Friday 27 March 2020

Responding to Collapse, Part 17—Shortages of Money, Part 2

A high water level, wind, big waves and temperatures below freezing
combine to create ice sculptures along Lake Huron.

I am writing this in late March of 2020 and it seems that hardly anyone else is writing anything that doesn't focus on the COVID-19 pandemic. A few posts back I said that shortages of electrical power, diesel fuel and money will be at the heart of the troubles that lie ahead for small remote communities as collapse progresses. I am interested in that sort of community because that is where I am recommending that you take refuge in order to ride out collapse, and where I have already taken refuge myself. I've covered electrical power and diesel fuel, and in my last post I covered the sort of money shortages that occur when you have money on deposit at the bank, or credit prearranged with them, but can't access it due to problems with the banking system.

Today, tempting as it is to talk at length about the pandemic, I'll be talking about the money shortages that occur when you have trouble earning enough money to live on because of problems with the economy. The end game is the demise of BAU (Business as Usual) and finding a sustainable replacement for it on a local scale. But between now and then there is a transitional state that is going to be pretty challenging for many of us.

To my way of thinking, the pandemic is going to result in a relatively small but very much regrettable loss of human life. To put that in context, I've been saying that the demise of industrial civilization that I expect to take place over the next few decades will result in the death of 80 to 90% of the human population. That's pretty horrific, I know, but it's the reality that we face and denying it will only make things worse.

For the majority those who survive the pandemic, its effect on the economy is going to be quite serious. As usual, I'm not expecting it to lead to a hard fast collapse over the next few months. Rather this will be one of those bumpy steps down that I have spoken about before, from which I expect we will recover to some extent. It will highlight the extreme fragility of our capitalistic economy, and serve to further weaken BAU. A lot of us will be learning more about what we can and can't get along without. Who knows, we may even see BAU weakened enough that local economies will have a chance to get started in some areas.

In any case, much of what I have to say today applies to hard times of any sort. And to get back to today's topic, as I said last time, the song says, "money makes the world go round", but I don't agree. Drawing from the writings of Dr. Tim Morgan on "surplus energy economics", I would say that it is energy that makes the world, or at least the economy, go round.

Energy and the economy

So, I've said that energy is what makes the economy function. How does that work? An economy is really a system for making and distributing the things that people need. And to be clear, those "things" do include data and information. The processes by which things are made require energy in the form of heat, mechanical energy and electricity. Without energy, nothing works. Economist Steve Keen is one of just a handful of economists worldwide who understand the essential role of energy in the economy. As he puts it: “Capital without energy is a sculpture and labour without energy is a corpse.”

In preindustrial economies heat came from firewood and mechanical energy came from muscles (human or animal) powered by food, and of course electrical technology hadn't yet been invented. (Yes, I'm leaving out power from falling water and moving air, but they played a relatively small part until more recent times. And I am aware that all these forms of energy ultimately come from sunlight.)

In an industrial economy most production is done by machines, and those machines are usually powered by some sort of energy other than human or animal muscle power. This became true only in the last few hundred years after engines driven by heat from burning fossil fuels were developed. Yes,. they could be powered by burning firewood, but it is interesting to note that they were invented in Britain only after that island was already pretty short of wood.

Because we use technology to access energy, people tend to think that technology produces energy. But just the opposite is true—technology uses energy. Even the technology we use to access energy uses some energy in the process. The energy that is left over is known as surplus energy, and that what really drives the economy. The term "Energy Returned on Energy Invested" quantifies this. Back in the day, for instance, it took about one barrel's worth of energy to get 100 barrels of oil out of an oil well, leaving 99 barrels of surplus energy for use in the economy. The EROEI was 100, calculated as 100 divided by 1. That was a very good EROEI, and resulted in a rapidly growing economy in the middle of the twentieth century.

In pre-industrial days, the process of converting sunlight into food (done by plants, and less directly by animals eating plants) and then food into muscle power, had an EROEI of around 5. And that is why pre-industrial economies grew very slowly and attained a limited degree of complexity compared to our modern industrial economies. To keep functioning, a modern industrial economy needs the average EROEI of its energy sources to be above 15 or so. When the average EROEI falls below that level, growth stops and eventually it becomes difficult to maintain the complexity of the system.

