Monday, September 05, 2011

Facing the New Reality

It turns out I don't have to write a great booklet about the economic future America faces - somebody else beat me to the punch.

Facing the new reality
by Various contributors including Sharon Astyk, Nate Hagens, Richard Heinberg, Dmitry Orlov...

The Community Action Partnership, which is the umbrella organization of Community Action Agencies--which in turn administer the lion's share of anti-poverty programs in the US--has just come out with a report, Facing the New Reality: Preparing Poor America for Harder Times Ahead. Input for the report came from (among others) Nate Hagens, Dmitry Orlov, Sharon Astyk, Dave Room, John Michael Greer, Megan Bachman, and Richard Heinberg.

From the report:

Letter of Introduction

Dear Friends and Colleagues:

The Community Action Partnership presents here an unprecedented and extraordinary report: "Facing the New Reality: Preparing Poor America for Harder Times Ahead." This report is based on the equally extraordinary premise that much of what passes for reality in "the popular narrative" is not based on reality but instead on a collective denial of a genuine reality too difficult for most Americans to fully comprehend or accept.

There are many versions of the popular narrative but it tends to include the following beliefs: the United States will fully recover from a strong but temporary recession; we have access to enough energy from coal, natural gas and nuclear power to meet our needs for decades; our economy will return to growth and keep growing for the foreseeable future; technology will solve our energy and climate problems; conventional agriculture will continue to feed our nation and much of the rest of the world; and American prosperity will solve our collective debt crisis and bring a higher standard of living to all in a promising future.

This report suggests that these beliefs are fictions that serve many special interests while deterring us from facing the real and pressing need to prepare society now for unprecedented hardship, economic turmoil, resource scarcity and greatly increasing ranks of Americans living in poverty...

What is the "New Reality"?

The phrase the "New Reality" is used in this report as shorthand for the near future, a period that we have already entered, projected out over several decades. The report factors in three global mega-trends that the report's authors believe will be the dominant drivers shaping this period. These are: resource depletion, climate change and economic turmoil. While not yet fully developed, these mega-trends will interact in ways that will profoundly affect daily life.

To put it plainly, the movers and shakers in my community simply do not believe this. At all. They are unwilling to commit a single iota of time or resources toward preparing my community for the new reality.

The first two sections of the introduction discuss resource depletion and climate change. I'll skip those here because they've been discussed ad nauseum and people are solidly in one camp or the other: deniers or realists. No amount of further blather will change their minds - only the painful results of reality will sway the deniers (and even then the deniers, who are largely evangelical right-wing Christians, are likely to claim God is punishing America - still denying that climate change is real or that they had anything whatsoever to do with it.) As for resource depletion, a lot of them claim the high prices of natural resources are some sort of evil plot that the "new world order" is using for world domination. For some reason, they can't grok the thought that you can only get so much stuff out of every hole in the ground, and there are only so many holes.

No, it's an international plot to bring America down, they believe. They can't or won't admit that they have brought themselves down with greed and extreme misuse of limited resources. They externalize all the blame, rather like spoiled 4 year olds throwing a tantrum because they ate all the lollipops in the box and it's now empty. Mommy and Daddy are just being mean!

So, let's move on to the section on economics.

...Economic Turmoil: While most agree that the global economy nearly collapsed in the fall of 2008, few acknowledge that nothing has fundamentally changed to prevent this from happening again. Recent bailouts of fragile European economies like Greece, Iceland and Portugal (like the bailouts of American financial institutions) increased the debt that first caused the defaults and likely set the stage for more economic chaos not far down the road.

Also, the bewildering array of derivatives— exotic financial instruments that create money but not real wealth, out of thin air—are now monetarily valued to far exceed the value of real goods and services on the planet. As the hard physical limits to growth begin to appear in the forms noted above, the entire growth-dependent financial system may be headed for a very hard landing. We can expect:

1. High inflation or deflation, either one further contracting the economy.

2. Scarce capital or credit for job-creating development or badly needed infrastructure projects.

3. Dramatic cuts in government services as debt liabilities grow and tax revenues shrink.

4. Growing ranks of the unemployed and families descending into poverty.

5. Possible, some experts say, inevitable, global economic collapse...

Let's take a look at these for a few minutes.

