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« What Am I Watching? | Main | Watching the Global Economic System »

July 12, 2012


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Brilliant as usual, George.

The ancients understood something that today's banksters and eCONomists never learned or are paid to forget. Debt-money and the attendant cumulative compounding interest claims to effectively infinite term cease to grow when the debt reaches an exponential differential order of magnitude beyond the underlying growth of wages and production, which are derivative of population/labor force growth and labor's capital deepening. Once the "Jubilee threshold" is reached, the debt must contract, i.e., be written down, charged off, or consumed by asset liquidation.

Debts are self-sustaining when they are made against collateral that permits rolling over or self-liquidation of the outstanding debt. A loan of $10,000 against secured collateral of $10,000 is self-liquidating. However, by way of the fraud of fractional reserve banking, banks take in $1 of deposits, set aside $0.03 of reserves against the deposits, and then lend $1. A charge-off rate of just 3% of outstanding loans (not to mention additional delinquencies) risks disaster for the bank and its depositors.

A bank that lends at 33:1 reserves at an average rate of 7% at an effective infinite term must realize a minimum spread of 2.9% between what the bank pays the depositor and lends to the borrow while at least doubling loans/deposits every decade. Competition for deposits and spreads, however, inevitably leads to banksters growing loans/deposits faster in order to capture the income before the other guy. The historical result is that banksters get swept up in the self-perpetuating debt-money bubble and go broke about once and decade, requiring gov'ts to issue debt to bail the banksters so they can do it all over again for another decade.

As long as growth of debt-money deposits/loans can be supported by a larger share of future claims on wages and production, the process continues until the exponential order of magnitude of differential growth of debt-money to wages and production is reached and the system collapses atop all that non-self-liquidating collateral. This is what happened in '08-'09, prompting the federal gov't to borrow, spend and bail an equivalent of 60% of private GDP and heading for 100% in the next 2-3 years.

Gov't borrowing and deficit spending has grown at 8-10% to post-'00 GDP of 3.6% and 2% since '07 (vs. 6.4% historically). Had the US gov't not borrowed and spent at 6-13% of GDP since '08, the US nominal GDP would have collapsed back to the level of '00-'02. However, at the differential growth of gov't debt to private GDP, we face a Greece-like day of reckoning by no later than '18-'21 and as soon as '15-'16 were another recession to occur, implying the risk of fiscal deficits approaching 100% of total receipts.

Real GDP has decelerated from the long-term pre-'00 trend rate of 3.3% to 1.6% today and near 0% per capita. The cumulative loss of real GDP growth since '00 has been 18-19% and 27% per capita, which is where Japan was in '98-'99 when outright deflation commenced. Since '90, Japan has lost 40% in real GDP growth from the country's long-term trend rate, which is where the US is headed by decade's end. A loss of 40% from trend real GDP and 50% per capita that otherwise would have occurred is a depression by any objective measure, albeit a slow-motion variety.

I suspect that few have considered what the US will look like with a loss of 50% in real GDP growth per capita growth that otherwise would have occurred had the trend continued from '00.

As I mentioned in an earlier post, the annual change of real wages after household debt service has fallen into recession territory since late Q1 and early Q2 to date and manufacturing appears now to be contracting, implying that the US is probably already in recession. Historically, the unemployment rate increases 50-60% to 100% during recessions, suggesting the risk of a US U rate of 13-14% to 16% by '14 or '15.

And now we have fewer than two private sector workers for each Social Security and Disability benefit recipient and their dependents.

Whoever is not concerned or increasingly pessimistic is not aware of what we face, is delusional, is positioned to be protected from the fallout, or is incapable of understanding the scope of the impending disaster.


Fantastic piece George - and just as a side note, the site The Big Picture, is one of my favorite financial reads each day

Just as Bruce points out the impending financial problems (self-created by the powers that be) above, i'd like to point out the following environmental picture to complement your and his analysis. This is only the tip of a very large and disturbing "iceberg" to keep it succinct.