In the nineteenth and much of the twentieth century successful economies in what we now call the developed world were powered by fossil fuels with high EROEIs and they grew quickly. But since we picked the lowest hanging fossil fuel “fruit” first—the ones easiest to access and use—the EROEI of the remaining fossil energy sources has declined considerably and the rate of economic growth has declined with it. There are many alternatives to fossil fuels, but the ones most people are counting on (nuclear, solar, wind) all have low EROEIs, among other problems.

Because our present banking system is fueled by growth and almost all economic operations are mediated through the banks, even small reductions in growth have very negative effects on the economy. The reduced EROEI of our energy supplies has been causing economic contraction for quite some time now. Governments don't understand this and are puzzled that none of the remedies suggested by conventional economists seem to work. So they have adjusted the way they calculate inflation, CPI, employment and GDP statistics to make it seem that the economy is still growing, inflation is under control and there are jobs for everyone, when none of that is really true.

The situation is worsened by widening economic inequality. To use a pie analogy, where the pie represents all the wealth generated by the economy, the upper classes have always insisted on an ever growing slice of the pie. As long as the economy was growing, the amount of pie left for the rest of us could grow as well, though not so quickly as the share allotted to the wealthy. But once the economy started to contract, our share had to shrink faster that the economy itself was contracting if the upper class' share was to keep growing. And indeed this is what has happened.

Any society that works like this will experience growing inequality and all but the upper class will suffer greatly during economic contractions. The U.S. is certainly an example of this. Since the 1990s there has been little real growth—debt and investment bubbles have been used as a substitute for surplus energy to keep things "growing". Interest rates have been lowered so that the increased debt can be supported. Those with wealth have been hard pressed to find investments that give good returns. Many have turned to speculation in real estate and this has resulted in real estate bubbles in many cities.

The contracting economy has also meant businesses have had to streamline their operations to maintain their profitability. This has resulted not so much in outright unemployment, but rather in under-employment—part time, precarious jobs that won't support even a lone individual, much less a family. That, combined with the overheated real estate market, is making it very hard for working class people to find affordable accommodations. This is leading to homelessness for more and more people, with many who still have jobs being forced to live in their vehicles. And the prices of food, fuel and other necessities have also been going up, which only makes things that much worse.

In societies where progressive taxation is used to take some of the money accumulated by the rich and fund a social safety net, inequality is decreased and conditions are much better for those at the bottom. The negatives effects of homelessness both on society and on the homeless themselves can be significantly reduced by providing socially supported accommodations.

Let's be clear—I am not saying that it is possible to reverse the decay of BAU, but the trip down can be rendered much less unpleasant and more resources can be retained at the community and personal level for the adaptations that will be needed when BAU does eventually fail.

Coping in a contracting economy—deliberate descent

If anything, the contracting economy has been harder on small, rural communities than urban areas. Farming still continues but because less labour is involved these days, the farming community is smaller, and the business of providing services to farmers has declined as well. For the last several decades there has been a steady flow of young rural people to the cities in search of work, reducing the local population and causing the economy to shrink that much further.

If, as I've been suggesting, you've moved to a small, remote town, found a job in the local economy and rented a place to live, you may well find that the local economy is drying up around you, and your job is much less secure, if it still exists at all. There will be a temptation to move back to the city. Why, then, am I recommending small, remote communities?

Well, things aren't, and increasingly won't be, all that much better in the cities. And I believe that as collapse deepens and infrastructure and supply chains start falling apart more quickly, the cities will become a very much worse place to live while rural areas will have a chance to support themselves outside of BAU. And remote areas will be faced with less of a deluge of refugees from the cities than those rural areas immediately adjacent to the cities.

The trick is finding a way to support yourself during the transitional period. Setting up economic arrangements outside of BAU will be very hard to do until BAU has been drastically weakened—today it just provides too much competition. You want to avoid homelessness if at all possible, since it has some very debilitating effects—poor health and lowered life expectancy, along with the sapping of personal strength and the loss of any sort of a community of people with the resources to help you.

