Economic recovery and boom until bust once again. We need the bust to get the boom and to keep the costs in check. We need high interest rates.

No more neo fiscal policy, we need real Capitalism again.

Oh please! This is basically the same as our Russian "when Comrade Stalin was in power, there was an order, and no corruption". You couldn't just turn history backward. The "real capitalism" - late XIX-century style - was incredibly ugly. And, actually, the "middle class" appeared as a definition only in 1920s, when the "real capitalism" was a history.

I have been reading a few depressing theories lately.

To summarize: for most of human history a tiny tiny % of the people controlled virtually all of the wealth, a small middle class existed to serve them while the vast majority of humanity >90% lived in abject poverty. The economic theory is that this situation is the human norm and that deviations from the norm will always revert to it because those in power will rig the system to make it so. The current first world situation of a large middle class is an abnormal one born of special circumstances which no longer apply and the economic difficulties and shrinking middle class are the system returning to the baseline above.

I don't exactly agree, but it is food for thought.

biochem wrote:I have been reading a few depressing theories lately.

To summarize: for most of human history a tiny tiny % of the people controlled virtually all of the wealth, a small middle class existed to serve them while the vast majority of humanity >90% lived in abject poverty. The economic theory is that this situation is the human norm and that deviations from the norm will always revert to it because those in power will rig the system to make it so. The current first world situation of a large middle class is an abnormal one born of special circumstances which no longer apply and the economic difficulties and shrinking middle class are the system returning to the baseline above.

I don't exactly agree, but it is food for thought.

Search on "Pareto Principle." However note that some of the economic problems come from people who just want to keep on doing the "same old, same old." We are in a time when what is the more valuable work will change big time. This is because we are improving production technologies.

A different food for thought: Anyone who works on improving himself to be more valuable will get better results, sooner or later. Watching TV or playing video games doesn't improve ability at production, distribution, repair, design, or any other financially useful skills.

HB of CJ wrote:
Practice make perfect. Or in this case good enough.

Edited by HB: Meaning all the various many survival skills must be practiced to maintain the skill level.

Examples would be medical training. Another would be survival gardening. A third would be defensive skills.

The needful list is very long. Difficult to turn back the clock to a self sufficient life style. Expect failures.

Rene Descartes wrote:I think; therefore I am.

But the ones who refuse to think well don't disappear.

Look at:

http://avoiddeterdefend.com/

Self sufficient is unlikely except for short emergency times. A better aim is develop local skills and relationships. IIRC, there is one small town where they are choosing to develop herbal medicine skills just in case. I'm concentrating on intensive gardening. I need some muscle labor to stay healthy, and am too lazy for jogging or such and at my age just can't move fast


Some of these can be fun hobbies, or even pay off by reducing expenses or increasing income

biochem wrote:I have been reading a few depressing theories lately.

To summarize: for most of human history a tiny tiny % of the people controlled virtually all of the wealth, a small middle class existed to serve them while the vast majority of humanity >90% lived in abject poverty. The economic theory is that this situation is the human norm and that deviations from the norm will always revert to it because those in power will rig the system to make it so. The current first world situation of a large middle class is an abnormal one born of special circumstances which no longer apply and the economic difficulties and shrinking middle class are the system returning to the baseline above.

I don't exactly agree, but it is food for thought.

Well, there was an attempt to change this (yeah, in Soviet Russia), but the technology and information processing capabilities of this time were simply unable to really work this out.

It seems that you need something close to technological singularity to really get rid of capitalism.

Ron Paul Media wrote:The people sense something is wrong but many don’t fully understand what it is. They have been told that more government spending will stimulate the economy and bring back jobs, and that more tinkering with interest rates will finally produce ideal economic conditions. But the real problem is that there is a cancer out there and it needs to be aggressively treated, not handed an aspirin. What we are seeing is an epic failure of the Keynesians who have tricked so many people into believing that economic interventionism can create a perfect economy. They have mismanaged the economy and I am afraid the worst is yet to come.

All is not lost, however. I am encouraged that so many people are seeing through government deception and are turning to the study of Austrian economics to understand what is wrong with our current system and how we can rebuild the economy. Reading Mises and Rothbard is the best way to understand what is really wrong with our economy…and how it can be fixed.

IMHO, the Austrian school of economics is the only one to have a solid handle on what produces booms and busts. The Keynesian difficulty comes from the failure to save when things are going good in order to have a reserve for when things are poor. The politicos enjoy the part about increasing government spending in tough times, but not the part about saving when things are good, and it won't work without both parts.

Paper money isn't worth much, and digital is worth less. The only usefulness is that they can easily be traded for something with real value. When there is no intrinsic value, the trade value can drop to almost nothing at any time that people lose confidence in it

DDHv wrote:Paper money isn't worth much, and digital is worth less. The only usefulness is that they can easily be traded for something with real value. When there is no intrinsic value, the trade value can drop to almost nothing at any time that people lose confidence in it

What, pray tell, is this "intrinsic value" you speak of?