America burning: Drought devastating 26 states is the largest natural disaster in U.S. history

“Severe drought conditions plaguing more than half of the United States has developed into the largest natural disaster in the country’s history.
The United States Department of Agriculture declared natural disasters for 26 states and more than 1,000 counties because of the extreme drought that has destroyed crops in farms throughout the nation.
The declaration come as the worst drought in a quarter century tightened its grip on Midwestern states over the past week.
Sweltering temperatures and scant rainfall punished corn and soybean crops across the region, a report from climate experts said on Thursday.

Nearly two-thirds of the nine-state Midwest region was in some stage of drought in the week ended July 10, up from just over 50 per cent a week earlier, according to the Drought Monitor, a weekly report on drought throughout the country compiled by U.S. climate experts.
A third of the region was in severe to exceptional drought, up from about a quarter of the region a week earlier, it said.”

(further down)

“On Wednesday, the U.S. Department of Agriculture slashed production forecasts for both crops due to the drought, joining scores of private forecasts that have sent grain prices to near-record highs.”
“Harder-hit Illinois, the No. 2 corn and soy state, was 66.28 per cent under severe drought or worse, up from 40 per cent the previous week.
Severe to exceptional drought covered 80.15 per cent of Indiana, versus 68.84 per cent the prior week.
Conditions in Missouri also deteriorated, with 82.54 per cent of the state in severe drought or worse, compared with 78.83 percent the week before.”

i think it's safe to say that we're into some serious do-do.

how to do online trading

The financial system is a big blown up balloon. Sometimes a simple not foreseen announcement by an economic of politic personnality is enough to bring the whole balloon to decadence.
[Moderator note: removed commercial URL]

Mark N

What a fantastic post George, systems science applied to our current situation really helps gain a better understanding of the overall mess that industrial civilization finds itself in. I would print this post and preach it like a gospel if I thought truth could shatter the normalcy bias that coaxes the industrial citizens to sleep.

I strongly agree that the financial system is not to blame for our woes; more than any other system in this unsustainable civilization. The financial system has become a convenient scapegoat for segments of the population looking to assign blame for the decay of our civilization; so as to not face the truth of resource depletion and the general unsustainable nature of our civilization. I find it fitting that if you take away the smoke and mirror producing financial system; the whole house of cards falls down.

Now back to work on getting off the grid and tinkering with my ideas for a post-industrial neo-hunter gatherer lifestyle I hope to transition to someday. I remain an optimistic doomer.


Tom, there is historical geological evidence that the US SW and Mountain West is early into a recurring mega-drought similar to the one that contributed to the end of the Anasazi and Maya civilizations.

Note that the Army Corps and BLM were aware of the population carrying capacity of water resources in "Lost Wages" (a.k.a. Las Vegas), Phoenix, Tucson, and the Palm Desert as long ago as the 1950s when they established a maximum population that was exceeded by the 1970s-90s.

One should not be surprised to see a mass out-migration of population from the SW and Palm Desert regions in the coming decades and the effective collapse of the local and regional economies.

That these areas are highly dependent upon discretionary recreational spending, the once-in-a-lifetime (-history?) Boomer demographic drag now underway implies that these areas were going to experience long-term economic decline in any case.

Further, there is also evidence to suggest that we are entering a period of low sunspot activity coincident with the convergence of the Gleissberg and Suess cycles occurring every 210-220 years and corresponding with periods of mid-latitude cooling and increasing weather extremes for continental climates.

Combine these climate/weather factors with Peak Oil, Peak Debt ("Jubilee"), falling net energy per capita, and population overshoot, and gov'ts and societies are about to be overwhelmed by cumulative forces for which the only solutions proposed by the "experts" are those that put us where we are today.

It's probably too late to build an ark . . .

Aboc Zed


Brilliant post as others pointed out.

But the question remains for those of us who are aware of the real situation and are not depressed by the magnitude of upcoming rebalancing?

What do we do?

I still maintain that all this analysis is only input.

Now I know George's concept of sapience, its evolutionary role and the edea of seed population wondering the globe waiting out for the dust to settle.