The key to avoiding destitution and homelessness is something called “deliberate descent', on which I wrote a series of posts a few years ago. John Michael Greer coined the phrase "collapse now and avoid the rush", and that is basically what I am talking about here—anticipating that the future holds a decline in your economic status, and taking voluntary steps to adapt to that before you are forced to.

Whether your resources consist of a job, a pension or personal investments, you will use part of your income for living expenses (keeping those as low as possible), some for paying down debts, and some for accumulating a reserve of cash and non-perishable emergency preparations. Always with the awareness that income based on BAU will eventually disappear, and may do so at any time and at a moment's notice. And finally, having taken care of yourself, it would be wise to invest in people who are less fortunate—more on that in a moment.

Unfortunately we are all being deluged with marketing efforts that attempt to convince us that we need a great many things. Most of those "needs" have only existed for a few years or decades at most and people got on just fine without them before that. So it is important to sort out your wants from your needs and concentrate on your needs when resources are limited. When it comes to material things, water, food, adequate clothing and a safe, warm, dry place to sleep are pretty much the short list. Of course, you may need some tools and equipment to acquire those things, but most of them can be made, borrowed or bought second hand.

It will still be necessary to maintain personal morale, and some small luxuries and entertainments may help. But non-material things, chiefly human relationships, are far effective at maintaining our morale, and in monetary terms, much less expensive. No single individual can hope to be completely self sufficient, but a community can come pretty close. And a close knit community can provide the sort of companionship and support that material toys simply can't. Independence and privacy are likely to be among the main casualties of the changes in life style that I am talking about, and that will be hard for many of us, especially old boomers like myself.

Rent, or taxes and upkeep on housing you own, will probably be the hardest part of BAU to get clear of and most of us will be paying them for quite some time yet. I think sharing housing with a group of people and pooling incomes to cover the cost is probably the way to go for many people. If you can find a way to set up an extended social unit that can maintain its integrity within BAU and generate enough income to pay taxes/rent and purchase what it can't produce (by gardening, hunting and so forth.), then the world should beat a path to your door. I notice younger people are being forced to try this, and are experiencing some degree of success, with which I am very impressed.

Eventually rural municipalities will have to admit to the realities of collapse and reduce both property taxes and services to match the realities of the situation. Land reform will also be needed, to take advantage of potentially productive land that has essentially been abandoned by owners who can't make a living farming it. This will be easier to do once housing developers are no longer interested, having realized that no one can afford the housing they would build on such property.

There is a role to play for an enlightened local government in organizing the response an area needs to mount when BAU withers to the point it can no longer provide the necessities, and in handling refugees from the city, but I haven't much faith in the kind of people who run for office in most municipalities. They tend not to be at all collapse aware and will most likely be caught unprepared and unwilling to change. More likely this will have to be done by small groups of people who are aware of what is going on and have planned ahead and made some preparations. I think the key is to realize that BAU's demise will be gradual, recognize the signs and start taking action at that point to get ahead of the curve of collapse.

I can think of a few different situations people may find themselves in during the coming years, and approaches suitable for those situations.

Retirees from the local area who (like me) have fairly decent pensions and already own a house will be in a good position until the pension fund runs into financial trouble, and our pension are discounted and finally disappear altogether. Indeed that is probably the way that BAU will first fail us. Fortunately, we know what's coming, we already know the area and have had lots of opportunity to established a network.

Retirees from the big cities, who have sold their city homes for several times the price of a house in a small town, can set themselves up in such a town with a fair chunk of cash left over to live on, especially if they are content to chose a fairly modest place for their new home. Investing that cash so that it doesn't disappear will be the big challenge for those folks, especially with the chaos we can expect to see in the financial sector.

Those who are still working to earn their living fall into several categories.

Some intrepid souls with a job in the city will elect to move to a small remote town and commute. This is expensive and involves a lot of personal wear and tear. Others are self employed in a way that is not location dependent, or have a job in the city but can do the work from home most of the time. All these situations make it possible to move without having to find a new job. This allows you to get to know your new community without making any irreversible commitments. Especially if you keep your place in the city and rent in your new town. Your city home can be rented out, or sublet if you are renting.