Regarding point one: In my personal opinion, we are reaching the end of the deflationary part of this cycle. Prices of housing may continue to fall due to inability of people to qualify for credit because of income stagnation, but the price of everything else is holding steady or increasing. Food has never deflated in price, actually. It has been plateaued or rising steadily even as housing and some other segments of the economy crash and burn. What will follow is the beginning of an inflation spiral. This ends in only one way - worthless paper money (and that "paper money" includes your electronic banking and direct deposit, class) and prices of everything shooting through the roof.

Again, few believe it can happen here, but there is really no other foreseeable outcome at this point. Nobody is buying US Treasuries except the Federal Reserve - an incestuous accounting practice if there ever was one. Other countries are quietly dumping their dollar reserves and buying gold, or other commodities such as land and oil futures. There is an international move to replace the dollar as the world's reserve currency. Once that happens (and it will, eventually) nobody outside the US will accept dollars for anything and people in the US won't be able to buy imports at anything less than their entire income. That's a problem since we import most of our food, clothing and everyday household items. Even a short-term confidence crisis of the dollar would wreak havoc in main street stores everywhere, as they would not be able to come up with the ridiculously high cash payments wanted by overseas suppliers. Hope you've got a garden going.

Regarding point two: to cite just one example, streets and roads in this country are maintained and paved largely using gasoline tax dollars. More and more people being priced out of gasoline, switching to efficient cars, telecommuting and other such options means less $ in the pot. This has been going on for some time, by the way. There are bridges and overpasses in this country that are in desperate need of replacing or being structurally updated and there are simply no funds to do it. Many counties are simply letting rural roads go back to gravel. More and more toll roads will spring up. And finally, the government will have to switch to taxing you by your mileage every year instead of your gasoline. You will have to pay a big mileage fee when you renew the tags on your car every year. This will simply price people out of the market for cars even faster. Thus the money for road and bridge repairs is disappearing fast, will soon disappear even faster, and will not reappear. That's just one example out of how many government offices?

Regarding point three: The US has sold other countries and our own citizens trillions of dollars worth of bonds that will have to be paid back. And more is added to the total every day - tax revenues aren't coming anywhere near close to paying the debt load. How could it when everyone has been moved to part time mc-wally-wort jobs at low pay and no benefits? These kinds of jobs do not produce adequate tax revenue to run local and state governments, much less the federal government. As these debts mature, more and more tax dollars will have to be spent to pay them. I believe it was Larry Burkett who predicted that the US govt debt payments would equal the entire federal revenue brought in sometime in the 90s or 2000s. He was a few years off, but his prediction was not fundamentally wrong. There will be less and less money available for social services, as I pointed out in my last blog.

Point four: Since there really isn't any combination of agencies or charities out there who can realistically take up that much social need, do you really think the homeless and starving people are going to just quietly lay down and die? I wouldn't count on it. Civil unrest, to put it mildly, will follow.

And finally, the second great depression in the US will take down a lot of other countries with it - countries that get a lot of their own income from exporting stuff to the US. Nobody here will get it, or be able to buy it. A great deal of it will end up stolen, looted, or on the black market. Either way, our "free trade" partners are going to figure out fast that letting the US rape them of their self-sufficiency and steal their resources for pennies on the dollar wasn't such a great strategy after all. So much for globalization.

...For most of you, the future this report depicts is in marked contrast to the future you expect. The authors know this and understand that many of you may be very skeptical of the information and points of view expressed here. Some of you, like most Americans, may consider this report "doomer" nonsense. But it isn't, and we simply can't wait for the "popular narrative" to finally catch up with the facts.

As the New Reality advances, we have the opportunity to help recreate something wonderful that diminished during the age of abundance but will be essential during the age of scarcity: authentic community.

Peter H. Kilde
Third Vice President and Strategic Initiatives Task Force Chair
The Community Action Partnership Board of Directors

I'm not holding my breath on that, though.


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