But I think that we should get over the negative emotional charge of scary future and simply deal with it.

And the question then is:

What do we do if the rebalancing becomes protracted and extends over one lifetime? how are we going to learn from it? What are we going to teach the kids that will be born when it starts and mature into the world of contraction?

How do we take into account that people who understand the real situation are dispersed throughout the world and only constitute a virtual community over the Internet?

What is the plan for eventual shut down of Internet?

I know these questions become irrelevant once a person enters survival mode but I do think that given the structure of 1-9-90 there always be some people that will both have the brains and time to ask and answer.

I therefore think that even if each of us will die at the first ripple of the buble burst if we answer these questions, at least in theory, and document them, making as many copies as possible in books and minds then we may consider our efforts useful for posterity.

If we do not even attempt to answer these questions now we are not using the time borrowed from future generations wisely.


Alex writes, "What do we do if the rebalancing becomes protracted and extends over one lifetime? how are we going to learn from it? What are we going to teach the kids that will be born when it starts and mature into the world of contraction?

How do we take into account that people who understand the real situation are dispersed throughout the world and only constitute a virtual community over the Internet?

What is the plan for eventual shut down of Internet?

I know these questions become irrelevant once a person enters survival mode but I do think that given the structure of 1-9-90 there always be some people that will both have the brains and time to ask and answer.

I therefore think that even if each of us will die at the first ripple of the bubble burst if we answer these questions, at least in theory, and document them, making as many copies as possible in books and minds then we may consider our efforts useful for posterity.

If we do not even attempt to answer these questions now we are not using the time borrowed from future generations wisely."

Alex, I assert that this is as profound a question as the human mind can conceive of at this particular juncture in our (r)evolution. Nature or The Universe requires nothing of us as a species. We, however, owe it to whoever is worthy of the question to ask it and conceive of answers similarly worthy of the self-selected, highly adaptive members of the super-species who succeed us.

But I reiterate that those among the top 0.1-1% who have built the global Anglo-American, militarist-imperialist trade regime's financialized superstructure, like Nature, do not need the overwhelming majority of us or our vision of how each of us individually, or "we" collectively, should prepare to adapt into and after the post-bottleneck trial period. To appeal to the top 0.1-1% is like asking the sky to spare one's property and survival from the effects of torrential rain and imminent flood.

The top 0.1-1% don't need us and our ideas, nor do they want the responsibility of supporting a social and economic system in which they must give up any of their wealth, status, privilege, and power in the process. Why should they?

Some readers will respond to this notion with charges of nihilism, fatalism, or pessimism, but this would presume that Nature's process of (r)evolution requires that one/we be "optimistic", "hopeful", or altruistic toward most or all of our fellow humans and non-human lifeforms; rather, it rewards with survival and reproduction successful adaptation. Everything else we would hope to achieve is a cognitive construction conditioned over centuries by geography, climate, availability of freshwater, forests, wild game, fish stocks, arable land, river valleys, and humus deposition, fossil fuels in the past century and a half, and so on.

Thus, one question that arises is what one is to do if the highest probability is that one's children and grandchildren are very likely to face not only few or no viable employment prospects and ability to successfully bear children and raise them to adulthood with similar prospects of their own?

What would one teach one's children or others' children within one's larger social network?

How to prepare them?

On what basis should they form a healthy self-identity given what likely faces them?

What is a constructive worldview?

What values will best serve them?

By which means shall the values be inculcated and reinforced?

How does one overcome the competing mass-media messaging? Or should one try?