Skilled people—professionals, trades people, artisans and so forth— who can find paying jobs in the local economy are another significant group. Many areas have one or more large local industries that employ a significant number of people, and will continue to do so until the failing economy forces them to shut down. There's nothing wrong with working at a place like that as long as you realize it won't last forever and plan accordingly. In most areas there are also opportunities in health care, education, agriculture, trades and various sorts of services.

I wouldn't advise anyone to try setting up a new business in a contracting economy, even if your idea seems fool proof (to you), but some jobs are available and if you have the right skills, there will be people who have need of you. You just have to find an area where the opportunities match your abilities. And of course if you succeed in "deliberately descending", it will be easier to find a job with pay that matches your needs.

Then there are those who are less fortunate, who are working at a job that doesn't pay the bills, or have lost their job or their pensions or whose investments have evaporated in a market crash. Sadly there will be a great many more such folks as economic contraction becomes more intense. Many will find themselves homeless or at least tottering on the edge of it. And people in any of the categories above should keep in mind that they themselves may well become less fortunate at any moment.

Sadly, many folks have a picture of homeless people as human detritus and pretty much beyond help, as if poverty was some sort of moral failing. But, if this was ever true, it is becoming less so all the time as ordinary working class people find it more and more difficult to earn enough to provide the necessities of life, even if they can find a job. I think there are a great many people currently in dire straits who could do, or easily enough learn to do, the sort of work that will need to be done in a community trying to support itself when BAU can no longer do so. Many would be willing or perhaps even eager. What is needed is the organization to offer these people a job, and training as required, with the aim of relocalizing* and, rehumanizing* the local economy in order to cope with broken supply chains and energy infrastructure.

Initially these will be local people who left for the city and are now returning along with a few city folks who have read the writing on the wall and want to get out before things get worse. Eventually, it will get worse and then there will be refugees.

In any case these people will need a place to live and they won't have the resources to buy or even rent. Those with local connections will live with parents or friends. Others will come in a vehicle and live in it, at least at the start, and they will need parking and access to services—water, washrooms, showers and electrical power as long as it is available. For those with no local connection and no vehicle, camping may be an option in the summer (certainly not in the winter, where I live), but families with a spare room should be encouraged to welcome them and collect room and board once they are working. Any empty housing should not be allowed to sit idle as long as there are people without a place to stay. The local community may eventually have get together to build some very modest, low cost rental accommodation, even though resources will be very short.

Whatever the details, investing some time and money in creating jobs and making a place to live for such folks will eventually pay off very well, as BAU fades away and the new local economy rises to take its place. Experience has shown that in emergencies people do come together to do what is needed.

That just about wraps up this series on responding to collapse. It would be good to have a closer look at the sort of community that I think you'll get when you do what I've been recommending here, but I'm beginning to think fiction might be a better vehicle for getting that across.

I've been blogging here for just over eight years now and I still have ideas for a few more posts, but at some point in the near future I may try to write some fictional stories about the kind of situations I've been talking about in this series of posts. Sometimes stories can be very effective at getting across ideas. Providing, of course, that I am up to the writing challenge. We'll see.

*Relocalization and rehumanization are words you won't find in the dictionary, at least not in the sense I mean them here. Relocalization refers to bring back to a community the part of its economy that was centralized during the industrialization of our society and producing locally what is needed locally. Rehumanization means that many of the tasks that have been automated over the last couple of centuries will once more be done by human muscles, hands and minds.

The word conservation is often used together with those two terms, and in this context means using less in order to get by with what can be produced locally. Thanks to John Michael Greer for expressing these ideas so clearly in his blog, The Archdruid Report.


Links to the rest of this series of posts, Preparing for (Responding to) Collapse:

https://theeasiestpersontofool.blogspot.com/2020/03/responding-to-collapse-part-17-of-money.html
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Tuesday 10 March 2020

What I've Been Reading, February 2020

Links

Late Breaking News

Miscellaneous

I googled "Is healthcare free in China?" and this is the answer that Google provided:
"China does have free public healthcare which is under the country's social insurance plan. The healthcare system provides basic coverage for the majority of the native population and, in most cases, expats as well. However, it will depend on the region you reside in."
As the link below shows, that's basically true, but the details are somewhat more complicated.