Aboc Zed


note i did not talk about 1 % of the top to continue to ask these questions but merely posited that _some_ people _somewhere_ in the 1-9-90 structure will have both brains and time to ask and answer these questions

granted with contracting real economy in biophysical terms (less energy per capita and less human biomass in total) the number of pockets tackling these questions may be expected to decrease and there may be a period when they will not have the luxury of connected environment of the Internet we enjoy now

this is why i feel it is of utmost importance to do our homework as much as we can now while we still have Internet and each of us talking here somehow has time and personal circumstances allowing it

i consider such situation a windfall that can end for each of us any moment and therefore i aske everyone to ponder what can we do in _practical_ terms now given our clear understanding of the immediate future

and i do not say that there is any kind of 'concrete solution' aka 'grass root direct democracy' or any other such irrelevant dreamer's thinking

i am asking for people who feel they understand to get past negative emotions and the fact that others do not listen to them and focus on finding out what do we do given the understanding

i feel that we do not do anything of that kind at all

i feel we merely talk about others not listening or how the whole in its current structure is doomed and how it is so complex that it cannot be changed before it crushes

my point is we have to get past that and keep on thinking about what _can_ be done, even if it ultimately just agreeing on the language, definitions and the meaning we use - an outcome i would concider huge progress and something that is missing

George Mobus


Thanks for the details!


This climate impact is just one of many examples of how we are going to need so much more energy to adapt right at the time we will so much less! More coming.

Mark N.,

Wish you well on the self-extraction project. If I were younger...


You ask some good questions about the practicality of living in contraction for all of those who don't choose the hunter-gatherer lifestyle. Honestly I don't have any answers because I just can't predict what is going to happen. Or to put it somewhat differently, I am certain every conceivable scenario is going to play out somewhere in the world. An not being able to predict what set of forces will be most dominant in any one place I simply can't recommend any formula for what people should be doing.

All I can say is what my floating screen saver message says - Adapt or Die.


Mark N

Adapt or die... that sums it up. I just wanted to share this report with everyone here; A Study in Global Systemic Collapse.

George Mobus

Damn Mark N. Beat me to the punch!!

Next in this series will be the general economic system and that will include things like the linkages between the supply chain and the financial system. Also, the food, energy, materials, and manufacturing relations.



What should can can be done? The short answer seems obvious to me:

Networked carbon negative food sovereignty.

I'm in a hurry and exhausted, so I won't explain much:
1) The carbon negativity requirement is optional. It's just for those who still harbor a little self respect or can't evade stringent geo-bio-pragmatic ethics.
2) An illustration of the networking thing: I'm thinking about producing t-shirts to wear at a German Buddhist convention, reading:
* Not carbon negative, no bodhisattva
* Not carbon negative, no sangha.
That is, without help from an apt sangha network, practically no 21st century Buddhist member of civilization has a chance to achieve bodhisattvahood. Sorry, but that's our century. (When I'm beyond 70 I'll perhaps try it alone in some cave in the Himalayas, just for fun. But that's not a solution.)
3) Alas, from all the few real Buddhists I met and those I read (except perhaps Joanna Macy) I have to conclude that it is all quite hopeless.

Anywhere But Here Is Better

George and Aboc - you two should get your heads together and design the 'knowledge preservation contraption' that George has proposed previously. Maybe the 'understanding' that Aboc fears we will lose in the chaos of collapse can be included in the device/system, for the benefit of successors with sufficient brainpower.

And George, I hope you don't mind me waxing lyrically to people in my acquaintance about the brilliance of this blog. If your ears are burning, you now know why.

Best wishes to all, Oliver


Books are a good way to save ideas. Maybe Christianity will break out and we will be forgiven our debts as we forgive our debtors. Was Christ giving a lesson in banking?


Bruce. Your list of questions seems to set the agenda. I have always thought that our generation is what faced Moses. He got to see the promised land, but didn't get to go there. Our society is trapped and a new cooperative way of existence will have to evolve for there to be survivors. E. O. Wilson deals with this to some extent in "The Social Conqust of Earth". However, no one seems to have proposed what sort of mechanism might be able to do something useful other than the usual blind process of evolution.


A new Sun god required.