Coronavirus

At this point (March 10, 2020) it's starting to look like the secondary effects on production, supply chains and markets caused by large numbers of people being locked down in quarantine may be worse than the primary effects of the virus itself. And of course panic will only make things worse. There is a lot of fear, uncertainty and doubt (FUD) on the internet, and many are using that to drive traffic to their sites. I have tried very hard to avoid articles of that sort in choosing the ones below. I still ended up with too many articles.

The plain fact is that we don't know much about the virus at the moment. When the dust settles, we'll know a lot more. The dust will settle and the human race will carry on, hopefully having learned something from the experience.

Capitalism, Communism, Anarchy

The New Fascism, and Antifa

I hear a lot of well educated people saying that the people some of us are calling fascists don't meet all the criteria for being "real" fascists. Others have even accused us of calling anyone we disagree with a fascist. I predict that a few decades from now those same people will be saying they wish they hadn't been quite so fussy with their definitions, and had acted sooner to oppose these "new fascists", even if they weren't identical to the fascists of the twentieth century.

Collapse

Peak Oil

Climate Change

Genetic Engineering

Before jumping to the erroneous conclusion that this section was paid for by Monsanto, stop for a moment and understand that organic agriculture/food is a multi-billion dollar per year industry that relies on fear to get people to buy its product. Millions of dollars are spent to convince you that non-organic food is dangerous. In fact both conventionally grown and organic foods are equally safe. Sadly neither method of agriculture is even remotely substainable.

  • Swiss Scientists Have Recreated the Coronavirus in a Lab, by Emily Mullin, Medium—OneZero
  • Panic-free GMOs, A Grist Special Series by Nathanael Johnson
    "It’s easy to get information about genetically modified food. There are the dubious anti-GM horror stories that recirculate through social networks. On the other side, there’s the dismissive sighing, eye-rolling, and hand patting of pro-GM partisans. But if you just want a level-headed assessment of the evidence in plain English, that’s in pretty short supply. Fortunately, you’ve found the trove."
    A series of articles that does a pretty good job of presenting the facts about GMOs. I plan to include one article from this series here each month.
  • Genetic engineering vs. natural breeding: What’s the difference?, by Nathanael Johnson, Grist

Canadian Politics

Politics

  • Politics Without Politicians, by Nathan Heller, The New Yorker
    This is not talking about anarchy, just about a different way to run a state. It is very unclear to me how we would get from the current neoliberal plutarchy to open democracy such as is suggested in this article. And even if we could, such a government is not still likely to be able to deal with the sort of predicaments that we are currently in any better than any other style of government.

Debunking Resources

These are of such importance that I've decide to leave them here on an ongoing basis.

Science

Lacking an Owner's Manual

The human body/mind/spirit doesn't come with an owner's manual, and we continually struggle to figure out how best to operate them.

Gender and Sexuality

Refugees and Migration

Poverty, Homeless People, Minimum Wage, UBI, Health Care, Affordable Housing

Artificial Intelligence

  • Artificial Intelligence—The Revolution Hasn’t Happened Yet, by Michael I. Jordan, Medium—Artificial Intelligence
  • 2019 in Review: 10 AI Failures, by Synched
    I include this not to say that AI is impossible, but rather that is has significant challenges that haven't yet been solved—that it is far from a done deal.
  • Asking the Right Questions About AI, by Yonatan Zunger, Medium—Artificial Intelligence
    "AI models hold a mirror up to us; they don’t understand when we really don’t want honesty. They will only tell us polite fictions if we tell them how to lie to us ahead of time."
    "A good rule of thumb, also recently encoded into EU law, is that decisions with serious consequences of people should be sanity-checked by a human—and that there should be a human override mechanism available."
    "We are not yet anywhere close to being able to do that in AI’s."

Humour

These are great times for political satire.

Books

Fiction

Non-Fiction

I am reading currently "The Moral Consequences of Economic Growth" by Benjamin Friedman, which was lent to me by a friend. Written by a conventional economist who doesn't even seem to know what causes economic growth, or what its consequences really are, it is pretty tough going. Important to know how the other side thinks, though, I guess.

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Tuesday 3 March 2020

Responding to Collapse, Part 16: Shortages of Money, Part 1

A few posts back I said that shortages of electrical power, diesel fuel and money will be at the heart of the troubles that lie ahead for small remote communities as collapse progresses. I am interested in that sort of community because that is where I am recommending that you take refuge in order to ride out collapse (and where I have already taken refuge). I've covered electrical power in parts 10 to 14 of this series and diesel fuel in part 15, so that leaves money for this post and the next one.

We'll be looking at shortages of money from two angles here. First, in this post, shortages that occur when you have money on deposit at the bank, or credit prearranged with the bank, but can't access it due to problems with the banking system. Second, in the next post, shortages that occur when you have trouble earning enough money to live on because of problems with the economy.

The song says, "money makes the world go round". You could certainly be forgiven for believing that, especially given the increased commodification of everything that has been going on, and the growth of the financial sector of the economy in the last few decades. I don't agree, though. Drawing from the writings of Dr. Tim Morgan on "surplus energy economics", I would say that it is energy that makes the world, or at least the economy, go round.

We'll get back to the role of energy in the economy in my next post, but first let's look at money itself. Money is really just a system of tokens we use as a medium of exchange, a unit of account, and a store of value.

Conventional economists tell stories about how before money was invented, people had to barter for what they needed but couldn't produce for themselves, and this was very inconvenient. In fact, as an anthropologist would tell you, barter was used only on those rare occasions when they were trading with strangers, and often with the intent of gaining a (possibly unfair) advantage. They were strangers, after all.

Most people usually dealt only with people they knew and didn't want to cheat. In small groups (less that Dunbar's number) there was no need of money since people just did what was needed, didn't attempt to keep precise accounts it, and accumulated little of value to store. This was primitive communism which worked on the principle of "from each according to their ability and to each according to their needs."

As people began to live in larger groups, it proved useful to have some way of keeping track of transactions with people outside one's immediate group. I'm not going to go into the historical details here (read Graeber's book if you are interested), but eventually we arrived at the system we use now.

Today money is created when a bank loans it out as debt. The main thing about money created as debt is that it can increase flexibly as the economy grows, where money based on precious metals is limited by the scarcity of those metals. In order to make a profit, which is after all the reason for their existence, banks insist that those loans have to be paid back with interest. This means that the economy must continually grow in order to cover that interest. As long as the economy is growing, this system works quite well. Indeed that is why we adopted it, to accommodate the growth stimulated by fossil fuel energy.

Only a tiny fraction of money ever exists as coinage or bank notes—mostly it just consists of entries in the banks' accounting software. Coinage confuses the issue of what money really is, since coins at least appear to be made of precious metals. Many people believe that money based on precious metals (gold, silver) has some real value, because of their rarity and the difficult of mining them. They call our modern debt based money “fiat currency” because its value is based solely on your confidence in it. I disagree. Take gold as an example—it has some limited industrial use because of its low electrical resistance and high corrosion resistance, but its current high market value is based almost entirely on what people think it is worth. In fact all money is an abstraction and its value is based only on what value people agree to give it.

Indeed the financial sector of the economy is largely based on trading in money itself as well as stocks, bonds, and derivatives. Much of the so called wealth in the world is based on these things, and their value is almost entirely based on public confidence in them. If the confidence evaporates, so does the wealth.

I would define wealth as an enforceable claim of ownership on things with real value, or an enforceable claim on future productivity, yours or someone else's. The value of money in the bank or investments, is based on a claim on future productivity, and if that productivity decreases, so does the value of your claim on it. And, of course, if your claims become un-enforceable, as they might if the financial sector or society itself experience disruption, your "wealth" is worth nothing.

In the last few decades the switch over from primitive communism to modern neoliberal capitalism has been just about completed. The idea of an "immediate group" has largely disappeared, much to our loss, and money mediates almost all relationships, even to some extent within nuclear families. This means that we are very much dependent on the systems which provide us with money, and via that money, the necessities of life.