@Curtis: See the above link. Christianity was as good as any Sun god religion until, well, I don't have to recount the history of the Roman and Orthodox churches, Islam, the Crusades, the Mongols, Turks, Monty Python's "The Holy Grail" and "Life of Brian", etc. Okay, the last one doesn't count. ;-)

Note, however, that Christianity has co-existed with, enabled, so far survived, and evolved with, and in spite of, "barbarian" invasions, Judaism, Islam, Leonardo, Galileo, The Schism, the Templars, The Inquisition, The Reformation and Martin Luther, capitalism, imperialism, socialism, communism, fascism, world wars, Father Coughlin, economic depressions, Monty Python, hippies, abortion, disco, Studio 54, Ronald Reagan, Jim and Tammy Bakker, Jimmy Swaggart, Madonna, Bill Clinton, pornography, pedophilia, and Polish and German pontiffs.

Thus, if we are to have a viable Sun god religion that addresses the limits of Spaceship Earth, Peak Oil, resource constraints, population overshoot, sovereign insolvency and default, and the post-capitalist, post-bottleneck world, Christianity is as good as any that exists today to be open to a transformation and adapting to a more eco-centric worldview, apart from perhaps Zen Buddhism or Ecosophy or Ecophilosophy.

However, I personally think that a synthesis based upon the worldviews of Zen/Tao, St. Francis of Assisi, Diogenes of Sinope, and Arne Naess ("deep ecology") informed by the exponential growth function and thermodynamics and the necessary compassion to apply the principles would be worth a try.

P.S. As for debt forgiveness, recall that the Roman church forbade charging interest on loans, as did Islam and Judaism when lending to another Jew. The ancients knew well of the negative effects of debt. It was not until the Renaissance Italian city-state banksters, attempting to get around the Pope's prohibitions, created bills of sale against which they charged interest-like fees modeled after the Khazarian Jews who similarly provided such credits for the purpose of facilitating Silk Road trade between Europe and China-Asia.


Preservation is already happening and has been for a long time.

I e-mailed the Library of Congress.

Here is the exchange:

To whom it may concern,

I am inquiring about the preservation of the libraries collection of knowledge in a hard copy form that is stored at another more secure location.
The reason I ask this is that since the Cold War a very real threat of complete destruction via nuclear attack is possible and as history shows us knowledge is not immune to destruction (Alexandria).

I know from the website that there is a digital preservation program but is there a physical one as well?

As a related question: Is there a Nationwide effort with all libraries to preserve there collections in hard copy?

Thanks in advance

The reply:

Thank you for contacting the Library of Congress Preservation Directorate.

The bread and butter of library preservation is preservation of the physical collections. Digitization is not preservation, but an access solution.

At the Library of Congress, we have two separate offices for preservation of the physical collections ( and preservation of digital assets (, including born-digital and digital objects we've made by photographing our collections.

To answer your last question, I would hazard to say that all major research libraries in the U.S. retain physical collections, the preservation of which is either explicitly or implicitly part of the institutional mission. Those libraries you may hear of that are going "all digital" are largely doing so by subscribing to e-journals and buying e-books going forward, as publishers move in that direction. They are simply replacing their traditional reading rooms with serial bookcases with computer terminals for reading those same serials online.

I hope this information is helpful. Please don't hesitate to use our Ask-a-Librarian service again if you have any further questions.

Mary Oey
Preservation Directorate
Conservation Division
Library of Congress
101 Independence Ave SE
Washington, DC 20540

George Mobus


I am falling seriously behind it seems. All great comments.

Bruce, thanks for the link.

Curtis, "Our society is trapped and a new cooperative way of existence will have to evolve for there to be survivors." Which is what I think sapience is - a path to higher levels of cooperation through natural behavior.

I think that what I have suggested is somewhat like giving evolution eyes so it is no longer blind.

Flor, may I suggest release from hope is also release from hopelessness?

Anywhere (Oliver), I am talking casually with some plant geneticists about the idea. Basically it involves coding leaf development genes to produce patterns (symbols) on leaves that would be identifiable as signs. From there, who knows? DNA is a versatile molecule!

Thanks for the endorsements, though.


I don't think the Library of Congress is considering preservation that would last, say, 100,000 years and be interpretable by people using a completely different language.



Design in Nature: Constructal Law.


Thanks for taking the time to post this.
[Moderator edit: removed commercial URL]

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