Today most of us access the cash we have on deposit at a bank via an automatic teller machine (ATM) or less commonly via a human teller at the local bricks and mortar office of our bank. And more and more we use debit cards to eliminate actual cash altogether, accessing our bank deposits directly at point of sale terminals. Many of us also have credit cards allowing us to access credit up to a prearranged limit at ATMs or point of sale terminals. Some of us, who are undertaking rennovation projects or operate small businesses for instance, have arranged lines of credit at the bank, at much lower interest rates than credit cards. This form of credit is usually accessed via cheques or online transfers.

But having cash on deposit or prearranged credit is no good if you can't access it. Ready access to money relies on infrastructure that can fail quite easily. A local grid failure or damage to communications cables can knock out ATMs, point of sale terminals and the banks themselves—you may have noticed that, when you are dealing directly with a human teller, they are making entries in a computer while dispensing or receiving cash. Cash itself has to be delivered regularly to both ATMs and banks and shortages of diesel fuel or storms closing the highways can stop those deliveries.

Financial crashes, recessions or depressions can cause banks to fail and take your money down a financial black hole with them. And during such crises the banks who don't fail get very cautious in their dealings with each other and the public. This is like throwing sand in the gears of the economy, and makes the situation worse. In such an event, you can except that your access to credit will dry up and that even your access to cash on deposit will be limited, since the banks will be concerned about nervous people deciding to withdraw all their money, in what is known as a "run on the bank". The banks, of course, don't have enough cash on hand to cover all the deposits that people have made, and would likely limit you to taking out only a few hundred dollar a week, at most.

The simplest preparation for these sort of problems is having a chunk of cash on hand, enough to see you through a few days or weeks at the worst. And having a stock of food and other essentials on hand so you don't need so much money to spend in times when the banking system isn't working.

A lot of people seem to think that a long term failure of the financial sector would be the end of the world, or at least of the economy, and believe that it is the form that collapse will take. But remember an economy is just a system in which the things people need are made and exchanged. Among small numbers of people who know each other (or can quickly come to know each other), and certainly in emergencies, it is quite possible for such activity to continue without anyone keeping track of it. The thing, of course, is to have close to hand the resources from which to make what is needed. In large population centres, once shipments stop, this quickly becomes difficult. In small agricultural communities, it need not be so much of a problem.

In communities of more than a couple of hundred people, it would be useful to print and issue a local currency and set up accounting systems separate from the no longer functioning banks. The idea that we can't get by without banks irks me—they currently have a monopoly on the services they provide and on which we depend—and they make a generous profit in that business. If they can no longer do their job, then we should feel free to replace them as needed.

As my regular readers know, I believe that collapse is actually something that happens quite slowly, has been going on for the last 50 years or so, and will be continuing for years or probably decades to come. But, when it comes to money, I can see why many people seem to have their hearts set on a fast collapse. Such a collapse would be much harder, of course, but at least your creditors, landlords, etc. would be collapsing with you and wouldn't be able to come after you for what you owe them. Leaving you free to concentrate on the business of survival.

In a slow collapse there will be a period of time (already started, actually) when the banks and landlords still want their pound of flesh, but many people no longer have jobs, or good enough jobs, to pay them.

That will be the subject of my next post.

As I have been writing this post, the corona virus, COVID-19, has been spreading over the world. I've done a fair bit of reading on it recently, and I am getting disgusted with the amount of fear, uncertainty and doubt (FUD) that is being spread around by people who stand to gain by attracting more visitors to their websites. This is uncertainly not conducive to an intelligent response.

This a new disease and there is much we do not yet know about it, much that we will only know after the dust has settled. I think this sort of uncertainty is going to be characteristic of many of the challenges we will face as collapse deepens. My hope is that this blog will be conducive to a calm and constructive response to such challenges. Here are a few links that I hope will help when it comes to responding to COVID-19:

That last link is behind a paywall, so I'm including a link with advice to help you get past paywalls in general.. Just part of my anarcho-communist approach to life.


Links to the rest of this series of posts, Preparing for (Responding to) Collapse:

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